The smartest article on why Bitcoin won't become the next currency

[BitcoinGirl325]

This article is one of the best & most intelligent articles I've read about why Bitcoin WON'T become the next currency:
https://medium.com/money-banking/2b5ef79482cb

That guy GETS Bitcoin, and he truly understands that it is NOT a currency. It is a commodity/investment.

It all comes down to the volatility and wild swings of Bitcoin pricing. Any item whose prices swing so wildly up & down can't be depended on for daily, routine transactions. Items that swing wildly up & down are considered speculative commodities (like gold), or a speculative investment (like the stock market).

Nobody wants to spend $5 on a loaf of bread today, only to realize that they could have gotten that same loaf of bread for 5 cents yesterday, or that they'll have to spend $500 tomorrow for that same loaf of bread. That just isn't how currency works.

Currency is STABLE. A loaf of bread is $5 today and it will be $5 tomorrow and it was $5 yesterday. If inflation happens, then MAYBE IN A YEAR'S TIME, that loaf of bread will cost me $5.05 in today's money. And MAYBE IN 2 YEAR'S TIME, that loaf of bread will cost me $5.10 in today's money. it's slow, predictable, stable, and dependable... because it's a real currency.

For Bitcoin to be actually be taken seriously as a real currency -- and not a commodity worth hoarding -- the price would have to become completely stable. And there's no indication that the price will ever stabilize. Ever.

Nobody is buying Bitcoins to spend them... people are buying Bitcoins to hoard them as speculative investments, just like gold or stocks. And that's why Bitcoin will not become anything rivaling currency.

Now, as long as everybody realizes that Bitcoin is nothing more than the equivalent of investing in gold, or playing the stock market, or playing at a casino craps table... then i think we're thinking about Bitcoin in the right way. We're all just playing the roulette table in one big casino. Nothing more, nothing less. Not that there's anything wrong with that... it's just important to know exactly what Bitcoin is.

Bitcoin is just like gold, but it's not nearly as precious because, come on, let's face it, we're basically buying & selling pac-man pellets here (as one other article perfectly nailed it).

Thoughts?

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[DannyHamilton]

- snip -
Bitcoin is just like gold, but it's not nearly as precious because, come on, let's face it, we're basically buying & selling pac-man pellets here (as one other article perfectly nailed it).

You are welcome to your opinion.  It doesn't make you right, but you are welcome to share it with anyone who will listen.

[nebulus]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium and that's when the things will get interesting....

[BitcoinGirl325]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium.

Yes, equilibrium. That's EXACTLY what Bitcoin needs to be accepted as a currency. But when will that happen? For all we know, that might not happen until 2140, when the last bitcoin is mined. I would love to see Bitcoin become a currency, but it needs to hit that equilibrium point. How can we make it get to a point of equilibrium sooner rather than later?

[notig]

Without even going into detail critiquing this..... is it really wise to judge a currency that could last hundreds or thousands of years on a small window of time where it is still being 'born' basically?

[BitcoinTate]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium.

+1 If you look at the statistics you will see that the amount of BTC traded today on exchanges is measured in 10's of thousands. If you look at the economic transaction side of BTC you see it is measured in millions of BTC. The currency side is alive and thriving.

http://bitcoincharts.com/bitcoin/

[ralree]

There are a couple of reasons why the bubble is sure to burst. The first is just that it’s a bubble, and any chart which looks like the one at the top of this post is bound to end in tears at some point.

Oh like how this has ended in tears?!?

[DeathAndTaxes]

All things have volatility.  The exchange rate between EUR and USD for example is continually changing however the changes (most days are relatively small).  Want to know why?  The Forex market is $4T per day, or >$1.3 quadrillion US dollars annually.  Think about that a second $1,300 trillion (although I just like saying quadrillion) dollars a year in pure speculation (and hedging, arbitrage, etc but no actual commerce).  The entire global GDP is roughly $70T annually.   

Bitcoin trade volume on a good day might be $10 to $20M USD.  EUR:USD exchange rate can vary by as much as 2% on a high volatility day and BTC:USD exchange rate can vary by 40%.  Why?  Simple the  EUR:USD trade has maybe 60,000,000x as much volume.  Will BTC:USD ever be traded in trillions of USD per day?  Who knows but as volume ramps up (we are not talking 20% higher volume but 20,000% higher volume) volatility will come down.  The markets will get deeper and more steep.

The idea that people don't accept rapidly falling prices is a falsehood.  Take HDTV for example.  Everyone knew when they were released there would be better ones for half the cost in a year.  Hell most early adopters would tell you that AS THEY WERE BUYING ONE.  As the performance improved and prices fell at each price point people bought knowing the track record that lower prices would be available in 3 months, 6 months, 12 months, etc.  At the point where the utility of a TV today outweighed the potential savings tomorrow they bought. 

