Or, you can trade BTC for a home, which i said i would do. No need for intermediary mediums of exchange. In valuing the BTC for my home, i might be thinking about points of reference, but i don't need to tell you about my references. It's worth 68,000 oranges right now, imo. But i generally use a reference point that everyone can understand, which is the most ubiquitous medium of exchange. The most ubiquitous medium of exchange, like oranges, is not necessarily the best store of value though. But i am interested in the ability to exange my BTC for any good or service in the world. To do that i have to think in terms of local currency. It's possible BTC, through it's lightning layer, could be the most ubiquitous, sometime down the road, becoming the go-to reference point for all goods and services. This requires political will, which we don't have right now. What i'm saying is if my home was in the Philippines, i might reference pesos when making an agreement to exchange BTC for my home. If i was in Iceland, i might reference the price of ice when deciding how much my home is worth...in BTC. Note, all currencies are actually compared to other currencies to help determine their value. All forex pairs are just that, PAIRS. The price of anything will always be paired to something else in comparison.
Which means it has no value in it's own right. It must be compared to something already established. That means it has no intrinsic value. And no, all currencies are not paired to another currency. Every currency on this planet is compared to the USD. Every currency not paired to the USD is computed through the exchange rate through other currencies to get the USD value. So again, here is the big question... What is your house worth in BTC, without equating it to the USD? Hamananana! There is no answer.
Well that is politics, and there is always going to be something "established" before a new thing replaces it. If anything is compared to the USD, it's for similar reasons measurements in the world are either metric or imperial. That was political. Doesn't mean imperial is better. Politically, if BTC were made, by fiat, the standard of exchange, it would be, and could be. Forcing standards does not make the standard the best store of value. The USD is generally maintained to lose 2% per year, so in 50 years it goes to zero relative to something that does not depreciate so quickly, and maintains integrity instead. Integrity is maintained by a non-political distribution and creation of the asset. People will eventually figure out which has the most integrity, in which to store value.
Still, the USD is compared to most other currencies. People are constantly evaluating whether it deserves to be "stronger" versus "weaker". Few are "pegged" to the dollar, if that's what you are suggesting. It's only a coincidence if anyone references USD, and would usually be for the purpose of buying something, like oil, that can only be bought with USD. Other than that, can you give any examples why anyone would need to get USD value, other than the threat of war? Ok, i'll take three BTC right now for my home.
He may have made his presentation before BTC became 1:1 correlated with the Nasdaq. So the logic goes like this: BTC = worth zero. BTC 1:1 correlated to Nasdaq. Therefore, Nasdaq = worth zero.
The relevant question is: why is bitcoin not worth 0? The simple answer: in 0 or negative interest rate environment Ponzi schemes occur. What will a BTC holder or new investor prefer between an asset worth $36000 (at over 100% volatility) or USD yielding over 2% soon?
Interesting discussion, and thank you for keeping it simple. Unlike Taleb. I think Overnight and Good1 are talking past each other, because one wants to equate BTC to a currency to justify its uselessness, while the other equates BTC to a store of value, like a virtual safe deposit box or gold. Or maybe I'm wrong. I'm trying to understand what BTC fundamentally displaces that is not politically motivated. I've heard the libertarian/anarchist argument which I see as precisely why BTC is struggling to make a point. Let's be real, BTC will not displace government control over currency. Currency manipulation by governments, businesses and individuals has existed since currency was invented. Governments use it to affect other governments' policies. It's easier and cheaper than going to war. Anyone who thinks BTC is meant to strip that lever from government is diminishing its potential as something possibly more valuable. I'm still unsure what that may be.
Exactly. Zero interest rates have pumped up the stock markets, bitcoin, real estate and even gold over the last 13 years. When the risk free interest rate on cash is high enough (2% might not be high enough, i was thinking 4 to 6%). Very few people will want to use Bitcoin as a store of value and the price will crash 90% or more.
But it's not, which is why the question failed. Inflation is technically the failure of the dollar. BTC is a hedge against the failure of the dollar measured by inflation (currently there is an anti-correlation between the dollar and BTC as measured by the DXY. When the dollar goes up, stock, and BTC go down, and visa versa). But the same can be said for other non-dollar assets, securities for example. They are referenced against the dollar. Their value is not the dollar. The real value of gold is not in dollars either. It's value is measured against the dollar, which has been upheld by the petro-for-dollar agreement, enforced by the threat of war. The dollar is a metric, like the metric system, or the imperial measurement system. The value of those measurement systems is their relative usefulness. Any currency that was declared "legal tender" by a nations government could become the prime metric by which other stores of value are measured. The dollar is useful as an ubiquitous medium of exchange for any and every single good or service in the nation, and to some extent, in other nations. BTC does not function as tender, let alone legal tender that anyone and everyone MUST use in exchange for any and all goods or services. It doesn't function as tender because it does not yet move fast enough, although that is being rectified by the lightning network, or something similar. It is mainly a store of value that moves fairly well. As such, it is stronger than the USD (as a store of value) but not yet as strong in terms of speed of transfer and ubiquity. It could be legal tender if a nation declared it so, for use within it's borders. With the speed of a layer two, it would be as useful, if not more than the USD, simply because it's inflation is better managed and transparent, rather than determined behind closed doors by cigar smoking oligarchs. Again, if i sold you my nipa hut in the Philippines for one BTC, i would tend to measure the transaction relative to the Peso, not the USD. This would be because if i lived there, i would have references, in my head, what, and how much of the goods and services i could buy with the local legal tender. Is the "real value" of BTC the Peso? No, it's the failure of all the fiat currencies of all nations to be good, honest stores of value, as well their failure to be transparent about their creation and distribution, which erodes their usefulness as stores of value. They have only always been fairly good as mediums of exchange, relative to all known goods and services. As such, they function like grease in the wheels of the economy. BTC could function as such, if given the chance. That is a political question. Meanwhile, it has one basic job: reliably store value and make stored value reasonably movable from one wallet to another across the globe. The ubiquitous measurement of exchange (the currency of any given nation) will be a reference point for measurement of properties and commodities. The value of those properties (BTC is like a property) and commodities is not the currency.