Bitcoin Eyes $9K as Billionaire VC Sees Dollar ...
30+ Reasons Why Cryptocurrencies Are Worthless
1)It is possible to change the code through a miner vote or a fork and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week. 2)You can also fork bitcoin anytime , start over from 0 and claim it's the real bitcoin. (BCH , BSV , BTG , LTC , BCD etc) 3)Why would you pay $10,000 for a digital collectible unit called BTC when you can use BCH or TRX or LTC .. you name it. They work just as fine and cost less. There is no rarity like in gold. 4)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even simply cash. 5)Private keys may be bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they could move them all at once instantly.(At least 45,000 ETH have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing could potentially break it. 6)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc.. proofs : “Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.” Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed” Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post” Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released. EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “ Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc.. 7)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels. 8)Then miners may be losing millions so they will stop mining , blocks may be so slow , almost no transaction will come though , and bitcoin may not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved may crash hard. 9)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”. 10)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc.. 11)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap. 12)Bitcoin price may artificially be inflated by Tether. 13)It’s an energy waste , an environmental catastrophy. 14)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation. 15)Governments will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity. 16)Most cryptos are scams , the rest are just crazy speculative casino investments. 17)It is pyramidal : early adopters intend to profit massively while last comers get crushed. That's not how money works. The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. Money is supposed to be rather stable. That's why the best cryptocurrencies are USDT USDC etc.. 18)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.00456329 BTC are ridiculous ! 19)About famous brokers listing bitcoin : they have to meet the demand in order to make money , it doesn't mean they approve it , some even short it (see interactive broker's CEO opinion on bitcoin) 20)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it , it's accepted everywhere , you can buy more things with it. 21)Everybody in crypto thinks that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it might not happen. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun. The markets are unpredictable. 22)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now. 23)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks. But it might be possible to do a rollback (blockchain reorganization) to reverse some transactions. BSV did it. 24)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governments might ban it to prevent fiat inflation to worsen. 25) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption. 26) The argument saying governments can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because they like it. But if crypto is banned , value will drop too much , and if you can’t sell it for fiat without risking jail , goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos. 27) Crypto doesn’t exist. It’s like buying air. It’s just virtual collectibles generated by a code. Faguzzi, fugazzi, it’s a whazzie, it’s a whoozie.. it’s a.. fairy dust. It doesn’t exist. It’s never landed. It’s no matter, it’s not on the elemental chart. It… it’s not fucking real! 28) Most brilliant guys have come out and said Bitcoin was a scam or worthless. Including Bill Gates , Warren Buffet , The Wolf Of Wall Street… 29) Inflation is necessary for POW , BTC code will have to be changed to bypass the 21M cap or mining will die ! If BTC code is not changed to allow for miners to be paid reasonably , they will cease mining when the bitcoin block reward gets too low.Even monero understood it ,the code will have to be changed to allow for an infinite bitcoin supply (devaluating all current bitcoins) or the hash will decrease and the security of bitcoin will decrease dramatically and be 51% attacked 30) Don’t mix up blockchain and cryptos. Even blockchain is overrated. But when you hear this or that company is going blockchain , it doesn’t mean they support cryptocurrencies. 31) Craig Wright had a bitcoin mining company with Dave Kleinman (he died) and on january 1 2020 he claims he will be able to access the 1.1M BTC/BCH/BTG from the mining trust. He may or may not dump them on the market , he also said BTC had a fatal flaw and that by 2019 there will be no more BTC. 32) Hacks in cryptos are very common and usually massive. Billions of dollars in crypto have been stolen in the last 6 years. In may 2019 Binance was hacked and lost 7,000 BTC (and it’s far from being the biggest crypto hack). 33) Bitcoin was first. It's an ancient technology. Newer blockchains have privacy, smart contracts, distributed apps and more.Bitcoin is our future? Was the Model T the future of the automobile? (John Mc Afee) 34) IOTA investiguating stolen funds on mainnet. IOTA shuts down the whole network to deal with trinity wallet attack. 35) Compared to bitcoin other cryptos work just as fine and don't waste so much energy. 36 ) Everytime miners disagree on the updates it will create another version of bitcoin : problem of governance and legitimacy. 37) Cryptos are only legitimate if they act as a credit for a redeemable asset like USDT or gold backed coins. While the native language of the writter is not english , I think you get the point and it doesn't make it any less relevant.
