Cryptocurrency

CloneOutWest

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It is both money and an investment. Here is a definition of "sound money" which I would argue bitcoin is:

Money that has the purchasing power determined by markets, independent of governments and political parties

You also bring to light another misnomer. Since blockchain is public it is much easier to trace then you think. As a total percent of transactions recent studies suggest dollars have a larger percent of overall transactions suspected as illicit then bitcoin.

The US dollar loses purchasing power YOY. It's value goes down It isn't stable. So comparatively, no I wouldn't buy bitcoin if it had an infinite supply potential like the dollar.
Here's another definition of "sound money":

Money not liable to sudden depreciation or appreciation in value.

Or...

Money is sound when its value is stable and it is thus able to perform its functions as a medium of exchange, a unit of account and a store of value.

Based on this definition, Bitcoin is nowhere near sound money. Could that change with time? Maybe but regularly losing 50%+ of it's value over the last few years hardly instills any confidence.

Also, is Bitcoin completely immune to regulation or crypto mining bans? If not, I fail to see how it's purchasing power is independent of governments and political parties. Can Bitcoin work in spite of regulations and bans? Sure, but it becomes much less attractive/valuable to most people if it's hard to use.

Also, just to add, I appreciate your openness to everyone's questions/skepticism.
 
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The closest thing we've ever seen to cryptocurrency is beanie babies. It has a value because people say it has a value.

The original idea wasn't a terrible one. A universal digital currency is intriguing, but the fact that it's not as easily recognizable/verifiable as other forms of money (and also therefore more easily abused/used to scam), makes it terribly inefficient and costly. If cryptocurrency had succeeded at being what it was supposed to be, it would be a terrible investment. It would be as boring and stable as a dollar. The fact that it succeeded (temporarily) as an investment made no logical sense. It's nothing...it's worthless...the last person holding the bag, holds nothing (not even a stuffed animal to give to their daughter).
 
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cyfanbr

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To your first point, Bitcoin also isn't backed by anything physical, so bitcoin and fiat money are no different. I agree that wages have not kept up with inflation, and that money has definitely flowed unevenly to the wealthy, but that seems to be divorced from what bitcoin is doing.

Like you said, bitcoin is fixed at 21m units. This makes bitcoin very susceptible to deflation, meaning the value of a bitcoin tomorrow is more than it is today. If bitcoin was to become a currency of the future, meaning more and more adoption and more use, then demand would constantly increase, while supply was constantly flat, causing the price to constantly rise. That's great if you're someone who bought BTC a couple years ago and didn't use it. It's terrible if you need to buy bitcoin in the future.

Economies generally hate deflation because it makes people not want to spend money. Why should I spend my BTC today if it will be worth more tomorrow? Inflation encourages spending since the value of your dollar today is worth less than tomorrow. Deflation can cause stagnant economies as every sits on their money. It's why the Federal Reserve likes to keep inflation at 2%, it is a slight nudge to keep the economy moving.

BTC is not solving anything for people at the bottom because if they can't afford a BTC today, then it becomes even harder for them to afford it tomorrow because the price should keep going up. Except now when everyone decides to dump their BTC and the value drops 50% over 6 months. Which is another reason why BTC sucks as a currency, it's incredibly volatile.
This thread moved fast today, and honestly I’m unable to keep up with all of it.

@melt very valid points. Ultimately, bitcoin has all the right properties to be a very good form of money, but it will not fulfill that role until mass adoption happens of course. It needs to become large enough where price doesn’t oscillate against other currencies or it needs to become the unit of account.

Think of it as an adoption curve. Currently the asset is in a phase of early adoption where value still building up. Once enough adoption occurs then it moves from an investment to a currency. Might never happen, but I think it is worth a bet on it.

A person does not need to afford a bitcoin. They can buy fractions of a bitcoin. There are 100M sats inside each bitcoin, so divisibility is not an issue. As far as helping the less fortunate, I’m not sure I followed your train of thought. I rather have a money that doesn’t lose its purchasing value than one that gets devaluated by a small group of non-elected officials.
 

aeroclone

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The closest thing we've ever seen to cryptocurrency is beanie babies. It has a value because people say it has a value.

