The crypto fan club likes to argue that cryptocurrencies like Bitcoin are a better alternative to fiat currencies like the US Dollar and that cryptocurrencies (Bitcoin or others) could replace fiat currencies one day.
Personally, I regard everything you've said as plainly true. For whatever reasons, BTC especially has become a cult and thus it's almost pointless arguing with them about their sacred beliefs. In response to your article they'll probably bang on
Where my curiosity now lies is what is the future for this "asset"? It has become surprisingly closely correlated with the nasdaq index, so much so that one can almost obtain an out of hours price just by checking BTCUSD ;-) It's not entirely clear to me why though, because nasdaq is constituted of prospective interesting firms with some great ideas, whilst BTC has nothing, no projected inflows to uprate or downrate. It also to my mind offers the institutional investor nothing beneficial as a diversifier. So why move in tandem, and will it really soar when the nasdaq eventually does?
My other curiosity in the area is what impact the (both long anticipated) release of Mt Gox coins and implosion of Tether might have. Either could be quite severe. I'm not sure why anyone rational would want to hold on and find out with little prospective upside.
There was the Dream the we could escape the incompetence and foolishness of central bankers and politicians managing the currencies as US Dollar and Euro. Destroying the value and end in high inflation. Escape at least partly.
For the average person in a developed country, buying BTC makes as little sense as buying a foreign currency for the purpose of speculation. But not everyone in the world has access to the banking and payment system that we have. For a low-wage Kenyan worker in Mexico, sending money to his family in Kenya, BTC probably would be a much more accessible alternative than others. I doubt other crypto projects will ever achieve the universal status that BTC has achieved, both because of network effects, as well as the name recognition from being the first
Do you have any evidence to show that such people as the "low wage Kenyan in Mexico" you describe are increasingly adopting bitcoin? As per the post, transaction volumes of bitcoin are actually declining of late.
Edit: just to say, I'm not saying you're wrong, just that that idea is bandied around often and I've yet to see something beyond wooly pro-crypto articles actually supporting it.
I don’t and I’m not surprised about the current decline, which makes sense because of the volatility. But I’m talking about a much longer time horizon. I think BTC eventually will lose its speculative allure and become less volatile. Even now, after Russia’s invasion of Ukraine and subsequent sanctions on Russians, there were multiple reports that Russian nationals were using BTC and ETH to transfer their money out of Russia into UAE. Perhaps it’s not a desirable use case for BTC, but nonetheless it’s an example of people without access to the banking system in the developed world and using BTC as an alternative
I wonder how US$ fits into the store of value definition when the stated purpose of the Fed is to deflate it with inflation at 2%/year. How are any of the world's currencies even a valid measuring stick? The physical sciences have constant measuring tools i.e. speed of light, temperature, distance, etc. Shouldn't that kind of consistency be what a currency be?
Looking at Bitcoin today and saying "This is useless" is like looking at NCSA Mosaic in 1992 and saying "This is useless". And to be sure, plenty of knowledgeable people did that, and much later than just 1992. Of course it looked useless: they didn't foresee an Amazon, a Google, a Facebook, an Uber. How could they? Anybody who did could reasonably have been written off as just a dreamer.
And—the dreamers were right, it was eventually seen. But in 1992, how could you tell the difference?
Crypto, right now, is certainly nothing but a speculative investment to most people, and it's not a currency or useful store of value to, I feel safe in saying, anybody at all.
But what you're completely failing to consider is that crypto is also the incentive mechanism that powers decentralized computing networks. That's what the next generation's Amazon or Uber is going to run on. I've been in technology nearly 40 years and I haven't been this excited by the prospects of anything since NCSA Mosaic. Of course, you may reasonably write me off as just a dreamer.
I do have one other minor criticism: I don't think it's a fair argument to say: "I propose that one definition of a currency is that the US government accepts it as a unit of measure. Therefore anything not accepted as a unit of measure by the US goverment is not a currency." That's not an argument, that's a tautology. I do happen to agree that Bitcoin is not a currency, but, that's not a valid supporting argument for the point.
It is - so far - the best speculative investment the world has seen. To me personally it is nothing else than just a bet. Like QQQ multiplied by 5. I assume there will be new highs when the Fed starts lowering again. Technical picture is fine as long as BTC stays above 8-10k.
