Medium of Exchange vs Store of Value - and effect on BTC worth

[deisik]

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

[natd]

I disagree with your premise. Bitcoin makes a fantastic medium of exchange (best in human history), and due to the predictability and certainty of mining new Bitcoins (at predetermined rates), and the lack of monetary inflation, it will also make a great store of value.

How could it possibly be "a fantastic medium of exchange" with that type of volatility? For a medium of exchange, it is of utmost importance beyond anything else that its exchange rate to a basket of other main currencies be as stable as ever possible. If you are curious, this stability is predetermined by the size of the economy a currency encompasses...

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

What's the point, if the price in BTC of the same service or good changes in a minute to minute rate? I could sell my house in the morning and not be able to buy the same house (or a similar one) in the afternoon of the same day.

[deisik]

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

What's the point, if a price in BTC of the same service or good change in a minute to minute rate? I could sell my house in the morning and not be able to buy the same house (or a similar one) in the afternoon of the same day.

The fact is the total majority of individuals and businesses wouldn't be selling for Bitcoins at any significant level, given this kind of volatility. Actually, why would they if they could just price their merchandise in dollars and forget about volatility? This has been proven so many times that it's not even worth discussing in serious...

[invisiblehand]

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

[Ibian]

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

[natd]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

[natd]

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

In the US, according to FinCEN Final Rule, it's legal to use  it "to purchase real or virtual goods or services" and doesn't require licenses. However, if I'm a store and accept your BTC, I suppose I cannot sell the BTC, I'd have to use it to buy something as well, as to sell a virtual currency requires a money transmitter license.

[Misesian]

The volatility you're talking about is when you price bitcoins in fiat money in which the supply is constantly expanding (fiat), we are forced to use centrally controlled fiat money because that is what our masters demand we pay our taxes in, if we had a system of free banking who would use a currency that was centrally controlled by government? Everybody would be using things like gold, silver and bitcoins because they provide many more advantages as currency one of them being a reliable store of value.

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

Bitcoin is volatile however because it's hard to tell what the owners of bitcoin are thinking, how much faith do they have in the dollar? Are they simply just speculating? But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments and the true value of bitcoin lies in how much faith people have left in the current system and whether any competitors can create a currency that functions better than bitcoin.

[natd]

Can't businesses accept BTC at "market price" like restaurants sell fish

I think that would be a viable solution

Nothing theoretically wrong with that, question is if it's legal.

In the US, according to FinCEN Final Rule, it's legal to use  it "to purchase real or virtual goods or services" and doesn't require licenses. However, if I'm a store and accept your BTC, I suppose I cannot sell the BTC, I'd have to use it to buy something as well, as to sell a virtual currency requires a money transmitter license.

Caution note: I'm not a lawyer, just a law student. Please for real business use, you should consult your legal counselor.

[Ibian]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

[deisik]

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

At first you say that money supply is constantly expanding, then you tell me to look at the exchange value of USD for oil... Did you look at the dynamics of oil prices yourself before writing this nonsense? It cost somewhere above 140 dollars in 2008 (or was it in  2007?), now it is at 110 dollars for barrel and fell to 30 dollars somewhere in between. How can this ever be possible? To say that just increasing the amount of money in circulation reduces the exchange value for other goods and currencies is meaningless unless you account for other factors, which could make your assumption flat-out wrong in most cases. If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down...

[Misesian]

And so what? This (and what you wrote after the emboldened text) doesn't change a thing about the fact - it's Bitcoin's volatility, not of the fiat currency you exchange it for. I have already written in my post that volatility (and stability for that matter) of a currency is predetermined by the size of the economy, i.e. the overall volume of goods and services that you can buy or have rendered to you. The money supply being constantly expanding doesn't affect the volatility of the currency (just in case that was your point)...

Of course expansion of the money supply affects the volatility of a currency, look at the exchange value of USD for oil or food it's constantly changing (or getting worse), money is just a means of exchange so increasing the amount in circulation reduces the exchange value for other goods and currencies. If you look at the price of oil in gold you can see it's barely changed, what can we infer from this? Expansion of the money supply increases the volatility of a currency.

At first you say that money supply is constantly expanding, then you tell me to look at the exchange value of USD for oil... Did you look at the dynamics of oil prices yourself before writing this nonsense? It cost somewhere above 140 dollars in 2008 (or was it in  2007?), now it is at 110 dollars for barrel and fell to 30 dollars somewhere in between. How can this ever be possible? To say that just increasing the amount of money in circulation reduces the exchange value for other goods and currencies is meaningless unless you account for other factors, which could make your assumption flat-out wrong in most cases. If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down...