The original idea wasn't a terrible one. A universal digital currency is intriguing, but the fact that it's not as easily recognizable/verifiable as other forms of money (and also therefore more easily abused/used to scam), makes it terribly inefficient and costly. If cryptocurrency had succeeded at being what it was supposed to be, it would be a terrible investment. It would be as boring and stable as a dollar. The fact that it succeeded (temporarily) as an investment made no logical sense. It's nothing...it's worthless...the last person holding the bag, holds nothing (not even a stuffed animal to give to their daughter).

Bingo. Pyramid scheme.
 

cyfanbr

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The closest thing we've ever seen to cryptocurrency is beanie babies. It has a value because people say it has a value.

The original idea wasn't a terrible one. A universal digital currency is intriguing, but the fact that it's not as easily recognizable/verifiable as other forms of money (and also therefore more easily abused/used to scam), makes it terribly inefficient and costly. If cryptocurrency had succeeded at being what it was supposed to be, it would be a terrible investment. It would be as boring and stable as a dollar. The fact that it succeeded (temporarily) as an investment made no logical sense. It's nothing...it's worthless...the last person holding the bag, holds nothing (not even a stuffed animal to give to their daughter).
I don’t think a transition like this happens this quickly. Ultimately I think countries with weaker currencies will adopt it first as they don’t have the luxury of the dollar. However, it might also never happen.

My personal experience was buying it as a small way to diversify my portfolio. Think it was a 3% position. If went to zero I wouldn’t lose any sleep, but if took off would definitely help my returns. Then over the next couple years I kept learning about the technology, and honestly became more convinced that it has a huge potential. Once again, not saying it will happen, but as you learn more about it it becomes very interesting.
 
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NATEizKING

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Question for the bitcoin bears in the room:

I sense some visceral reactions from some of you (and I have for some time) when it comes to bitcoin. I am curious as to why such strong negative feelings as opposed to indifference? I mean, there are plenty of investments of which I have limited knowledge or am not interested in. But I can't think of any investment I oppose to a strong degree.

I don't intend to debate. I am honestly wondering why some have such strong negative emotion towards bitcoin.

Thanks to anyone willing to share!
I'm not a bear or bull. What it comes down to for me is I can't guess a future value of crypto so it's just a swing trade if I'm in or out. With a company (which I've lost my ass in this market recently in speculative plays, especially as a bio guy) I can at least determine what I think they can provide to the market and get in revenue. With crypto it's all just what people think it will be worth. It's hard to place a value on it as it's just what people think it's worth.
 
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JustAnotherTimeline

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Here's another definition of "sound money":

Money not liable to sudden depreciation or appreciation in value.

Or...

Money is sound when its value is stable and it is thus able to perform its functions as a medium of exchange, a unit of account and a store of value.

Based on this definition, Bitcoin is nowhere near sound money. Could that change with time? Maybe but regularly losing 50%+ of it's value over the last few years hardly instills any confidence.

Also, is Bitcoin completely immune to regulation or crypto mining bans? If not, I fail to see how it's purchasing power is independent of governments and political parties. Can Bitcoin work in spite of regulations and bans? Sure, but it becomes much less attractive/valuable to most people if it's hard to use.

Also, just to add, I appreciate your openness to everyone's questions/skepticism.

Fair enough. Yes, Bitcoin definitely doesn't meet the criteria of that definition.

Crypto is currently attracting the best finance and tech talent away from the legacy banking sector. Whether people like it or not much innovation is occuring in the crypto/web 3 space which includes the metaverse concept. Countries don't want to risk being an enemy of crypto/web3 and lose talent and the tech race to other countries. Mining is part of the equation. For example, if the US decided to ban it like China that would cause the miners to go to greener pastures and the US would no longer be considered as crypto friendly. The US would take a step back in the tech arms race so to speak. I don't think the US would do that because it values the race imo.

As an aside, allow me the opportunity to carve out a place for Bitcoin for you. Can you suggest anything else that accomplishes the following? Pretend the term Bitcoin doesn't exist and we are after the following criteria

1. No discrimination. Anyone in the world can have an account x in seconds
2. Fixed total supply of x
3. Fungible - x always equals x
4. Solves the double spend problem.
5. Easily sent in minutes worldwide
6. Transaction occurs outside any oversight

I am not asking if you are interested in x asset. I am wondering f you can come up with any other alternative to Bitcoin. And, I am wondering if you can see why this software holds value to some people.

