There are two core economic problems with Bitcoin as I see it.
The first is that it's not legal tender. It's a collectible hashtag. This means that the only people who can use Bitcoin as a replacement for money are other Bitcoin collectors. Legal tender, on the other hand, must be accepted for all debts "public or private".
The second issue is that Bitcoin is a fixed currency. I know that some "Libertarian" economists prefer this (e.g., the gold standard) and preach the evils of inflation etc, but ultimately the quantity of money has a natural value of goods and services in an economy (as a result of the first issue). Everything else depreciates; make money something that doesn't depreciate then you have a liquidity death spiral as it becomes the ultimate commodity.
As a result of the two, let me add another prediction. #17. Bitcoin ownership will concentrate and the remaining owners of the collectible will become more fanatic in keeping and expanding their collection even as aggregate value declines.
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Date: 2015-02-02 08:34 pm (UTC)The first is that it's not legal tender. It's a collectible hashtag. This means that the only people who can use Bitcoin as a replacement for money are other Bitcoin collectors. Legal tender, on the other hand, must be accepted for all debts "public or private".
The second issue is that Bitcoin is a fixed currency. I know that some "Libertarian" economists prefer this (e.g., the gold standard) and preach the evils of inflation etc, but ultimately the quantity of money has a natural value of goods and services in an economy (as a result of the first issue). Everything else depreciates; make money something that doesn't depreciate then you have a liquidity death spiral as it becomes the ultimate commodity.
As a result of the two, let me add another prediction. #17. Bitcoin ownership will concentrate and the remaining owners of the collectible will become more fanatic in keeping and expanding their collection even as aggregate value declines.