[Severian]

Nobody is buying Bitcoins to spend them... people are buying Bitcoins to hoard them as speculative investments, just like gold or stocks.

Utter nonsense. Statements like this lack insight into human nature. People are buying bitcoins in order to spend them when they see fit. We all know Bitcoin is going to rise in overall price over the course of time. Someone might cash some out for a car if their coins become worth enough. Or a house. Or start a business. Delaying momentary gratification for future gain is called "saving". It gets called "hoarding" by the uninformed.

The quoted statement also misses a lot of context. Many of us have spent a bunch of bitcoins in the past year or two and did our  parts in getting this show on the road. Only speaking for myself, I'm saving my coins because it's my money and I'll do whatever I want with it. Saving is the wise thing to do right now.

[DannyHamilton]

- snip -
How can we make it get to a point of equilibrium sooner rather than later?

Mostly all we can do is wait while the free market works it out.

Services such as BitPay help quite a bit though.

They allow merchants to use bitcoin as a payment network rather than a currency.  This minimizes the risk for both the Consumer and the Merchant as each only holds the bitcoin long enough to perform the transaction.  Meanwhile the exchanges back and forth to enable the transaction add liquidity to the market.  The visibility of merchants advertising that they "accept bitcoin" adds to it's perceived validity and create a situation where a merchant can opt to keep some of the receipts in bitcoin to pay their vendors.

[BitcoinTate]

103,539 BTC traded on Gox today. (Speculation and currency exchange)

Bitcoins sent last 24h: 1,551,145.95 (Currency exchange)

And you still say BTC is not a living breathing transactional currency?

[DeathAndTaxes]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium.

Yes, equilibrium. That's EXACTLY what Bitcoin needs to be accepted as a currency. But when will that happen? For all we know, that might not happen until 2140, when the last bitcoin is mined. I would love to see Bitcoin become a currency, but it needs to hit that equilibrium point. How can we make it get to a point of equilibrium sooner rather than later?

There is no such thing as perfect equilibrium in anything, ever.  The amount of USD inflation varies from month to month and year to year. This is for a single synthetic financial construct totally under the control of a single central bank.  Even they can't prevent volatility in the rate at which the USD devalues.

There is no magic point where Bitcoin (or anything) will suddenly be at equilibrium and have 0% volatility however volatility is declining and it will continue to decline as the markets get deeper, faster, and more efficient.  Volatility a decade from now will be significantly lower.   Price apreciation isn't the same thing as volatility.  Bitcoin is also expanding rapidly, number of users, number of merchants, amount of coverage and that is reflected in the price.  That too will eventually slow, as a case in point look at the growth of number of internet users.  As Bitcoin becomes more and more widespread the number of potential new users will shrink and the upper rise in exchange rates will slow.

As someone above said reporting that Bitcoin wont make it less than 5 years after its creation is probably mature.  You seem to have made up your mind so

1) Sell all your BTC except those you are comfortable seeing go to $0.00
2) Transfer it to a paper wallet.
3) Check back in after 20 to 30 years.

[InspiredEye]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium.

+1 If you look at the statistics you will see that the amount of BTC traded today on exchanges is measured in 10's of thousands. If you look at the economic transaction side of BTC you see it is measured in millions of BTC. The currency side is alive and thriving.

http://bitcoincharts.com/bitcoin/

Agreed with BitcoinTate

As for you Bitcoin Girl, meh, your points seem to come from the perspective of someone who doesn't yet understand the value of bitcoin, because you likely haven't used it to solve a problem in the real world; whether it be sending money internationally with little fees, contributing to an organization like wiki-leaks, or purchasing something. There's more than enough of a potential market in the few examples we've listed above to justify a substantially larger $/btc price than we see today.

If you'd like, we can trade my pac man pellets for your bitcoins, if you have any.

Also, in case you care, you come across as a FUD agent, or a troll, neither of which is appreciated here.  If you'd like to be better received you should more carefully package your messages.

[buddhacoiner]

yeah, i think the key thing to keep in mind here is that bitcoin is still in it's infancy.

according to Max Keiser, when bitcoin his $2700 it will be on par with the market capitalization of silver.  to this day, silver is still considered a volatile investment.  however, that doesn't make it unwise to invest in silver.  he further suggests that silver is a good hedge against bitcoin, and that bitcoin investors should peel off 10% and put it into silver.

[DannyHamilton]

- snip -
Also, in case you care, you come across as a FUD agent, or a troll, neither of which is appreciated here.  If you'd like to be better received you should more carefully package your messages.

Yeah, I'd agree.