[Article] Debunking the theory that a "deflationary" currency cannot be the basis of a functioning economy
Many economists argue that a low level of inflation (approx 1-2%) is required in order to maintain a productive and functioning economy. This is evidenced in the fact that most central banks have low level inflation as a target of their monetary policy objectives: The European Central Bank, Bank of England, and the Federal Reserve to name a few . As a result, detractors of bitcoin say that it can never become a currency as it is deflationary in nature . That is, there will only ever be 21 million bitcoin in existence. This means that over time once all of these coins are in circulation, there will be no new supply of bitcoin, and so any demand increase will result in a price increase. Currently there is around 4.3% annual inflation of Bitcoin's supply , and by 2028 that is projected to fall to below 1% . Furthermore, if the anonymous 'Satoshi' has truly vanished then there are another 1M coins out of circulation ; and some studies suggest the total number of lost bitcoin is nearing 3M coins , a number that can only increase over time. Due to these 'missing' bitcoins, the supply of Bitcoin will become increasingly scarce, and so their value is expected to rise given a constant or increasing level of demand. This means that goods and services will fall relative to their bitcoin valuation, resulting in deflation (deflation = the price level of goods & services in an economy decreasing). The traditional argument then goes as follows: due to goods & services becoming cheaper over time, saving is incentivized. After all, why would one buy a car for 1000 bits when it can be purchased for 998 bits tomorrow? A common example people point to as evidence for this is the infamous 10,000 BTC pizza purchase in 2010 which at today's valuation costs 100M USD . However, this argument against bitcoin as a currency is flawed on two levels. (1) When pointing to examples such as the pizza purchase, or the rapid increase in bitcoin's value, people are misattributing the cause of the deflation by assuming it is to do with bitcoins supply. In fact, in the years since the pizza purchase, the total supply of bitcoin has increased from 3 million BTC to 16 million BTC. This is a more inflationary supply increase than even the USD over the same period of time . The real causes of bitcoin's price increase (and thus deflationary properties) in this period can be attributed to the parabolic nature of adoption that bitcoin has seen since its creation . When looking at the practical nature of bitcoin as a world currency, and then drawing stats from the coin in its infancy, you are committing the fallacy of false equivalency  as the evidence presented is from a period of increasing adoption while a global currency would imply full or near full adoption. At the 'early adopters' stage we will see major +/- % fluctuations regularly, however if worldwide adoption was to be achieved then these value changes would be far smaller and much less significant. For example, the dollar, the world reserve currency, fluctuates on average by 92 pips in a day (1 pip = 0.0001 USD). Applying this same level of stability to a mass adopted bitcoin, and we see that the price fluctuations would become far smaller and less significant the greater the capitalization of the currency. Thus, in order to assess the viability of bitcoin as a world currency, one must start with a situation where bitcoin is a world currency in the first place. (2) The second flaw of this argument is to assume that deflation will always lead to a deflationary spiral and thus collapse of the economy. With this same logic, one could argue that inflation will always lead to an inflationary spiral and thus an economy collapse as people see price levels rising, and thus are incentivized to spend their money NOW before they increase any further. This then leads prices to rise further and the effect to spiral out of control. CLEARLY though we can see that inflation does not always lead to an inflationary spiral as all western economies operate on an inflationary model. And thus to try use this logic that is empirically flawed as an argument of deflation is self defeating: Levels of inflation will not always lead to inflationary spirals, and levels of deflation will not always lead to deflationary spirals. It is this excessive quantity of inflation or deflation that will result in a spiral, not the attributes of inflation or deflation in isolation. In the same way that 1-2% inflation per year is small enough to not trigger an inflationary spiral of panic, a small amount of deflation on a yearly basis would not trigger this deflationary spiral. In fact, we have evidence to support this claim. In the UK over the period of 1983-2006 we had interests rates that were higher than the rate of inflation , this would mean that consumers are incentivized to save instead of spend as they would have greater purchasing power in the future(i.e. there is deflationary pressure), yet we did not see an economic meltdown during these times. What we actually saw over this time period was a DECREASE in the savings ratio of the average UK household , from around 15% of income to just under 10% despite the fact that any money saved would have compounded 5% more inflation adjusted purchasing power per annum. At first this might seem to be irrational behavior but there are some speculative reasons as to why this was the case. One theory suggests that consumers do not notice inflationary or deflationary pressures in small quantities and thus do not make economic decisions based on them. Another one would say that despite the deflationary pressures, there are some purchases that are necessary and therefore cannot be delayed. i.e. the supermarket shop might be a small % cheaper in 1 years time, but it is necessary to do it now in order to survive. Finally, it can also be argued that as deflationary pressures make consumers feel wealthier, they are more inclined to go out and spend this wealth, thus decreasing their savings rate. The arguments presented above show that perhaps Keynesian economic thinking is too narrow, and that an economy can be run on the back of a currency with deflationary pressures as these pressures in the right quantity will not result in a deflationary spiral, and have the advantage of not eroding the wealth of the population in a way that benefits the wealthy and hinders the poor (see: threshold effects of inflation for more information on this matter). While this article has argued that a deflationary currency can run an economy, it is a topic of future article to discuss which model of the economy is preferable. Till next time, Logical Crypto Sources:  https://en.wikipedia.org/wiki/Inflation_targeting#Summary  https://www.theatlantic.com/business/archive/2013/12/why-bitcoin-will-never-be-a-currency-in-2-charts/282364/  https://charts.bitcoin.com/chart/inflation#lf  https://cointelegraph.com/storage/uploads/view/1d067f3721f10f0a76439de9860a4e54.png  https://qz.com/1107843/bitcoins-btc-new-record-price-of-6000-means-satoshi-nakamoto-is-worth-5-9-billion/  http://uk.businessinsider.com/nearly-4-million-bitcoins-have-been-lost-forever-study-says-2017-11  https://en.bitcoin.it/wiki/Laszlo_Hanyecz  https://upload.wikimedia.org/wikipedia/en/5/58/MB%2C_M1_and_M2_aggregates_from_1981_to_2012.png  https://blockchain.info/charts/n-transactions-total?timespan=all  https://en.wikipedia.org/wiki/False_equivalence  https://www.economicshelp.org/wp-content/uploads/2012/01/inflation-interest-rates-1945-2011.png  https://tradingeconomics.com/united-kingdom/personal-savings
Money should be a good store of value, medium of exchange, and unit of account. There are a lot of barriers preventing bitcoin’s widespread use by the aforementioned criteria, let’s take a look and see how they might be solved.
