Is an Increase in Use of Bitcoin in Transactions Positive or Negative for Price?

BrilliAnt

3 years ago

Scenario 3. The Fed has thrown in the towel on the greenback, and implemented a new CBDC. Paper money is no longer considered legal tender. Millions of people are thrust into a world where digital money is the only money. Which one wins?

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BrilliAnt

3 years ago

Reply to BrilliAnt

Hey Mish. Love your work, but I need help understanding your opinion on this. If you have the time, please try to answer my question. Because you seem to be making the case that Bitcoin can’t survive in a world of fiat – at least the US Dollar fiat. But if the Fed is forced to either default or allow hyperinflation (which is just another form of default), then the USD will have become the latest fiat to die its inevitable death. So in that scenario, will the new US CBDC survive, or will it be Bitcoin or something else?

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phil

3 years ago

What is the business case for bitcoin?

What problem does it solve?

I can think of a couple, and it has nothing to do with small transactions.

#1. Quick in and out for large movements of ‘venue’, outside of the banking system. (Note: I picked up the ‘venue’ word from an interview on youtube sponsored by either Forbes or Bloomberg, over a year ago. When the South African sharpie/participant used the word ‘venue’, I chuckled.)

#2. Completely related: avoiding capital controls. (In same interview, another sharpie said her firm was focusing on its use in Africa, and mentioned ‘capital control’ avoidance.)

Other question: what sets it apart from other faux cyber currencies? Is it indeed a breed by itself, and the only one at the end of the day? Self-custodial, is one way it’s been described. I guess that means, you don’t need an exchange, other than going in and out using an exchange like coinbase, I suppose. Is that right?

I see how it could provide an important service. That said, why wouldn’t it work at $1 a bitcoin? I don’t understand why it would be a good investment. Just a means to move ‘venue’, quickly.

Please advise.

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Business Man

3 years ago

This is a subject of big interest to me. I currently operate a business with heavy transaction volume on the customer side. I have contemplated accepting Bitcoin and promoting that, but then using it as an arbitrage opportunity. In other words, because of 1) volatility and 2) the lack of competitors offering this I can charge a premium. Then, at close each day I can set up a trade for my Bitcoin receipts into dollars.

If I charge a premium of, say, 20% of the current Bitcoin to dollar exchange rate, why don’t more vendors do this? I know there’s volatility, but is it more than 20% on any given day? What is my real risk on average, knowing that I’m holding Bitcoin for a few hours at most? And, Im guessing that I’d only be holding a few hundred dollars, or maybe a couple thousand at first.

Would Bitcoin holders be willing to purchase things at a 20% premium if I am upfront about that? I’m interested in anyone’s thoughts on this.

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MarkraD

3 years ago

Reply to Business Man

“If I charge a premium of, say, 20% of the current Bitcoin to dollar exchange rate, why don’t more vendors do this?”

While part of me thinks that’s a great way to capitalize on the bright and shiny bitcoin crazed kids, the other part thinks, for the headache of setting it up & associated learning curve…will it be around long enough?

Granted, I was asking that question almost a decade ago.

.

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Lisa_Hooker

3 years ago

Reply to Business Man

It is quite evident that Bitcoin holders are willing to buy nothing with real money.

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michiganmoon

3 years ago

Reply to Business Man

Why would anyone pay a 20% premium when they could just sell their BTC and pay you in USD?

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Business Man

3 years ago

Reply to michiganmoon

That’s the rub, isn’t? Why use Bitcoin at all?

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vanderlyn

3 years ago

bitcoin most likely was like darpa net and manhattan project and highways. government sponsored, inventions with many uses. bitcoin helped make ancient hawala blockchain money transfer system used for centuries, into a nice swift way to move “money” around world for black ops work, but obviously knowing block chain and crypto would have commercial uses perhaps.

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Anonandon

3 years ago

In other words everything that happens is bad for bitcoin.

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8dots

3 years ago

Our gov should promote fair and free competition, prevent unfair commercial practices without regulations, but we got creepto and Twitter.

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Zardoz

3 years ago

Reply to 8dots

Twitter’s now a bastion of free speech… except for that video of Elon getting booed at the Chapelle show.

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vanderlyn

3 years ago

Reply to Zardoz

ha ha ha. SF is polite. imagine him on stage in brooklyn. rotten tomatoes would be hurled. who cares how wealthy men are. if they are d bags. lefty or righty. a holes are a holes.

