bitcoininthevp wrote: ↑
Fri Oct 29, 2021 10:05 am
D1984 wrote: ↑
Thu Oct 28, 2021 11:58 am
One, how many of the transactions in Bitcoin so far are for actual goods or services and not just speculative buying and selling of Bitcoin for short-term investment/speculation purposes? How, does this compare to the amount of goods and services bought in, say, USD each day?
Two, how is Bitcoin cheaper, easier, or more frictionless to use than dollars? I can pay with a contactless credit card, with my phone, with a regular debit or credit card, via Venmo or via another P2P or P2Seller type app, or with cash itself; cash is accepted pretty much everywhere and Vias/MC/Amex/Discover are accepted maybe 95% to 99% of places.....BTC not so much. If I am not trying to hide anything, am not interested in evading taxes, and I am not one of these paranoid inflation hawks who somehow thinks 4 or 5% inflation is going to lead us to become Weimar Germany, then why should I want to use Bitcoin as a way to make purchases?
If the issue is credit card fees, then the simple solution to that is to have the government legislate to regulate the fees such that they are less than they are now (Visa and Amex--nor the actual banks issuing the cards themselves--do NOT need 2 or 3% on each transaction to make money; maybe they did back when credit cards first started back in the 1960s, but not with today's technology).
I think a useful mental framework for Bitcoin is that it is a digital store of value (a digital gold, if you will) with a clunky payments mechanism attached.
Few people are wanting to buy bitcoins just
to be able to transact with them immediately. Some are, for remittances or whatnot, sure, but bitcoin isnt a cheap/fast payment network first, which is how you are approaching it. This is a useful chart of how I see Bitcoin progressing:
Part of the speculation on Bitcoin is speculating that it will continue to progress along this curve (the process of becoming money).
You asked how Bitcoin is better than gold and I provided a starter list of how. Did you have objections there?
D1984 wrote: ↑
Thu Oct 28, 2021 11:58 am
If the issue is worries about inflation, I can just buy I-Bonds (and set up either a trust or an Arizona or Wyoming LLC if I want to buy more than $15K a year of them)....besides, I don't know about you but I'd kinda prefer my "stable store of value" not to be something that can either almost lose half its value in a few short months nor nearly double in a few months....both of which BTC has already done in 2021 alone). If OTOH I am actually looking at a truly long-term store of value (for retirement savings, say) then I'd be likely putting the money into equities or property of some kind (i.e. something that over the long term wouldn't be expected to just keep up with inflation but far surpass it) rather than either cash or Bitcoin.
Sure Bitcoin is volatile. Did you really think a magic Internet money was going to go from $0.0000000 to $1,000,000 in a straight line??
But if you look at data the volatility of bitcoin is decreasing over time. And as I show in the chart above, no one is claiming bitcoin to be a unit of account TODAY.
Close your eyes and imagine a magic Internet money eventually becoming a unit of account and stable store of value. Isnt the first 11 years of bitcoin exactly how it would go?
D1984 wrote: ↑
Thu Oct 28, 2021 11:58 am
Maybe I'm just being shortsighted but when I think of ANY new technology that succeeded in the marketplace, there were two common factors involved:
1. The use case was pretty obvious, and
2. It did something better (sometimes MUCH better), more effectively, and/or cheaper than a currently existing technology.
1. I provided a list of use cases where bitcoin excels
2. I provided a list of how bitcoin is better in many ways to gold (the existing technology)
You didn’t seem to have objections to either, but then post the exact same "concerns" again.
My objection is that Bitcoin as a stable store of value (at least as it stands today and in the near future) kind of...well...sucks.
If I want to hold a "stable" store of value, then it needs to actually hold value and not shift around by more than, say, a few percent over a short period of time.
Let's say I wanted to put aside some money from my paycheck to pay for the following:
1. My groceries next week
2. A vacation six months from now
3. For a down payment on a home that I will be buying maybe two years from now.
I would never want to save for any of those in Bitcoin because I don't want a store of value that could conceivably lose half (or more) of its value right when (or shortly before) I need to liquidate and spend it. For much the same reason, I wouldn't save for any of the above, in, say, a triple leveraged ETF, or in oil futures, or even in relatively (compared to the leveraged ETF or the futures) "tame" stuff like an ordinary S&P 500 ETF, or gold, or long-term Treasury zeroes. Yes, with any of those I could potentially profit handsomely (as indeed I could with Bitcoin) but it's not worth the risk of a severe and sharp drawdown in the value of my savings thanks to my having chosen a too volatile and too potentially risky store of value for said savings. How does BTC beat (in terms of stability and guarantee of the return of my principal) a checking account for #1 above, a savings account/MMA/reward checking account for #2 above, and either one of the same options as #2 and/or I-Bonds for # 3 above? It doesn't.