Lack of Understanding
Bitcoin is complicated and unfamiliar. This is a huge barrier to entry because people distrust what they don’t understand, and ease-of-use and simplicity is what usually sells a new technology. If you have read this series from the beginning though, you may now see some potential upsides to such a drastically different system than what we are used to. Many resisted smartphones for a time (and a few still do). The benefits have to outweigh the costs of adoption, so we may see niche cases being the early adopters (like citizens of Venezuela or remittances payments). Also, when a new complicated technology rolls around, it sometimes takes a generation before it becomes widespread; young people are particularly adept at adopting new tech.
The tendency of bitcoin’s price to change rapidly or unpredictably is what comprises volatility. When you search for bitcoin you may find that most of the results you get (and the discussions happening on forums) are about it’s price. This is understandable, it has seen some crazy moves both up and down over the years facilitating the potential for huge gains (and huge losses). Still, over time the price certainly is increasing. Unless you bought in a single 2 month period in 2013, holding bitcoin for longer than 2 years at any point in its history would land you in a better position than when you started. And, when viewed on a logarithmic scale (used in long-term stock charts), the trend is quite clear: (Bitcoin Price 2012-2018, Logarithmic Scale (bitcoincharts.com)) There is a risk/reward to adopting new tech, and this is no exception. But, my goal is absolutely not to “sell” it to you as an investment by any means.
This is not financial advice. We’re simply looking at the pros and cons of this space, and I encourage everyone to do their own research and come to their own conclusions. Never invest anything you aren’t prepared to lose.
This meteoric rising (and crashing) of the “price” (which, I’ll point out, might just as well be considered an exchange rate) understandably makes it pretty difficult to use bitcoin as a currency. If it moves a few percent in a day, and can move a few hundred percent in a month, purchasing a car or a house could cost you significantly more by the time your finished closing. That’s just not viable, and certainly not a good unit of account. However, I see the volatility in price simply as growing pains. It is the market that dictates the price of bitcoin, quite literally, it’s traded like a stock. This is referred to as speculation (“the purchase of an asset with the hope that it will become more valuable at a future date”). Speculation happens between national currencies already, but they are generally stable in comparison so it’s not lucrative. People are unsure of how this whole bitcoin thing is going to play out. It’s not like anything we’ve ever seen, it’s difficult to understand (and use), and it’s not accepted at every corner store or online business. Many in the space are just here for a quick buck, and they sell it when the price rises to get back “real” money we are used to, that is “stable” in price against other currencies, and can predictably buy goods and services. The way I see it, all of these will concerns diminish in time. Though Amazon or Target don’t yet accept bitcoin, Microsoft and Overstock.com do. Some cities and towns across the world are embracing it a lot more than others. It’s not surprising to see San Francisco accommodating the new technology. But, other cities like Portsmouth in New Hampshire with numerous cafes and shops accepting bitcoin (and “Dash coin”) might surprise you. There are maps available to see where crypto-currencies are accepted at locations near you, and the amount of them are increasing, albeit slowly. It’s a bit of a chicken-and-egg situation, but that hasn’t stopped revolutions from happening before. Consider when cars first came about, roads were dirt and mud which cars didn’t do well with. It took building massive infrastructure before cars could ever become mass-adopted, but we spent the time, money, and effort because we saw the potential advantages. It will be trivial for businesses to accept bitcoin compared with pouring hundreds of millions of dollars in asphalt to connect our world. Other parallels include train tracks, phone lines, electricity lines, communication satellites, etc. Each of these replaced or iterated on previous functional technologies, and required massive upfront costs before the benefits were available. It’s clear now that we made some good choices there but there were doubts at the time. Despite some pretty major setbacks, bitcoin’s trend is up. Interest is growing and more businesses and individuals are actually using it. But due to the trading mentality, the uncertainty with regulations, uncertainty in the technology itself, uncertainty that the price will not drop, and other factors, emotion and greed encourages people to sell in flocks if the price climbs high enough. Furthermore, right now with a large enough stack of money one can influence this market in drastic ways, and cries of manipulation of the price are not unfounded. So-called “whales” can buy and sell huge amounts of coins and the price can jump a bit each time. Coupled with uncertainty in the space, and so many “investors” trying to time the markets, we end up with a pretty volatile landscape where the price is not stable. My argument is that this is diminishing as it gains in popularity, and it is gaining value because its utility is growing (see the network effect”) and the utility itself is slowly becoming more apparent.