Thanks for the chat!
 

JustAnotherTimeline

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This thread moved fast today, and honestly I’m unable to keep up with all of it.

@melt very valid points. Ultimately, bitcoin has all the right properties to be a very good form of money, but it will not fulfill that role until mass adoption happens of course. It needs to become large enough where price doesn’t oscillate against other currencies or it needs to become the unit of account.

Think of it as an adoption curve. Currently the asset is in a phase of early adoption where value still building up. Once enough adoption occurs then it moves from an investment to a currency. Might never happen, but I think it is worth a bet on it.

A person does not need to afford a bitcoin. They can buy fractions of a bitcoin. There are 100M sats inside each bitcoin, so divisibility is not an issue. As far as helping the less fortunate, I’m not sure I followed your train of thought. I rather have a money that doesn’t lose its purchasing value than one that gets devaluated by a small group of non-elected officials.

Couldn't have said it any better. This is spot on.
 
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I don’t think a transition like this happens this quickly. Ultimately I think countries with weaker currencies will adopt it first as they don’t have the luxury of the dollar. However, it might also never happen.

My personal experience was buying it as a small way to diversify my portfolio. Think it was a 3% position. If went to zero I wouldn’t lose any sleep, but if took off would definitely help my returns. Then over the next couple years I kept learning about the technology, and honestly became more convinced that it has a huge potential. Once again, not saying it will happen, but as you learn more about it it becomes very interesting.
I think what you said in your second paragraph has a lot to do with why the value of crypto (and bitcoin) rose so dramatically. I suppose my saying there was no logical reason for it doing well was overly-simplistic. The rise of bitcoin follows the trend line that we also see when you look at the overly exuberant market that occurred from 2016 until the beginning of this year, and in particular it got a massive shot in the arm when the COVID stimulus packages were given out. People were given large amounts of free money. Why not throw a bit into speculative plays?

Cryptocurrencies, Gamestop, AMC, marijuana stocks...all looking like the benefactors of excess cash that flowed into people's checking accounts. Now all down approximately 50% since the beginning of the year...
 
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nocsious3

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The price of bitcoin could be manipulated just like ANY tradable asset especially with derivatives.

But you can't manipulate the software. So, the supply, hashing algorithm, etc cannot be manipulated. If you change your USA perspective of having dollar as the unit of account to considering bitcoin as unit of account then you will see that it in fact cannot be manipulated.

On the other hand, the dollar is under constant manipulat

I will just disagree vehemently with this. The reason why Apple has value is it produces goods and services that people want to buy. That's fundamentally different than crypto in many, many many cases.


Probably, but honestly I don't think this is very indicative of anything. If you look at the .com bust of 2000, there were a fairly high % of trash companies that just put .com in their name and took seed money from dummies then went to zero. Same thing is going to happen in Crypto now and IMO it's a natural cycle. I think Bitcoin will be around forever for example.

I just think the time to buy Bitcoin was in 2013 if you wanted to actually get wealthy, just like the time to buy Apple was in 2001 if you wanted to get wealthy. You can still buy both and they are probably good overall investments but I'm not going to go crazy on them like the crypto evangelists

I will just disagree vehemently with this. The reason why Apple has value is it produces goods and services that people want to buy. That's fundamentally different than crypto in many, many many cases.


Probably, but honestly I don't think this is very indicative of anything. If you look at the .com bust of 2000, there were a fairly high % of trash companies that just put .com in their name and took seed money from dummies then went to zero. Same thing is going to happen in Crypto now and IMO it's a natural cycle. I think Bitcoin will be around forever for example.

I just think the time to buy Bitcoin was in 2013 if you wanted to actually get wealthy, just like the time to buy Apple was in 2001 if you wanted to get wealthy. You can still buy both and they are probably good overall investments but I'm not going to go crazy on them like the crypto evangelists.
Sound money. Lol. What is a bitcoin? It's the answer to a digital math problem, cryptographically locked up with a password, of which their is a total set of 21,000,000. Nothing about that is money.

The analog equivalent is a 4th grade teacher assigning a set of math problems to her class and making it a race to solve each one. When the problem is solved, the teacher stamps the paper with the correct answer and the student locks it in their desk.