Most of your posts seem to be trying hard to explain to all of us that use bitcoin how it can't be possible to use it, and how something that has existed for over four years isn't likely to exist very long.  You might as well be running into a movie theater in the first 10 minutes of a movie and yelling to all the patrons about how it is impossible to make projected pictures move while offering a bunch of explanations about your technical reasons for believing so.

[buddhacoiner]

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium.

+1 If you look at the statistics you will see that the amount of BTC traded today on exchanges is measured in 10's of thousands. If you look at the economic transaction side of BTC you see it is measured in millions of BTC. The currency side is alive and thriving.

http://bitcoincharts.com/bitcoin/

Agreed with BitcoinTate

As for you Bitcoin Girl, meh, your points seem to come from the perspective of someone who doesn't yet understand the value of bitcoin, because you likely haven't used it to solve a problem in the real world; whether it be sending money internationally with little fees, contributing to an organization like wiki-leaks, or purchasing something anonymously from a tor network. There's more than enough of a potential market in the few examples we've listed above to justify a substantially larger $/btc price than we see today.

If you'd like, we can trade my pac man pellets for your bitcoins, if you have any.

Also, in case you care, you come across as a FUD agent, or a troll, neither of which is appreciated here.  If you'd like to be better received you should more carefully package your messages.

that's completely unfair Eye, she (or he) does not come across like that at all.  s/he brought up a valid point to consider and mull over.  a lot of people have already done that here in the past, but that's not a reason to berate her thinking.  we all just want more information, and i suggest we continue to help one another out positively.

[BitcoinTate]

yeah, i think the key thing to keep in mind here is that bitcoin is still in it's infancy.

according to Max Keiser, when bitcoin his $2700 it will be on par with the market capitalization of silver.  to this day, silver is still considered a volatile investment.  however, that doesn't make it unwise to invest in silver.  he further suggests that silver is a good hedge against bitcoin, and that bitcoin investors should peel off 10% and put it into silver.

I will consider dropping 10% of my BTC into silver when it hits $2700. But there is no way in hell I will dump any BTC into silver before then. Both silver and gold prices are being suppressed by central banks selling off gold and silver derivatives to keep precious metals from undermining the USD and euro which would indicate the true pace of inflation.

[BitcoinGirl325]

Also, in case you care, you come across as a FUD agent, or a troll, neither of which is appreciated here.  If you'd like to be better received you should more carefully package your messages.

Sorry for coming across as a troll... I think it was my pac-man line that probably did that. I really appreciate the great responses so far... this gives me a lot of great food for thought. I especially liked the AAPL stock chart!  

As far as FUD goes, yes, I personally have FUD about the future of Bitcoin, but this isn't coming from a place of wanting to see it fail... I want to see it succeed, and I'm extremely nervous about it. I think that as I start to purchase actual things with the (very minuscule number of) Bitcoins that I own, that I may become more enlightened to BTC as a currency.

[BitcoinGirl325]

that's completely unfair Eye, she (or he) does not come across like that at all.  s/he brought up a valid point to consider and mull over.  a lot of people have already done that here in the past, but that's not a reason to berate her thinking.  we all just want more information, and i suggest we continue to help one another out positively.

Thanks so much, buddhacoiner!!

Sorry, I might have been too opinionated in my original posting. It's just something that I am concerned about and I wanted to discuss with the forum... sorry if it came across the wrong way. I was mostly trying to sum up that other guy's article and further exemplify it with my own personal concerns.

In any case, I appreciate the excellent discussion about this topic... EXCELLENT thoughts & opinions & points of view!!

[Luno]

How much is a ticket for a Justin Bieber concert in 2035 worth valued in gold?

If the ECB announced that they were to introduce a currency to substitute the current Euro with a release plan like Bitcoin starting with a value of 0.01 cents, in a few hours, price would have soared into the thousands of Euros.

Bitcoins rise in price is due to it's release method, i.e. it's difficulty self adjusting properties.

Real money are a commodity too. Liquidity for a business is just another worth for it. It takes money to make money, a commodity you need to stock to be able to do business.

Wild price swings, sure but real currencies would swing as much too if it wasn't for international agreements. Small currencies outside the "monetary world club" are thrown around as much as Bitcoin.

What is hampering Bitcoin as a vehicle for payment ATM is it's crazy price rise. No one is going to buy anything with an asset that appreciate as fast as Bitcoin. That's why you see these 20% - 50% discounts in web shops accepting Bitcoins.

But take it easy it will slow down that's a fact of supply and demand. Will it lead to a crash? Maybe, but not for sure, we might end in an situation where most of Bitcoins in existence are held by too few with to much invested to dump them without making them worthless. In such a scenario prices will be pretty stable like any other currency in the club! Those arguing that it can't happen to Bitcoin should remember how Gold and diamonds always have been attempted to be controlled by the ones that hold the most of it.

So the greatest threats are competition or regulation by governments.