Volatility is actually decreasing.
Bitcoin Volatility Over Time(bitvol.info) In the period from 2011 to 2014 bitcoin’s volatility often spikes into the 15% range. But from 2014 to the present, volatility has only just spiked above 7% twice, spending most of it’s time below 5%. Even the large boom and bust in price at the end of 2018 seems tame compared to the early years. The trends show the price going up over time, and volatility going down. The more actual use the coin has (people saving and buying with bitcoin), the percentage of people entering the space to use it the way it was intended increases, the percentage of “stock traders” declines. And as more capital enters the space, the less influence whales have (because the current against which they swim is getting stronger). And as the price stabilizes, traders will become less interested. There is a critical point where this becomes a negative feedback loop. I could be wrong, but the idea is at least founded in reality, and it would solve the unit of account issue if the price could stabilize to within a few percent per year. Similarly, as a store of value, bitcoin becomes more viable in this scenario. This is coupled with the fact that although bitcoin is somewhat inflationary now as the supply is increasing (bitcoins are “discovered” as rewards for mined blocks), the amount of discovered coins are cut in half every few years. This “halving” is logarithmic, meaning eventually the amount of coins discovered is infinitesimally small, and total supply will asymptotically approach 21 million coins (the maximum supply that we will ever see). This model of supply is actually meant to mimic gold because it’s a well-known store of value and monetary device throughout history (though it is not easily divisible, and not as portable as bitcoin). In both bitcoin and gold, mining is more fruitful in the beginning, and as we extract the low-hanging-fruit, mining requires greater effort and yields less return. World population is increasing which leads to bitcoin becoming deflationary in the future if demand continues (the supply won’t increase beyond 21 million). And, I argue that it will become more valuable in time due to the network effect as bitcoin use becomes more widespread (the value of being able to exchange with more people anywhere, any time, and without permission from anyone). This is a positive feedback loop, and shows how bitcoin is deflationary long-term. While deflation is generally considered negative by economists, the main reason is based around debt which isn’t possible in the same way with bitcoin because bitcoins cannot be created out of thin air like fiat currency. The discussion of deflation vs inflation is an important one, and bitcoin’s monetary policy is an outlier compared with national currencies which are typically inflationary. The US dollar for example averaged 3% inflation since the year 1900. That means that over the last 100 years, a dollar has lost over 95% of its purchasing power. You could buy 95% more stuff with $1,000 last century, or, saving $1,000 from 100 years ago would buy you 95% less stuff at present. Put another way, purchasing power is cut in half after about 25 years, a concern for anyone retiring for over 20 years with a fixed retirement sum. Some other national currencies have higher inflation rates, and there are numerous cases of inflationary spirals over the years. A few examples include Germany 1923, Hungary 1945, China 1947, Vietnam 1988, Peru 1990, Yugoslavia 1992, Zimbabwe 2008, and right now in Venezuela 2018. Entire countries of people have lost essentially all of their money, and it keeps happening over and over. A wise man would tell you it’s dangerous to say “it could never happen here”. *UPDATE: Turkey is also now in financial crisis. This is our money with which we hold and exchange value, our earnings, our savings, our livelihoods. Maybe it’s time we had, at least, another option outside of government control. An option that governments can’t destroy through mismanagement. A neutral option that ignores all borders, is open to everyone, and can be accessed anytime from anywhere.
The Fear of “Hacks”
It’s a very real threat to have all your money stolen, if your bank was robbed you are protected by FDIC (in most cases only up to $100,000). The vast majority of coins that have been stolen have come from hackers attacking “exchanges” and getting away with millions. These exchanges are websites where you can trade bitcoin for other crypto-currencies (or “alt-coins”). You can also buy and sell bitcoin on them, and subsequently people end up storing a lot of coins on these exchanges, and the exchanges hold the “private keys” so they can execute trades. Cryptographic private keys are analogous to a key that opens a door, or, a key that locks a message in a box before it is sent to the recipient. In our case the door opened allows you to sign your message and spend coins, and the message is your transaction on the bitcoin network. Anyone with your private keys can spend your coins. Exchanges are a honey pot of thousands of private keys that represent a lot of money. If a hacker can break into the exchange and steal the keys all at once, their work will pay off. This is why any crypto guru will advise you not to store large amounts of coins on exchanges, and rather transfer them in your own wallets where you hold the private keys. The mantra is “your keys, your money; not your keys, NOT YOUR MONEY!” Of course your own computer can be hacked, but you are not as big a target as an exchange which may hold vast sums of money. There are also some pretty safe ways to store your coins if done right. Centralized exchanges are a necessary evil for many people because they facilitate acquiring and trading coins easily. But decentralized exchanges are becoming more common because they allow you to trade while keeping your coins in your control at all times. They need some work and more users, but it’s a promising solution to this problem. Summarizing the above, the big hacks you read about are virtually eliminated if your keys are in your control and you keep them safe.