The teacher can make a new set of math problems the next day.

Unless you tokenize something of real value, and peg the token to represent the tangible asset, it's just a stamp from the teacher saying good job Jimmy, you got the correct answer.

There are protocols vastly more efficient, faster, and allow for tokenization, escrow, automatic execution of contracts, auditability, KYC, etc. Some of these protocol and tokens will be adopted and have value in one of two ways.

1. The token and network solve a business problem and do so in a more economical manner than current systems. (What Ethereuum claims to do but does not)
2. The token is pegged to sovereign currencies and assigned a value much like gold used to be pegged to the dollar.

Why most will go to zero? Survival of the fittest. Most aren't purpose built to solve any problem and are just a programmer in a garage throwing crap at the wall, or just scams, including scams run by financial institutions in the shadows. Many have exploitable problems in their code, structure, or security. Many aren't easy to upgrade the cipher if it becomes economical to attack it. Proof of work and even proof of stake consensus has inherent drawbacks.

Bitcoin has first mover advantage, and tremendous dark money behind it. It's not anything what the Twitter influencers and YouTube stars say it is. You're getting sold a bill of goods that has served a sinister purpose since inception, but that usefulness is running it's course.

This post will mostly fall on deaf ears.
 

nocsious3

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Now that Luna has been killed, Binance coin might be next to fall. I don't know the order, but fall they will like a chain of dominos.
 

cyfanbr

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I think what you said in your second paragraph has a lot to do with why the value of crypto (and bitcoin) rose so dramatically. I suppose my saying there was no logical reason for it doing well was overly-simplistic. The rise of bitcoin follows the trend line that we also see when you look at the overly exuberant market that occurred from 2016 until the beginning of this year, and in particular it got a massive shot in the arm when the COVID stimulus packages were given out. People were given large amounts of free money. Why not throw a bit into speculative plays?

Cryptocurrencies, Gamestop, AMC, marijuana stocks...all looking like the benefactors of excess cash that flowed into people's checking accounts. Now all down approximately 50% since the beginning of the year...
I 100% agree with you here, but I’d argue that this effect went beyond just the speculative assets. The tweet below looks and stock market performance versus the amount of money in circulation. Ultimately when you account for all of the money printing then markets were not really up. Now the analysis below is not 100% accurate as it accounts as all of that money going into the markets, but still gives you a fair directional analysis.

The current money/fiat system might still be able to be saved, but at this point it is very difficult and in my opinion very unlikely. Policia s and the FED just don’t have the right incentives to make that fix. The days of an open and fair market are long gone. Progress slows down when you don’t let those that made mistakes fail.

 

BryceC

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I'm indifferent to mildly positive on Bitcoin and cryptocurrency in the sense I think there's a reasonable chance they stick around and have some usefulness in the medium/long term. I'm strongly negative on the overall culture of the cryptocurrency, blockchain enthusiast, and Web 3.0 world. Essentially, it's a group of people who believe that all the problems of the world will be magically solved because we've invented a secure software algorithm. It's frustrating, because it catches up people in hype and magical thinking, distracting from solving real problems. It's the equivalent of saying "We are writing our contracts in ink now rather than pencil! There will never be fraud or contract disputes ever again!"

I also dislike those who are "hard money" enthusiasts because as often as not they tend to believe they're smarter than everyone else and that fiat currency is some kind of global conspiracy created to transfer power to world governments and some kind of cabal of wealthy elites. That's just not how the real world works. The world's economies shift from harder to softer money and back over time based on the issues facing the economy at the time. There is no true, perfect "hard money" because even the supply of cryptocurrency does vary over time and there is no objective intrinsic value of anything, all economic value is relative. Whether they be gold bugs or crypto enthusiasts, they annoy me equally. The world's problems would not be solved if we were to simply shift to a hard money system permanently - that should be obvious and if you're a person who's willing to think enough to realize we can't just keep printing money forever, you should also be able to think enough to realize we can't keep the money supply static either.

Nothing personal against any individual, just my feelings on the general culture.

Agreed. Any aggression I have around the coins are the online cult members who have bought into an idea that this is going to revolutionize the world. It might be a part of some future but it's not going to revolutionary at all IMO. We're 10 years into Bitcoin. 10 years after the internet hit the world was vastly different.

