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Bitcoin could become ‘worthless’, Bank of England warns

theguardian.com

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Re: Bitcoin could become ‘worthless’, Bank of England warns

#41

Post by donatj »

bwb wrote: post #12
donatj wrote: post #6

Bitcoin just like any other currency, is worth exactly what people think it is worth. The entire financial system is basically a collective delusion of sorts. Any currency can become worthless as faith in it drops out.

Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here. Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

What would you propose the actual mechanism is for these giving fiat its value? Simply these things giving people more faith in fiat? Minimum wage laws, target interest rates and federal reserve shenanigans?

I think if anything all that give me less faith overall than something maintained by people who operate a currency for the love of it.

The value of my past work being tied to the success of something I have no control over, a machine that murders innocent people in drone strikes across the world?

That's not something I want to have faith in.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#42

Post by flyinglizard »

TheBlight wrote: post #7

Central bank fearmongers over decentralized currency that could potentially undermine its existence.

It’s much more likely the central bank is worried for the stability of the UK banking system in case of a Bitcoin collapse than Bitcoin somehow making the monetary system redundant.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#43

Post by dave_sullivan »

KptMarchewa wrote: post #28
impulser_ wrote: post #25

I think these central banks really underestimate the Bitcoin maximalists. These people will hold and buy Bitcoin for the rest of their lives. Half of all Bitcoin hasn't been moved in 2+ years, despite multiple -50% moves. The price went from 20k to 2k and most wallets didn't even have a coin move from it.

Let them hold all the way to zero.

If bitcoin keeps dropping 50% every week for the next 5 years, it still won't be zero. And every 50% drop, someone's thinking "Now could I double my money?"

I dunno, there are feedback mechanisms that could keep this thing alive for a long time. And if not BTC then certainly some crypto based on the concepts.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#44

Post by bwb »

authed wrote: post #16
esarbe wrote: post #13

Earlier quoted context omitted.

Could it? How? I'm honestly curious because I don't see how Bitcoin could be useful.

It is being used to transfer money in other countries to avoid the fiat shit show.

I will admit this is useful, although the fluctuations is a PITA and if you can do GUSD it is better. I've done this to pay contractors in Brazil and other places with high banking fees.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#45

Post by kergonath »

rjbwork wrote: post #15
bwb wrote: post #12

Earlier quoted context omitted.

Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here. Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

Don't forget that whole pesky "have to pay taxes to the state in their chosen currency under threat of the state monopoly on violence" thing. It is somewhat touched on in your first sentence, but at the end of the day, if you want to engage in productive economic activity in a particular jurisdiction, you must render what is Caesar's unto Caesar - and Caesar demands his preferred fiat.

Not only taxes. In a lot of countries private businesses are required to accept the local official currency as well.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#46

Post by md_ »

rjbwork wrote: post #33
md_ wrote: post #24

Earlier quoted context omitted.

Known as https://en.wikipedia.org/wiki/Chartalism , by the way. :) While these risks clearly _do_ apply to traditional currencies, I do think, as an investor, it's worth considering market cap (as a proxy for "social belief in") and history of stability. Bitcoin's market cap is probably (factoring in permanently lost coins) something like $750B, which makes it a bit smaller than, say, the Swiss franc, and its history…

Chartalism is more of an absolute. I don't claim that money has value only due to this reason, just that it is a significant component of the mass delusion.

Agreed, chartalism as the only explanation for assigned value is clearly empirically false. But as one mechanism, or perhaps one of the stable or reliable mechanisms, is somewhat convincing to me.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#47

Post by jack_pp »

meltedcapacitor wrote: post #4
Synaesthesia wrote: post #3

Bitcoin is a huge bubble, being driven up by speculation and some rather dodgy stablecoins. It's hard to say how long it will be able to sustain it's price, but if that bubble pops it could bring down the entire economy.

Or it could act as economic stimulus, as the exit dollars get invested in productive endeavours, rekt coiners have to get a job, and electricity and electronics become cheaper due to the capacity being freed from cryptomining.

As mining bitcoin is only worthwhile with ASICS there will be no flood of electronics entering the market at low prices, being used for something more "worthwhile". You could argue this is a feature and not a bug. I, as many people before me, thought about a cryptocurrency with a "useful" PoW like protein folding but if you would create such a thing it would be very susceptible to attack by govt or any big private actor because if you could mine cryptocurrency with general hardware then acquiring said hardware for an attack has 0 cost. You could acquire hardware for the attack, crash the currency then just use it for the protein folding.

So the fact that the mining hardware can't be used for anything else is a feature which makes bitcoin more secure against attack.

Re: Bitcoin could become ‘worthless’, Bank of England warns

#48

Post by bwb »

mattbrewsbytes wrote: post #40
donatj wrote: post #6

Bitcoin just like any other currency, is worth exactly what people think it is worth. The entire financial system is basically a collective delusion of sorts. Any currency can become worthless as faith in it drops out.

I would counter that Bitcoin is not a currency. A currency is used as a medium to exchange goods/services so you don't have to take goats down to the market to purchase seed. It operates more like a stock than a currency and can be moved by any person/firm/entity that has a few billion dollars. I would venture a guess that the number of individuals using bitcoin to purchase goods/services is less than a couple percen…

we might be underestimating the market for drugs as that seems like the primary use

Re: Bitcoin could become ‘worthless’, Bank of England warns

#49

Post by [deleted] »

zwirbl wrote: post #9
donatj wrote: post #6

Bitcoin just like any other currency, is worth exactly what people think it is worth. The entire financial system is basically a collective delusion of sorts. Any currency can become worthless as faith in it drops out.

This is often repeated, but it always ignores that there are state-level actors (often called a "state") propping up currencies, often supported by central banks. In this regard Bitcoin is definitely not "like any other currency". This is by no means exhaustive, there are a myriad of differences

[deleted]

Re: Bitcoin could become ‘worthless’, Bank of England warns

#50

Post by usrusr »

rjbwork wrote: post #15
bwb wrote: post #12

Earlier quoted context omitted.

Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here. Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

Don't forget that whole pesky "have to pay taxes to the state in their chosen currency under threat of the state monopoly on violence" thing. It is somewhat touched on in your first sentence, but at the end of the day, if you want to engage in productive economic activity in a particular jurisdiction, you must render what is Caesar's unto Caesar - and Caesar demands his preferred fiat.

At first glance ransomware might seem like a perfectly sufficient reimplemention of the taxes/violence thing. But that breaks down completely when you realize how willingly that particular Caesar would be taking whatever form of payment offered. I suppose it fully reverts to the theoretical grounding on taxes/violence of fiat once that ecosystem of shell consultancies set up for embargos and tax deductability comes into play.
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