Transaction fees are generally negligible in a bitcoin transaction, but in many ways “fees” are holding us back. Interestingly, this is a symptom of being in the very early days. Firstly, there is a lot of work on “scaling” crypto-currencies (making fees even lower than they already are and increasing transaction speeds). This is just an engineering problem, and many people are working on solving it in many different ways. Other currencies like NANO or IOTA have different underlying tech and have zero fees and instantaneous transactions. In fact, most fees people encounter aren’t fees from bitcoin transactions; instead, they get hit with fees when exchanging between national currencies and bitcoins. In order to electronically trade USD($), EUR(€), or YEN(¥) with bitcoin, we need to hook into the closed-off for-profit banking network and we need third-parties to do so (and they take their cut). But even these fees could be avoided in time. For example, you can buy bitcoins with cash directly from a person (localbitoins.com). And, it might seem distant, but in the future you may end up receiving bitcoins as your salary, from a friend, or from accepting them in your place of business. Likewise you can spend your bitcoins directly to other bitcoin users. Getting coins directly eliminates all the exchanging and associated fees because once your money is on the bitcoin network, fees will be negligible (especially as these networks evolve).
Right now it’s easier than ever to acquire some bitcoin. People can download “Coinbase” or “Square App” on their smartphone and purchase some using a credit card in a few minutes. Depending on which service you use and how much you want to buy, you may need to send a picture of your license for KYC regulations. However, as I mentioned above, there are risks to storing all your coins on exchanges, especially with large amounts. I always recommend transferring them to a wallet where you control the private keys. But using wallets and storing private keys (and “seeds”) securely, is not as straightforward as we would like. This is a major factor holding back adoption, because if it’s not easy to use, people will consider it too much effort. The next post in this series digs into wallets and storing your coins.
My grandparents emailed me an article in The Atlantic this morning: http://www.theatlantic.com/business/archive/2013/12/why-bitcoin-will-never-be-a-currency-in-2-charts/282364/ It's another attempt to demonstrate that bitcoin = deflation = fail. Here's my response to them... Hey Grandparents, This is what's known as the "deflationary spiral" argument, and has been hurled at Bitcoin advocates since Bitcoin's inception. The argument is that when people expect their money to be worth more tomorrow, they won't spend it today. On the surface, it makes sense. In reality, it's at best entirely exaggerated, and at worst a complete fallacy. The deflationary spiral argument has been used by inflationistas (people who believe in endless money printing to achieve prosperity) to justify their horrible central planning and monetary debasement. It is the main argument economists use to denounce gold as money (because gold isn't produced at the same rate as economic growth, thus meaning the value of gold may appreciate relative to goods - similar to Bitcoin). Of course, the fact that 19th century America was on a gold standard and saw its strongest period of wealth creation and economic growth ever hasn't seemed to bother gold's detractors. Fortunately, now that Bitcoin exists, and exhibits not just deflationary tendencies but MASSIVE deflationary tendencies (it's up 10,000% this year, etc), we have an amazing real world laboratory to see if the deflationary spiral truly is as terrible as alleged. From what I've seen in Bitcoinland, we can debunk it as a myth. People absolutely spend, even when they think the money will be worth more tomorrow. They may spend less... but that is not a bad thing. It means they spend only on the things they really want, instead of rampant consumption. It makes buyers think twice before buying. This is wise and prudent. It encourages saving, and discourages consumption. Indeed in my own experience, I buy things with Bitcoin all the time... and I KNOW it will be worth more in the future. Am I a fool? Or do I merely realize that money is not wealth - that its only value is in exchanging for real wealth. I need to eat. I need a home. I need a car and clothes and some entertainment. These things are wealth, and so I trade bitcoins for them. I'm just more prudent in how I do it. Detractors would claim that when people are prudent with their own finances, that this is bad for the economy. I believe the opposite - when people are imprudent with finances, that is when the economy suffers. Of course, imprudence means exaggerated spending today, which boosts GDP figures (because GDP is just a measure of spending). This seems to have tricked most modern economists into thinking that consumption is the cause of economic growth. I disagree. Consumption doesn't drive an economy - it is the result of the economy. Consumption is the reward for production and savings. Besides... if the deflationary spiral was actually a dire runaway phenomenon, then are the detractors saying that Bitcoin will rise in price forever? If so, why aren't they buying some? And if they aren't sure that it will rise forever, then this defeats their argument, because once it is no longer rising, people would be happy to spend it, thus correcting the deflation problem. Examined carefully, one should realize that to the extent the deflationary spiral exists, it is a self-correcting phenomenon (as are most pricing issues in an open market). And for a final anecdotal nail in the coffin... last year on Bitcoin Black Friday, BitPay (the largest merchant processor for Bitcoin payments) processed 99 orders globally. This year on Bitcoin Black Friday, despite the fact that Bitcoin rose from $13 to $1000, BitPay processed 6,296 orders globally. I have not seen evidence that "deflation" is hampering growth... in fact, quite the opposite. -Erik BitPay article: http://www.washingtonpost.com/blogs/the-switch/wp/2013/12/02/black-friday-set-a-record-for-bitcoin-commerce-bitpay-says/
Seriouspost: why I and others can't take btc or it's fanatical disciples seriously.