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MarkraD

3 years ago

One selling point for Bitcoin was it’s supposed hedge properties, like gold, it was supposed to move independent of stocks, this last year is proof positive of otherwise.

That aside, as a merchant, to consider accepting bitcoin is to acknowledge, had I received payment one year ago, those payments would now be worth as little as 25% now.

This then means I have to either sell or hedge Bitcoin payments, a pointless headache to facilitate a gimmick.

For the fact that I have yet not had a single client request to pay in crypto, there’s no reason to, but even if there were requests, I wouldn’t because of price volatility.

DXY price is at least partially regulated by the Fed & is far less volatile, Bitcoin price is regulated by demand of 20 yr old’s buying it, with no underlying asset or guarantee.

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Billy

3 years ago

In the late 80s baseball cards were run in limited quantities. There were cheaper brands like Topps who sold 10 times more than brands like Upperdeck. Fast forward 35 years later and they are now worth nothing. All of them.

Crypto was born during a time when governments were creating money out of thin air and giving it to anyone who made less than $150k/year. It was also during a time that online betting stopped because a virus shut down professional sports.

It was a great introduction made by someone that no one knows. -Mysterious!

It was a way to get the general public to look seriously at using a digital platform for money.

It’s also a way to get the citizens to think tracking is a good thing.

But in the end, long after we are all dead, Silver and Gold will be around. As long as people exist, it will be worth something.

As of 11/3/22 there are currently 1719 crypto currencies that are now worth nothing.

Cryptos are not actual coins that you can take a picture of however most of the time a Bitcoin is portrayed in a picture it’s Gold in color.

Luckily for me all of my silver was gifted to me late April 2011 when the fair market value was $47/ounce and they paid even more for it.

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HippyDippy

3 years ago

So far, all of the people telling me I need to “invest” in Bitcoin know less about crypto than I do, which isn’t much. I think the only way I might buy it is if Kramer shorts it.

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StukiMoi

3 years ago

Reply to HippyDippy

I have been pretty certain for awhile now, that the truly big break for Crypto, will come once BTC (or something) becomes entrenched and accepted enough that politicians and other officials can retire very, very well in offshore locations based on clandestine payments they received, while “serving the public” back home. With none being the wiser. That’s a major game changer. Not just a small change.

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HippyDippy

3 years ago

Reply to StukiMoi

Well, bitcoin is already pretty proper with intelligence agencies. Since they’re the ones doing most of the tracking, they don’t have to worry about being caught by the feds. And those officials could all sell their bitcoins before they decide to drag everyone else down by shutting it down due to Russian interference or the Chinese doing Chinesey things.

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Doug78

3 years ago

Reply to StukiMoi

So basically you think that the only way bitcoin can be accepted is through massive corruption of public officials and not by being useful in economic activity. Am I right? That was Sam Bankman-Fried’s strategy and it didn’t work because it is a very bad strategy.

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StukiMoi

3 years ago

Reply to Doug78

Bitcoin can, and will have to, become useful for buying plenty of stuff; most stuff come to think of it; before it can be relied on for retirement savings.

Problem is: Since crypto makes shaking down; and keeping in indenture; productive people so much harder for politicians and other connecteds compared to simply running a printing press, AND politicians and other connecteds seem to have so much success indoctrinating most of their captives: Crypto will face an awful lot of pushback from debasement beneficiaries.

In the early days of Bitcoin, the mantra seemed to be that Bitcoin would reach a breakout point, when the anonymity it afforded would allow for keeping politicians honest by making it safer to flat out put contracts on their heads. Since the guy placing the contract could remain anonymous; and there would be no money trail leading to the guy filling the contract.

That may still work. But I doubt it will ever have to come to that (thank goodness, I suppose…).

Since the same anonymity will, prior to that, clear the eyes of enough of those who are currently sufficiently indoctrinated to fall for the scam that politicians and their connected hangers on can in any way be trusted at all. After all, when everyone, at all times, everywhere, can trivially easily be compensated for their “corruption services” directly; you’d think even the densest and most starry-eyed among the indoctinati; would finally wake up and realise what the motivation behind every single decision made by all possible government ever was and is.

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StukiMoi

3 years ago

A few observations:

In financialized dystopias, fundamentals have little to no bearing on the price of anything whatsoever. The current nominal price of BItcoin, like the Dollar, is almost entirely set by the same forces which once priced tullips at $million a pop. Nothing more nor less.

