BITCOIN

Adyinvestment

fwor said:

Now some would argue that eventually everyone will be able to pay for anything natively in Bitcoin - but I don't see any sign of that happening any time soon. Probably the biggest reason is the instability in the "value" of Bitcoin, and there's no realistic prospect of that improving in the foreseeable future.

I am not sure what you count as a sign, but there are plenty of ways to use Bitcoin the same as Fiat.

All the worlds biggest payment processors now offer options to spend in Bitcoin...Visa, Mastercard, Paypal, Stripe, Shopify Payments etc

My mate paid for my fish and chips a couple of weeks ago with Bitcoin, I would say that was a pretty normal transaction.

The instability of the Bitcoin value is irrelevant for the retailers (in fact they would not even know Bitcoin was used) as the retailer will always get the fiat amount they are due.

fwor

Adyinvestment said:

The instability of the Bitcoin value is irrelevant for the retailers (in fact they would not even know Bitcoin was used) as the retailer will always get the fiat amount they are due.

It's not irrelevant if you've paid for your stock in Sterling and you don't know how much Sterling you'll get for your Bitcoin because it can move by relatively large amounts in a matter of minutes. There is an element of risk in that - and you can bet that the retailer is not the one who will be paying to cover that risk.

Dalby84UK

fwor said: Unfortunately, you've missed one simple fact: there is no link between the effects of inflation on a fiat currency and the "value" of Bitcoin in that currency. Take, for example, a rate of inflation of 5% for someone whose local currency is Sterling. There is simply no mechanism that forces the "value" of Bitcoin to go up relative to Sterling by 5%. It might do, or it might not.

All fiat currencies will continue to inflate towards less purchasing power, yes at different rates but they still will because their governments have no other way out now except to print more money whenever they run out, the US the last 2 years printed 50% of the total supply of dollars.

Heres two lovely charts for you to mull over:

btw see that peak on the right it will probably be where the smaller one is in 5-10 years if they keep those printing machines running

Adyinvestment

fwor said:

Adyinvestment said:

The instability of the Bitcoin value is irrelevant for the retailers (in fact they would not even know Bitcoin was used) as the retailer will always get the fiat amount they are due.

It's not irrelevant if you've paid for your stock in Sterling and you don't know how much Sterling you'll get for your Bitcoin because it can move by relatively large amounts in a matter of minutes. There is an element of risk in that - and you can bet that the retailer is not the one who will be paying to cover that risk.

As I said, it is irrelevant to the retailer, they will always get what is due.

I would say it is similar to using your credit card abroad, you won't know the exact exchange rate you are paying at the precise time, although my understanding is the transactions are all in real time (even if Bitcoin is a lot more volatile than Fiat) so you should know reasonably well.

fwor

Those graphs are irrelevant, because there is no link between local currency inflation and the exchange rate between that local currency and Bitcoin.

If you can't pay for things directly with Bitcoin then you simply pay the inflation when you exchange back to local currency.

Here's an example:

Let's say you buy £1000 worth of Bitcoin and keep it for a year, during which time inflation is, say, 10%. Is there some mechanism that means that when you sell a year later you get £1100 back? No - there is no such mechanism. The "value" of Bitcoin is purely driven by sentiment and nothing else. So it does not give the protection from inflation that you say it will.

In almost very case, when people talk about paying with Bitcoin directly, they are doing nothing of the sort. All you are getting is a local currency purchase with a currency exchange bolted onto the front. That is NOT paying natively in Bitcoin. The retailer gets rid of the Bitcoin at the earliest opportunity to remove the exchange rate risk.

Dalby84UK

fwor said: Let's say you buy £1000 worth of Bitcoin and keep it for a year, during which time inflation is, say, 10%. Is there some mechanism that means that when you sell a year later you get £1100 back? No - there is no such mechanism. 

Yes but by your logic you are only going to be happy if you find a place to leave your money where you get guaranteed 10% return with 0% risk and 0% price fluctuation? You are talking about the holy grail my friend, even gold wont give you that. But looking back historically it has gained over major fiat currencies USD/GBP on average 120-150% per year over the last 10 years, ill take that average over the ups and downs

fwor

Dalby84UK said:

Yes but by your logic you are only going to be happy if you find a place to leave your money where you get guaranteed 10% return with 0% risk and 0% price fluctuation?

Not at all - I don't expect to get a return at the moment that will match inflation.

What I'm pointing out is that your suggestion that Bitcoin somehow protects you from inflation is wrong - it doesn't. The gains that you refer to above have nothing at all to do with inflation. They are solely down to the speculative nature of Bitcoin, as are the recent losses.

Reaper

There is another problem with the claim Bitcoin is non-inflationary, which is that you are looking at it in isolation.

There are currently over 18,000 different crypto currencies, almost all of them creating "value" out of thin air without anything to back them up.

Investors (or "speculators") have a choice which one to buy, or even create their own. Having an almost infinite supply and limited demand will undoubtably turn out to be inflationary.

Frequentlyhere

@fwor is right, @Dalby84UK

The other thing you're missing is that even if it can't always keep up with inflation, cash does have a yield, whilst Bitcoin does not. That graph doesn't take into account that no-one (ok very few) keeps their cash under their mattress for decades - it goes to work, invested at banks and in investments.

In this respect (alone), BTC's prospects are more like gold. Zero-yielding and very much hostage to the whims of the crowd. It's demonstrably not an inflation hedge, and walks it's own path. Gold's long term real return is only just above inflation itself, and with huge volatility.

If that was the end of the story, we could perhaps just think of BTC as an interesting quirky asset to hold a small amount of as part of a diversified portfolio. However, unfortunately BTC carries greater risks. Gold has at least some intrinsic value, and has been an item deemed desirable for thousands of years, it isn't just lines of code just over 10 years old.
Meanwhile, Gold's fortunes aren't tied to rather questionable stablecoins which, when they implode, might have dramatic consequences.
Then there's the greater difficulty of storing BTC safely long term (as opposed to a regulated gold ETC), risk of theft, the environmental issues and on and on. All making it rather less than appealing for most people.

Oh, and you really need to stop trying to average out 10 years of highly speculative returns. By that logic, Gamestop (GME) with it's 2000% return in the last 2 years  is a better investment - and it's gone down 69% recently, so it must be an even better investment if it returns to it's average ;-)

Adyinvestment

Reaper said:

There is another problem with the claim Bitcoin is non-inflationary, which is that you are looking at it in isolation.

There are currently over 18,000 different crypto currencies, almost all of them creating "value" out of thin air without anything to back them up.

Investors (or "speculators") have a choice which one to buy, or even create their own. Having an almost infinite supply and limited demand will undoubtably turn out to be inflationary.

Agreed, although this is a Bitcoin thread and is supposed to be a discussion about Bitcoin, there is another general Crypto thread that was started to discuss other Crypto's but unfortunately alot of posters seem to think that Bitcoin is a general term for the whole Crypto space.