Someone had asked why I circlejerk bc here. First off, I do appreciate the technology behind buttcoin. It's pretty amazing that in essence some crazy savant created a system where people are putting faith into a sequence of numbers that were solved by a shit load of computing power (faith as in billions now). In this case the primary motivator is libertarian ideals. Free flow of capital, lack of state interference, lack of inflation, and the "freedom" to do what you want with your loot. I can also see a whole host of applications for cryptocurrincies in the future, especially in despotic countries, or for organizations like wikileaks. Currency is a form of expression and in our world the rich and powerful can cut off that expression all to easily. Shitty PP's like paypal are robber barron's of the internet, ripping people off and giving them nothing. Credit Cards are horrific oligopolys with literally no feasible way of beating them. Oiligopolies act as monopolists if you go back to econ 101. Fuck those fuckers. All of them. They take a disproportionate amount of the common man's flesh. When I first started looking at BTC, I thought that it could solve a lot of these problems, scare the shit out of these assholes and keep groups like wikileaks or people like snowden from going tits up. Great. I was intrigued and got on board pretty early - years ago. However, once you go down the rabbit hole, or get a finance degree, you start to see some chinks in the armour. Things that are totally derrived from libertarian ideals eventually lead to movies like "Black Hawk Down" or "Wall Street". There's a reason God invented regulations and laws. So.... : a) A finite number of bitcoins were a clever solution to bootstrap the currency. Satoshi was fucking smart to do this, since everyone knew that the supply would dry up. At the beginning it wasn't a huge deal since you're looking at 10's of millions of digits that were worth exactly shit. However, in the off chance the primordial soup started to form some amino acids, that finite number would would prove to be the single most important aspect of why we're seeing what we see. While no doubt there were plenty of people who tossed away, diced, bought pizza and so forth, when the prices started to surge things changed. People were scooping up 7950's not to meet market demand, but to speculate about future increases in value. Mining became so ridiculous that PC's were useless and ASIC miners were the only feasible platform. You had BFL, which was so lulzy that they took BTC for their bullshit boards, waited a year in some cases while their BTC appreciated and in essence made people pay multiples more for their bullshit product because they took BTC, never delivered and the customers couldn't mine. This brings me to my point (a). Why the fuck would you sell your BTC at time (x), if you know that at time (Y) its going to be worth more? there will be less BTC injected into the market at time Y, so your BTC should be worth more down the road. Solution? Hoard your BTC. Eventually, for all practical purposes, the spigot will be as good as zero. No more buttcoins will be coming out. Now I know the literal zero date is 2100 or some bullshit, but that's semantics and marginal returns have waaaay kicked in. And I don't deny that there are useful applications for cryptocurrencies, any spike in demand we see results in increased pressure. b) On the flip side of the bitcoin though, is that everyone who holds BTC is playing musical chairs. It's no different than any market, anywhere else on the face of the planet. You're waiting to be the last fool off the ship. The ridiculous rise that we just saw was bound to pop. There are so few instances in life that can justify what we saw in the past few weeks. So few applications, markets, business, commodities that can justify that kind of growth. Yes, even BTC can't justify that kind of growth. It was inevitable that you'd see that 40-50 percent pop. But wait a minute, bitcoin will still say "I'm up 1 million fucking percent since 2009" or some shit. Maybe so and good for you, but what this volatility proves is my next point: BTC is the worst fucking currency ever conceived of. c) a currency must be a stable medium of exchange, that is to say a common ether so that we don't have to barter with each other : http://www.investopedia.com/terms/m/mediumofexchange.asp OH WAIT, except that BTC is so fucking volatile, you might as well fucking use cows or chickens, as they would probably have a more stable, measurable value than BTC. Hmm, actually pork looks far less variable and a better medium http://futures.tradingcharts.com/chart/PB/ d) As a currency you need to have a unit of account http://www.thefreedictionary.com/unit+of+account Picture this: you're running the Bitcoin cafe, since NeckBeard McFedora just told you it's a great payment system. You just accepted 100,000K in bitcoin last month for your coffee sales. Your accountant assumes that these great 100K bitcoins will be worth 100K by next week when he uses the reliable MtGox website to cash his loot out to USD. But wait! BTC loses 50 percent of value, and your coffee bean supplier happens to work for Tony Soprano - he's not taking your -50 percent BTC. Meanwhile, the guy down the street accepted USD one month ago and guess what? His 100K in coffee sales are worth about 100K bitcoin has told me many times quote : oh but we'll use intermediates who will hedge (use derivatives) to reduce volatility so that people can safely buy and sell at stable prices. So, you'll need another paypal or intermediate for this "free currency"? and you think people will take your risk on for free? risk != free. Remember why this whole fucking thing was started? As a business owner I would stuff your BTC up your asshole if I lost 50 percent in a few days, or if I had to get insurance on a fucking currency. I'd sooner take Mastercard's 4 points than go through that bullshit. As a business owner I'm not in the business of speculating on currency. Not my fucking job. I build widgets or bikes of pimp hoes. Not currency. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=unit+of+account "Using money as the unit of account for prices also provides a measure of value--how much value buyers and sellers place on a good. If a Deluxe Club Sandwich carries a $5 price, while a Live Headless Squirrels music CD sells for $10 each, then a relative a measure of each commodity can be had. Buyers place twice the value on the Live Headless Squirrels music CD than on the Deluxe Club Sandwich. Buyers are willing to give up twice as much money to buy a Live Headless Squirrels music CD as to acquire a Deluxe Club Sandwich. Sellers incur twice the opportunity cost of producing a Live Headless Squirrels music CD as the cost of producing a Deluxe Club Sandwich. This is the reason that money functions as a measure of value. Because money is commonly accepted in payment for all goods and services, because money is the universal medium of exchange, prices provide a relative comparison of value." You cannot judge OPCOST if the fucking currency yoyo's like Pam Anderson's tits on a roller-coaster. Anyway, longpost is long. And I have no doubt this is all very debatable, like all my ex-wives. A few last things: http://www.usinflationcalculator.com/ In the last ten years you would have lost 26ish percent had you put your cash in your floorboards. Fucking communists! But wait! You're not supposed to use currency as a long term investment. Not a good fucking idea. I've dealt with wealthy people my entire life. And they NEVER have gobs of real cash sitting in BOA banking account for this very reason. Contrary to Ron Paul, the fucking Mises Institute (?), and other nut jobs, REASONABLE inflation is actually a good thing Why, Augustus you fucking pinko communist nazi mothefucker?
Fiat currencies (which bitcoin isn't I concede, but obviously was the partial impetus behind btc) are literally worthless if you put it under your pillow. They are literally useless unless they have motion behind them. Having a stack of 100's in your pillow doesn't build bridges, invest in new porno websites, cancer hospitals or buy weed from British Columbia. All of which help sustain the economy. People react to stimuli. In this case, the stimuli happens to be inflation. Keep your wealth in dollars and you'll have less of them, invest them and you'll have more of them, hopefully. Libertarians fucking hate this, they reject it, they reject that it works, they reject the lot of it. And so bitcoin was born. Fuck the fed, fuck the man. Fuck the evil Rothschilds and evil rich cocksuckers who manipulate our money supply so that we have less and less each year. But really, http://www.usinflationcalculator.com/ 26 percent over ten years is pretty modest. Most conservative investments would have kept your bucks at par or better.
Bitcoin on the other hand, is encouraging people NOT to invest in the economy. That finite number of BTC is again stimuli. It's signalling users that hey there's a scarce amount in the world and hey there's been these huge jumps in prices. Next time it goes down, IM ALL IN. So we'll see this ridiculous volatility, while merchants will slowly catch on that it's probably a bad fucking idea to accept these things when there's clearly a big fucking BTC bubble (see above as to why it's a bad idea). And so we'll see this cyclical up and down. This deflationary spiral of people keeping BTC in their pants so that they can make money off the next guy will not be conducive to it being a futuristic currency. The silk road was never BTC's Achilles heal, it was built into the system.
The real and imagined problems with Bitcoin[part1]
The more you read about bitcoin, the more patterns will emerge as to what people think will be the reason bitcoin cannot succeed. Many of these concerns are silly... and others are worthy of further thinking. So in no particular order I shall list them Perhaps the worst argument of all against bitcoin is that it's creator is a mystery. This is a bad argument. It's like saying that your software calculator is evil or bad because you do not know the name of the programmer who wrote it. Bitcoin is just a program and a program is just a tool. The source code is open and transparent. Everyone involved knows the rules and there is no mystery. So why would no one want to take credit then for the creation of something so important? I can think of one glaring reason among others.... you will notice that bitcoin investors will typically not answer questions about how many bitcoin they own. That's the smart thing to do. It's estimated that satoshi has somewhere between 1-2 million bitcoins. If his identity was known people might try to steal it from him. They might kidnap members of his family or people that he loves. Having that many bitcoins and letting it be known is simply dangerous. Another silly argument against bitcoins is that it is a ponzi scheme. Bitcoin is no more a ponzi scheme than a stock is. If someone buys a stock and that company starts to go south the stock price will fall and the latest ones to buy in to the stock will lose the most. In a way that resembles a ponzi scheme... but that's all. The only way you could even claim that bitcoin resembles this is if you assume that it's going to fail. So right away anyone who calls it a scheme is telling you that it is going to fail and that they can predict the future. Another problem frequently cited around bitcoin is its volatility. It has been claimed that bitcoin can't be used as a currency because it is too volatile. The problem with this theory is that reality proves it wrong. Even during the times of its greatest volatility there are still transactions happening. People still use it as a currency. A merchant