The benefits are obvious but the downsides make bitcoin zero a real possibility whether people like it or not. If there is a 9/11 type attack on America in the next week that we find out was funded by bitcoin and other cryptocurrencies, the government will absolutely smash them and that will make mass adoption extremely unlikely. If we find out some big drug cartel has been doing the same then the same thing happens. When things are allowed to expand unfettered by regulation the growth possibilities are greater. There could be something that comes along that's better than bitcoin technology wise we just don't know about. Technology, especially AI is getting better at an extremely quick rate. GPT3 and stuff like DALL-E are absolutely insane when you look at what GPT2 was even 2 years ago. It's 14 year old technology now and stuff moves quickly.
 

TrailCy

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I am not discounting the people that have made money trading bitcoin. To me, that doens't justify its existance.

For a decentralized currency, it was created by a guy who wrote an algorithm. Its defernders talk about how no one can control it, yet put endless blind faith into a guy and his coding. At least with fiat currency there is some transparency, whether you agree with decisions or not.

Let's pretend a bitcoin is a house. There will only ever be 21,000 houses. The population keeps growing and growing, yet we cannot build more houses. Those who own the houses will get rich as their value goes up. The rest of society will not as they need to pay more to get into a house. Inflation or deflation, the result is the same. A select few holding onto their "asset" for as long as possible. If you only ever had 21,000 houses,. why would you barter/trade/transact in real estate?

And to the question "what currency can solve the following issues..."

Why do those issues need to be solved? Why do we need untraceable, instantaneous movement of unlimited amounts of money? Go back to my house example... the question could be reframed as "Why do we need to know who owns the houses, when they're sold, and why they're sold?" Imagine the absolute corruption in the market if you couldn't build more houses and no one knew who owned/bought houses, and you couldn't do anything about it. How is this different?

Again, the fact people became millionaires investing in bitcoin early on is not proof of its inherent value to the greater society. People have made millions investing in art. Great. That doesn't help the other 7 billion people who are unable to do so.
 
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agrabes

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Fair enough. Yes, Bitcoin definitely doesn't meet the criteria of that definition.

Crypto is currently attracting the best finance and tech talent away from the legacy banking sector. Whether people like it or not much innovation is occuring in the crypto/web 3 space which includes the metaverse concept. Countries don't want to risk being an enemy of crypto/web3 and lose talent and the tech race to other countries. Mining is part of the equation. For example, if the US decided to ban it like China that would cause the miners to go to greener pastures and the US would no longer be considered as crypto friendly. The US would take a step back in the tech arms race so to speak. I don't think the US would do that because it values the race imo.

As an aside, allow me the opportunity to carve out a place for Bitcoin for you. Can you suggest anything else that accomplishes the following? Pretend the term Bitcoin doesn't exist and we are after the following criteria

1. No discrimination. Anyone in the world can have an account x in seconds
2. Fixed total supply of x
3. Fungible - x always equals x
4. Solves the double spend problem.
5. Easily sent in minutes worldwide
6. Transaction occurs outside any oversight

I am not asking if you are interested in x asset. I am wondering f you can come up with any other alternative to Bitcoin. And, I am wondering if you can see why this software holds value to some people.

Thanks for the chat!

Is it though? I've yet to see anything innovative come out of that space - the only thing I've seen is people recreating existing capabilities using different technology that is most often inferior to the existing capabilities but at best provides incremental improvement. Second Life in VR is still Second Life at the end of the day. Banking using the blockchain is still banking at the end of the day. Selling royalties using an NFT based smart contract on the Ethereum blockchain is still selling royalties based on a contract at the end of the day.

The invention of Bitcoin in 2009 was innovative, so was developing the concept of the distributed ledger. So far, no one has come up with a use case compelling enough to inspire widespread adoption for either of those yet. Is there something innovative - something that the average person will want to use - that is in development in the crypto/web3/metaverse space? For example - TikTok went from nothing to basically eating Twitter/Youtube/etc's lunch in a few years. We've yet to see that with Web3.

I 100% agree with you here, but I’d argue that this effect went beyond just the speculative assets. The tweet below looks and stock market performance versus the amount of money in circulation. Ultimately when you account for all of the money printing then markets were not really up. Now the analysis below is not 100% accurate as it accounts as all of that money going into the markets, but still gives you a fair directional analysis.