Sure oil prices have fell recently, but look at the 50 years graphs and tell me which currency is more volatile, I'm not sure about the dynamics of oil pricing so I cannot comment on recent changes but over the past 50 years oil priced in gold has remained steady wheareas priced in dollars it has increased substantially since 1998 (when the money printing really got going). How can oil prices fall 30 dollars despite rapid expansion in money supply? Perhaps efficiency gains in extracting oil or discovery of a new reserve, I honestly don't know but I never stated price rises always come about as a result of monetary inflation, it does however always leads to an upward pressure in prices that could be offset by other factors. You said "If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down..." Yes this is true but the exchange value of money is lower than it could have been if monetary expansion never happened, you see what i'm getting at?

[natd]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC  is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents

[Ibian]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC  is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents

Define value and explain how governments that confiscate peoples bank holdings provide it.

[deisik]

Sure oil prices have fell recently, but look at the 50 years graphs and tell me which currency is more volatile, I'm not sure about the dynamics of oil pricing so I cannot comment on recent changes but over the past 50 years oil priced in gold has remained steady wheareas priced in dollars it has increased substantially since 1998 (when the money printing really got going). How can oil prices fall 30 dollars despite rapid expansion in money supply?

You seem to not understand what volatility actually means or just intentionally try to confuse matters. It is a measure of price variation of a currency over time (or any other good for that matter), not its overall appreciation or depreciation. Volatility doesn't measure the direction of price changes nor the absolute increase/decrease in prices, it shows the dispersion of prices around some mean value (e.g. standard deviation in relative terms) for a given time period...

The volatility of prices measured over 50 years just doesn't make sense (you would be tracking long term trends instead of volatility)

[deisik]

You said "If the economy is expanding at a faster pace then the money supply, the currency could actually appreciate meaning that prices and axchange rates go down..." Yes this is true but the exchange value of money is lower than it could have been if monetary expansion never happened, you see what i'm getting at?

It is easy to show that the monetary expansion has very little to do with price volatility if at all. If Bitcoin supply is fixed as it is, why then do we see that Bitcoin is volatile as hell in the first place?

[pjviitas]

This is assuming that currencies that make people mindless greedy drones is a good thing.

Bitcoin is
A medium of exchange that forces people to be engaged in a currency instead of living by the mantra of "Suggested Retail Price".

AND

A store of value that filters out people that try and control it...i.e. greed.

Sounds perfect for spending as well as holding onto a few extra for a rainy day.

[natd]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC  is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents

Define value and explain how governments that confiscate peoples bank holdings provide it.

To be short and simple, economic "value" is the price of goods and services. BTC is not backed by any good or service. Exemplifying, as some can say miners are providing services,  BTC would be backed by a service if 1 BTC could be redeemed by 1 doctor visit. On the other hand, the service by miners is not value, it is operational cost.
Please understand I'm not against virtual currencies, I think they can be very useful in the future.

[deisik]

Ok, in that case (BTC  is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents

If you saved your paper dollars under the mattress, this wouldn't be much different from saving some files on the storage media in your computer. Whether material or immaterial, the form in which value is saved or stored plays no role. What really does is the subjective value people attribute to the things and which you cannot redeem in order to store safely in your home. If security as well as safety are among them, then anything that provides security and safety will have that subjective value (which you just can't squirrel in the backyard because it is purely a mental construct in people's heads)...

So you're actually confusing issues here (I hope unintentionally)

[Ibian]

BTC is no store of value,

Explain.

Bitcoin is not backed by anything. Fiat money derives it's value by a government declaring it to be legal tender. BTC does not have legal tender status in any jurisdiction.

Been over this countless times just in the short while I have been on the board. Bitcoin is backed by the strength and security of the network as well as the safety compared to fiat. Ultimately it all comes down to trust, even with government "backed" (in that it is not actually backed by anything physical) paper money.

But I believe there is a core group of bitcoin owners who recognise the economic problems currently facing many governments and they have lost faith in the currency issued by these governments

Hi!

Ok, in that case (BTC  is "backed by the strength and security of the network as well as the safety"), where is the download link where I can redeem my BTCs for that in order to store some safety in my own home, or use it in my laptop once in a while?
See? It's not backed by anything of value. You cannot trade subjective stuff as strenght, security or safety. My 2 bit cents

Define value and explain how governments that confiscate peoples bank holdings provide it.

To be short and simple, economic "value" is the price of goods and services. BTC is not backed by any good or service. Exemplifying, as some can say miners are providing services,  BTC would be backed by a service if 1 BTC could be redeemed by 1 doctor visit. On the other hand, the service by miners is not value, it is operational cost.
Please understand I'm not against virtual currencies, I think they can be very useful in the future.

Fiat is not backed by anything at all. Not only that, banks lend out more than ten times the amount they nominally have. I'm close to just writing you off as a troll at this point.