who accepts bitcoin can tie in with a company like coinbase and immediately convert to cash and assume no risk holding it. Things that are sold for bitcoins can be tied to the price of anything quite easily with simple programs. You could have an online store and have everything priced in bitcoins and have the amounts tied to something like dollars or even gold. This doesn't mean volatility isn't a problem. It can make things pretty inconvenient , but it isn't as big of a deal as some people make it out to be. The reason why is because the volatility of bitcoin is linked to it's userbase. The userbase cannot increase (or decrease) exponentially forever. The amount of people joining or leaving bitcoin won't continually be changing by large amounts in short periods of time. Bitcoin is still in it's infancy so for the time being you can expect volatility. If all of the sudden you had 2 or 3 or 4 times as many people using the dollar as there was days before you would probably be seeing volatility with it too (despite how fast the Fed seems to be at creating new ones) . Just like a stock, the deeper the markets are the less volatility there is. Intrinsic value is another often cited problem with bitcoin. Some theorists claim that bitcoin needs an intrinsic value to enforce that it will always be worth something. Gold if not used as money can still be used as jewelry. Dollars, although not backed by gold, are backed by men with guns. Some people claim that bitcoin isn't just a currency but rather it is a network and that the intrinsic value of bitcoin is this network. What someone is really saying when they say that money needs intrinsic value is that it needs to be good at something besides being money to be good at being money. That's pretty unnecessary. All that intrinsic value does for gold as a store of value is create a psychological effect. It adds a price floor. But that price floor isn't the actual price and therefore it is only creating a psychological crutch. I'm not saying that it is entirely useless. A psychological crutch adds confidence and confidence is good. But it also adds burden. A money that is backed by something like gold is burdened by gold. Can you still instantly transport it across the world? Could you drop an empty safe in the ocean and then send it into the safe while it was sinking at a depth of over a mile? You can send bitcoins in that fashion. You could keep all the gold in some centralized place and send the money but then... that introduces storage costs and centralization and counterparty risks. Bitcoin obviously has value to some people and it is already used as a currency so to say it can't be a currency because of this reason or that is kind of ignorant. Many economists claim that bitcoin is doomed because it will lead to deflationary spirals. Why spend something now when you know it's going to be worth more tomorrow? is the oft-cited question. The problem is that economists have certain ideas and they try to fit reality to those ideas rather than their ideas to reality. There are three main counterpoints to this. THe most popular one is that there is a cost in deferring payment. Why buy a computer now when in a year you know you can get a more powerful one for the same price or cheaper? Because you need it now. Another counter point is that with bitcoin a deflationary spiral is essentially impossible because you will never get the whole market to agree that the price is going up. In any market... especially bitcoin you have bulls and you have bears. If the price suddenly rose 10 times you can bet that a lot of people would be trying to get rid of their bitcoins by "buying" goods or dollars with them. Nothing only goes up in value. If it did then it's chart would look like a straight line. Bitcoin doesn't have such a chart. Economists tend to look at bitcoin in isolation when they talk about deflation. But can the sudden and shortlived bubbles that bitcoin experiences harm the economy? If bitcoin was the only currency to exist then you could make the argument that merchants would suffer during these times because there was less spending. But we don't exist in such a world (and nor will there ever likely be a world where the only currency is just 1 digital cryptocurrency) . And even if we did ..... those periods of rapid deflation are not sustainable and short lived.
Bitcoin’s Recent Volatility Risks Deflationary Spiral, Could Undermine It as a Currency. Skype December 8, 2017 Technology Leave a comment 211 Views ... Bitcoin 1-day chart. Source: CoinMarketCap. After its third block subsidy halving completed, excitement has grown over the next price move for Bitcoin, which lost $1,200 in the run-up to the event at the weekend. Palihapitiya warns on “massive deflationary spiral” Earlier on Tuesday, the chairman of Virgin Galactic called Bitcoin the most “uncorrelated” asset to fiat markets as the U.S ... While this common form of criticism can be made against the viability of Bitcoin, the truth is that the deflationary spiral is a condition that affects standard fractional reserve banking systems. The reason Bitcoin cannot be affected by this kind of deflation is that it is an entirely different kind of currency. The Problem with Traditional Currencies. Traditional currencies like the U.S ... Bitcoin Eyes $9K as Billionaire VC Sees Dollar ‘Deflationary Spiral’ May 12, 2020. Bitcoin was fighting for $9,000 support on May 12 as more public praise surfaced amid continued dismal conditions for the world economy. Cryptocurrency market daily overview. Source: Coin360 ... Bitcoin’s Recent Volatility Risks Deflationary Spiral, Could Undermine It as a Currency. By Joel Hruska on December 8, 2017 at 8:40 am; Comment; This site may earn affiliate commissions from the ...
[Keith Weiner] Bitcoin Hyper Deflation Cheering for Bitcoin - MUST WATCH
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