Also, how is BTC as easy to spend as dollars? How many places accept it vs accept cash (or even accept it vs accept Visa/MC if you think "places that accept cash" isn't a fair comparison since cash is legal tender by fiat in the US while neither BTC nor Visa/MC are)? How easy is it to get a refund for goods paid for in BTC if the merchant disagrees with me and refuses to give me the refund? What recourse do I have if I pay for a good or service in BTC and the seller simply never holds up his end of the deal and never provides the good/service agreed upon? Will the US government accept BTC directly in payment of taxes?
Most of your "use cases" you mentioned were fringe (and/or illegal) things that don't apply to roughly 97-98% or more of financial transactions. I don't plan on doing things that some people have used BTC for....stuff like: paying over the Dark Web to have someone murdered, or buying stolen documents from Wikileaks, or purchasing illegal drugs or trafficked human beings, or ransomingwareing a large company and demanding payment in BTC, or evading taxes I legally owe, etc...and I'm not exactly worried about the US dollar turning into a Weimar or Zimbabwe style "100 trillion dollar bills that are only good as toilet paper" hyperinflationary clusterfuck in the next few years either.
How exactly does BTC offer "cheaper payments" than, say, cash, or ACHs, or POPMoney/P2P transfers, or bank wires (much less what would happen if everyone simply had a bank account at the Fed and could transfer money instantly to anyone else at zero cost)? Average BTC transaction fees (while as of right now at around $3 or $3.50 or so) reached above $45 or $50 earlier this year (late March though much April of 2021); furthermore, if I am reading this right--and I hope I'm not--the more people using the Bitcoin network at any given time, the higher
typical average transaction fees will go (which seems to me to be exactly the wrong direction to go in; you want economies of scale to benefit
a currency transaction system, not go against it). The Lightning Network may help some of this but again, if we can all have instant zero fee money transfers simply by giving everyone a current account at the Fed, then why do we need BTC (or Lightning) for transactions? How does it make them quicker or cheaper and/or more liquid than doing what I just suggested?
The one major reason I can see to hold BTC that makes sense is speculation; if BTC does
ever approach (for example) gold's market cap then that implies a roughly 9.5 or 10-fold increase from its current value. This reason at least makes sense to me....but again, the whole "potential 10-bagger" thesis for investing in BTC could apply to any
speculative investment (and like any other speculative investment, BTC could also lose 99 or 100% of its value rather than shoot up to a million dollars).
If your investment case for Bitcoin is that "as more people hold it, then the value will fluctuate less and less, which will drive yet more people to see it as safe and thus even more people will want to hold it, which will drive further reductions in volatility, etc, and so ad infinitum, and as such it makes sense now to get in on the ground floor while Bitcoin is still (relatively speaking) cheap" then yes, that makes sense (although to be anything close to a replacement for Dollars/Yen/Euros/etc it will end up having to fluctuate even less than, say, gold or stocks; most people don't hold their everyday spending cash or their short-term or medium-term savings in instruments like that for the very reason that they are too volatile and thus too risky)...I'm not saying that I agree with it or that it will come to pass, but at least from a rational first principles explanatory standpoint it makes sense.
Other than that...I'm sorry, I still don't see a reason to hold or to use Bitcoin when ordinary US dollars still spend just fine, thank you.
PS - Long-term deflationary currencies are a bad idea for an economy as a whole even though they may be good for any particular individual holder of said currency/currencies. A long-term stable currency (i.e. neither inflationary nor deflationary) might well be a different story but--given that BTC will only ever have 21 million coins and never more (and if I understand it correctly it's even worse than that since if someone loses a physical or digital "wallet" then those BTC are gone forever and essentially don't exist anymore)--it stands to be a long-term deflationary currency which is not something a growing economy needs.