As for volatility, the only way bitcoin will ever shake it's toing and froeing is if it is pegged to the dollar by some powerful organization. Not likely. Nor will increased participation flatten out bitcoin's screaming ups and downs. Unlike stocks, gold, or U.S. dollars, bitcoin lacks a non-monetary stabilizer (see here and here). Put differently, its price is indeterminate.Moneyness
Why bitcoin has failed to achieve liftoff as a medium of exchange
JP Koning
The most reliable way to make a new currency accepted is for a government to specify the new currency as the approved method for paying taxes. The second best method is for a creditor to accept the currency for payment of debt.
ReplyDeleteThere are really no other ways. BTW, this argument was central to the platform of the Greenback Party.
I love that the author of the piece assesses Bitcoin *from the viewpoint of somebody in a US dollar economy*.
ReplyDeleteFrom the viewpoint of the US dollar economy the British pound is 'volatile', and not even the US has suggested pegging the British pound back to the US dollar recently (the Europeans of course want the GBP pegged to the Euro, but then we can see their competence with Greece).
When you operate within a currency area then real stuff within that currency area doesn't really move relative to your position.
People within the Bitcoin community don't convert their Bitcoins back to US dollars. They buy and sell in Bitcoins - permanently. They get paid in Bitcoins.
But then the tax demands turn up...
Cryptocurrencies are not just a Visa card replacement, and simply don't work at all if you view them like that.
"People within the Bitcoin community don't convert their Bitcoins back to US dollars. They buy and sell in Bitcoins - permanently. They get paid in Bitcoins."
ReplyDeleteMy understanding is that most of them do. They buy Bitcoins with dollars, and make the purchase that they want to conceal. The person on the other end then usually converts the Bitcoins back to dollars.
Put simply: there is not an economy behind bitcoin, not in a sufficient level.
ReplyDeleteThe economic exchange is close to zero, and the financial instrument jut becomes an end itself of production, wasting precious resources (enemy/hardware) on producing it ("mining").
Bitcoin users don't understand money, just like goldbugs don't. They are obsessed with pseudo-theories of the quantity of money, they are monetarists at heart. And we know that monetarism is an intellectual hoax.
When they lift an economy above their exchange medium wake me up, then they may have a chance at getting bitcoin to be an actual money instrument instead of an speculative virtual asset.
"My understanding is that most of them do."
ReplyDeleteNo doubt, but they are not within the Bitcoin community as it was originally conceived (an Anarchists paradise).
They are using it for disintermediation purposes only - and unsurprisingly that runs out of steam pretty quickly as the downsides of that approach become apparent to the users.
In other words it doesn't eliminate a cost. It just moves it around the players without additional benefit to cement the move.