Bitcoin is a Digital Risk Asset, Not a Currency – Ep. 276

Bitcoin is a Digital Risk Asset, Not a Currency – Ep. 276

Speculative Asset
Bitcoin is a digital risk asset, not a currency. If you own bitcoin you have an asset, but it is not a safe haven. A safe haven is an asset that is not likely to go down in comparison to another speculative investment. Bitcoin has been extremely volatile; it happens to be going up, but the price is based on speculation. Does anybody believe that bitcoin has less downside risk than the stock market?
Not a Currency
Bitcoin is not used as currency. They trade in bitcoins for dollars or euros or yen to buy things, but very few legal goods and services are priced in bitcoin. Because the price is highly volatile and backed by nothing, it can not be used as a currency. It is being used as an asset. The number of top retailers who accept Bitpay is diminishing, not increasing. Merchants will try to make it easy to trade bitcoin for currency which would then buy goods and services. Most people who own bitcoin are not spending them; they are hoarding them because they think they are going to keep going up.
Just Noise
At the end of the day, the realized gains from speculation in bitcoin are going to be overshadowed by the speculative losses. All the rest of it is just noise. The realized profits will be concentrated on a small group of people, whereas the realized losses will be dispersed among a larger population.
Reversing the Consequences
Bitcoin will end up achieving the opposite of its original goal, which was to challenge the power of central government, to disrupt money, that is would rein in government and have real commodity money in the same way FedEx upended the Post Office or Uber upended taxis. This is going to give more power to government, because when digital currencies collapse, the central bankers will say, "We told you so! This is what happens when you allow the free market to do what government should do. When the free market creates money it leads to disaster. You have to stick with currencies backed by government. "
No Joke
The original currencies that were created by the private sector, and not by government were issued by banks and backed by gold. Today, the private sector could issue digital currency backed by gold just like paper currency backed by gold. What gave the paper currency value was the gold backing. If any bank tried to issue paper currency backed by nothing, it would have been laughed out of existence. It would have been a joke, except now it's not a joke. People actually want digital currency backed by absolutely nothing.







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