Quote:
Originally Posted by Fuzz
The difference is that the stock market for the most part is backed by tangible assets, for which people are betting on the profitability, or future profitability of the company. That is, that they have the ability to generate income. Real estate is the bet on the value of a tangible asset to increase.
Bitcoin is a bet that someone else will pay you more for it later, but it's not really based on anything but scarcity. Which is to say you are betting almost entirely on human behavior, not on the underlying asset and its value. And it's fine if people want to do that, but you, know, recognize that is what it is. If it was more than that, we'd see effective use cases for now, for which we've been told existed a decade ago, and yet...
I also don't think all digital currencies are bad, or destined to go the way of Bitcoin. But Bitcoin's limiting factors make it baffling as to how it can do what people say is the source of it's future value. It just doesn't make sense, other than it is the first, and most well known. So...it's basically won the popularity contest.
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I think we all agree that Bitcoin is pretty terrible for day-to-day transactions. It’s too slow and uses up too much energy. There are probably many other cryptos that are better suited for business and transactions.
And I think we can also agree that Bitcoin has no intrinsic value. But many things we trust have no intrinsic value…such as the cash in our wallets, or numbers on our bank statement… they only have value because we collectively agree they have value. Those agreements are backed by a massive entity, which make them all relatively safe…but in the end, it all comes down to some sort of collective trust.
So for sure, Bitcoin is terrible for day-to-day transactions, and its value is not intrinsic. But I wouldn’t be so hasty to discount the “store of value” angle…because I do think there is a real need for one in the digital world. If Bitcoin can ever become the defacto digital “store of value” for a large enough collective, I don’t think it needs to have any other practical use. Being “digital gold” would in itself would quite worthy to many people and corporations, especially in many countries where it’s a daily battle with the degrading purchasing power of their fiat currency.
If you think about it, gold doesn’t have a particularly huge practical or industrial use either, (that’s more of a silver thing) and is mostly just used for jewelry and as a store of value. Like Bitcoin, it is also pretty bad for day-to-day transactions (imagine everyone having to walk around with a scale and purity tester) or across distances. So gold’s primary purpose is as a store of value, and I think that’s what a lot of people are hoping for with Bitcoin. Personally, I like having something backed by a physical entity, but there’s been a whole generation of people growing up in the digital world, so I’m not surprised they want their “gold” to be digital too.
To achieve that type of status, the best thing that could happen to Bitcoin is for it to become stable and predicable. No wild swings… just a boring and relatively steady trend upward, that perhaps loosely tracks inflation or something. The more boring an predictable it can get, the better. Having said that, if it ever does reach that status…it will have quite a fight on its hands with Governments and Central Banks. Countries use their currencies as economic tools (some may say weapons), and I doubt that they want to give up that type of control. Hence their desire for CBDCs of course.