The current money/fiat system might still be able to be saved, but at this point it is very difficult and in my opinion very unlikely. Policia s and the FED just don’t have the right incentives to make that fix. The days of an open and fair market are long gone. Progress slows down when you don’t let those that made mistakes fail.


Preston Pysh is an interesting guy. I'm not going to say he isn't a successful investor or that he isn't smart, but he went off the deep end into crypto evangelist territory a few years ago. I listen to his (former) podcast We Study Billionaires which he was essentially kicked off of because he was so far into the crypto world that he couldn't even talk about regular investments and economics anymore. And that podcast is basically a bunch of tech bros that buy into every hyped up buzzword you have to grit your teeth to listen to half the time as it is, for him to be booted out of it is really saying something. His argument that inflation should be measured as the change in M2 money supply is just BS. I've always wanted to see a guy like him truly debate someone who is an expert and is not down the rabbit hole of hard money/crypto.
 
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I 100% agree with you here, but I’d argue that this effect went beyond just the speculative assets. The tweet below looks and stock market performance versus the amount of money in circulation. Ultimately when you account for all of the money printing then markets were not really up. Now the analysis below is not 100% accurate as it accounts as all of that money going into the markets, but still gives you a fair directional analysis.

The current money/fiat system might still be able to be saved, but at this point it is very difficult and in my opinion very unlikely. Policia s and the FED just don’t have the right incentives to make that fix. The days of an open and fair market are long gone. Progress slows down when you don’t let those that made mistakes fail.

I think the correction we’re seeing in the markets is evidence the system still works…thankfully. I don’t like losing money, but I’m very encouraged that regardless of how (not) intelligent the people are who are in charge, the markets will eventually correct themselves.

I certainly don’t begrudge anyone who has made money investing in crypto I have a friend who was able to let his wife stop working because of money they made, but now that rates are going up and money is tightening (and people have spent some of the extra savings they built up on houses, cars, finally getting out for a vacation or two, etc.), I think we’re seeing money being pulled out of these speculative plays at a higher rate, so people who believe in cryptocurrency should take a hard look at the fundamentals and decide if they believe there’s a viable path to crypto being used in the future…or if they just think it’s a good idea in theory (but perhaps nothing being offered is going to work).

I invested a small amount of money several years back in debit cards that essentially had a rolling digital pin system built into them. It was a good idea for security purposes, but the cost of the cards ended up being too high to get the buy-in needed…so it failed. From my vantage point, crypto has similarly failed. It is only worth something because of its limited supply…and the speculation of “what if this works?” As people cash in on their “winnings” from an investment perspective, and that drives people to look at the fundamentals…and they largely say this doesn’t work…it all goes to zero. It’s not going to be any different than beanie babies…or confederacy money.

Of course I could be wrong, but in my opinion the fundamentals have to change/improve. You should believe that will happen if you remain invested.
 

Clark

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I am not discounting the people that have made money trading bitcoin. To me, that doens't justify its existance.

For a decentralized currency, it was created by a guy who wrote an algorithm. Its defernders talk about how no one can control it, yet put endless blind faith into a guy and his coding. At least with fiat currency there is some transparency, whether you agree with decisions or not.

Let's pretend a bitcoin is a house. There will only ever be 21,000 houses. The population keeps growing and growing, yet we cannot build more houses. Those who own the houses will get rich as their value goes up. The rest of society will not as they need to pay more to get into a house. Inflation or deflation, the result is the same. A select few holding onto their "asset" for as long as possible. If you only ever had 21,000 houses,. why would you barter/trade/transact in real estate?

And to the question "what currency can solve the following issues..."

Why do those issues need to be solved? Why do we need untraceable, instantaneous movement of unlimited amounts of money? Go back to my house example... the question could be reframed as "Why do we need to know who owns the houses, when they're sold, and why they're sold?" Imagine the absolute corruption in the market if you couldn't build more houses and no one knew who owned/bought houses, and you couldn't do anything about it. How is this different?

Again, the fact people became millionaires investing in bitcoin early on is not proof of its inherent value to the greater society. People have made millions investing in art. Great. That doesn't help the other 7 billion people who are unable to do so.

I think the better analogy is land, not a house. Bitcoin can be divided into fractions and a house cannot.