Personally, I regard everything you've said as plainly true. For whatever reasons, BTC especially has become a cult and thus it's almost pointless arguing with them about their sacred beliefs. In response to your article they'll probably bang on
Where my curiosity now lies is what is the future for this "asset"? It has become surprisingly closely correlated with the nasdaq index, so much so that one can almost obtain an out of hours price just by checking BTCUSD ;-) It's not entirely clear to me why though, because nasdaq is constituted of prospective interesting firms with some great ideas, whilst BTC has nothing, no projected inflows to uprate or downrate. It also to my mind offers the institutional investor nothing beneficial as a diversifier. So why move in tandem, and will it really soar when the nasdaq eventually does?
My other curiosity in the area is what impact the (both long anticipated) release of Mt Gox coins and implosion of Tether might have. Either could be quite severe. I'm not sure why anyone rational would want to hold on and find out with little prospective upside.
There was the Dream the we could escape the incompetence and foolishness of central bankers and politicians managing the currencies as US Dollar and Euro. Destroying the value and end in high inflation. Escape at least partly.
Ok, it was a dream.
For the average person in a developed country, buying BTC makes as little sense as buying a foreign currency for the purpose of speculation. But not everyone in the world has access to the banking and payment system that we have. For a low-wage Kenyan worker in Mexico, sending money to his family in Kenya, BTC probably would be a much more accessible alternative than others. I doubt other crypto projects will ever achieve the universal status that BTC has achieved, both because of network effects, as well as the name recognition from being the first
Do you have any evidence to show that such people as the "low wage Kenyan in Mexico" you describe are increasingly adopting bitcoin? As per the post, transaction volumes of bitcoin are actually declining of late.
Edit: just to say, I'm not saying you're wrong, just that that idea is bandied around often and I've yet to see something beyond wooly pro-crypto articles actually supporting it.
I don’t and I’m not surprised about the current decline, which makes sense because of the volatility. But I’m talking about a much longer time horizon. I think BTC eventually will lose its speculative allure and become less volatile. Even now, after Russia’s invasion of Ukraine and subsequent sanctions on Russians, there were multiple reports that Russian nationals were using BTC and ETH to transfer their money out of Russia into UAE. Perhaps it’s not a desirable use case for BTC, but nonetheless it’s an example of people without access to the banking system in the developed world and using BTC as an alternative
Up until March 2020, the correlation between BTC and SPX was near zero, and now it’s near 0.6
Thank you for the article.
I wonder how US$ fits into the store of value definition when the stated purpose of the Fed is to deflate it with inflation at 2%/year. How are any of the world's currencies even a valid measuring stick? The physical sciences have constant measuring tools i.e. speed of light, temperature, distance, etc. Shouldn't that kind of consistency be what a currency be?
Looking at Bitcoin today and saying "This is useless" is like looking at NCSA Mosaic in 1992 and saying "This is useless". And to be sure, plenty of knowledgeable people did that, and much later than just 1992. Of course it looked useless: they didn't foresee an Amazon, a Google, a Facebook, an Uber. How could they? Anybody who did could reasonably have been written off as just a dreamer.
And—the dreamers were right, it was eventually seen. But in 1992, how could you tell the difference?
Crypto, right now, is certainly nothing but a speculative investment to most people, and it's not a currency or useful store of value to, I feel safe in saying, anybody at all.
But what you're completely failing to consider is that crypto is also the incentive mechanism that powers decentralized computing networks. That's what the next generation's Amazon or Uber is going to run on. I've been in technology nearly 40 years and I haven't been this excited by the prospects of anything since NCSA Mosaic. Of course, you may reasonably write me off as just a dreamer.
I do have one other minor criticism: I don't think it's a fair argument to say: "I propose that one definition of a currency is that the US government accepts it as a unit of measure. Therefore anything not accepted as a unit of measure by the US goverment is not a currency." That's not an argument, that's a tautology. I do happen to agree that Bitcoin is not a currency, but, that's not a valid supporting argument for the point.
It is - so far - the best speculative investment the world has seen. To me personally it is nothing else than just a bet. Like QQQ multiplied by 5. I assume there will be new highs when the Fed starts lowering again. Technical picture is fine as long as BTC stays above 8-10k.