Over time, fundamentals will reassert itself. When that happens, something with which you can buy more things from more people/companies; is more intrinsically valuable than something with which you can buy nothing from noone. The fact that you may still have to pay an occasional traffic fine in Mexican Pesos, does not mean that the fact you can buy everything else; including most Mexican cops who would otherwise issue you traffic fines; in Bitcoin is suddenly irrelevant. Instead: The more you ca buy for Bitcoin, the larger the share of their holdings most people will be willing to keep in Bitcoin. Even if they may still choose to exchange some for Fiat, in order to deal with those pesky traffic fines.

Bitcoin may never fully supplant every Fiat. But the more stuff you can buy for Bitcoin directly, the more useful it becomes to simply hold Bitcoin. Quadruply so, since the Fiat pushers are so bent on robbing you at the exchange points. As long as you stay in Bitcoin, the various fiat-controlling juntas; have a much harder time lopping 10-25+% off of every economic activity you want to engage in with someone somewhere. And the ambulance chasing leeches serving as the juntas leeching tentacles, will have a much harder time figuring out who has deep enough pockets to be worth shaking down. Much less figuring out how much to shake each one down for. There’s no benefit to anyone, from having some ambulance chaser somewhere in the US able to arbitrarily just confiscate everything you own. None. Instead, having the leeches NOT able to do so, is worth putting up with a bit of additional inconvenience for.

I get it that some people don’t, for one reason or another, “like” Bitcoin. But as the world we live in is more and more becoming one where noone works and trades freely for their money, but instead live off of taking money from others: Any increase in the ability of said others to keep ahead of this systemic theft directed at them, can only become more and more valuable as the thieves get more and more desperate and brazen.

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HippyDippy

3 years ago

Reply to StukiMoi

The tulips weren’t as crazy as it sounds. In fact, those tulip bulbs are still very expensive. It’s a major market. Now Bitcoin? Nothing is as it seems with it. It’s untraceable feature was touted until someone wrote some simple code to track it. In fact, it’s exactly how that one child who ran the Silk Road website was caught. I figure that any commodity that will disappear forever when the internet goes down isn’t for me. If you think that the internet cannot crash for good, though it might be revived again, you should check out people like Wozniak (aka Captain Crunch). And as for that password? How many times have you lost something like that, no matter how many different ways you saved it? There is no recourse for losing your password and all you can do then is stare at the login page and cry as you realize your 30 million fake dollars might as well not exist for all the good it does you. On the bright side, losing a number of passwords would at least increase the holding rate. Not that it would do the holder any good at all.

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Carl_R

3 years ago

Merchants accepting BTC is neither positive nor negative. It’s merely a reflection of what else is happening. If people start using BTC for purposes, are they making purchases as a way of slowly liquidating their BTC position? Are they purchasing additional BTC so that they will have it available to spend? There is just no way to conclude that increased use of BTC is a reflection of a positive or negative trend. The one sure effect of increased use of BTC for transactions, though, is that there will be more transactions to be recorded, but I’m not sure what effect that will have, or if it is significant.

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StukiMoi

3 years ago

Reply to Carl_R

Wouldn’t it be a bit of a stretch, to claim that there is no way to conclude the effect on the value of the dollar, from noone accepting it anymore?

A currency ultimately, fundamentally, derives it’s value from liquidity: You can obtain anything else with it. BTC is no different.

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Carl_R

3 years ago

Reply to StukiMoi

Yes, the dollar would fall if no one accepted it anymore. It is a currency, and as such, needs to be accepted as a medium of exchange. Bitcoin is not a currency, but rather an investment, just as gold is an investment. Within the US, things like the Euro would also be an investment, since they can not be used as a currency in the US.

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StukiMoi

3 years ago

Reply to Carl_R

Bitcoin is very much a currency. What other than medium of exchange, and store of value, is it fundamental useful for?

In financialized dystopias, every harebrained anything is attempted recast as an “Inveeeestment.” Since “investments” are how financialized dystopian governments redistributes wealth to their connected hangers ons. From productive people and enterprise.

In economics, investment is savings is witholding from consumption. That’s it. Not weird stuff that monkey-dancers and betting-system-believers hop around babbling about going up-up-up.

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jfpersona

3 years ago

Reply to StukiMoi

“Bitcoin is very much a currency. What other than medium of exchange, and store of value, is it fundamental useful for?”

That’s actually the problem, isn’t it. You claim it is a currency – I won’t really argue, but it is very bad at that job/function. It’s currently poor as a medium of exchange because hardly anyone accepts it as a medium of exchange (notice I didn’t say no one accepts it…). And as its performance trend over its lifetime attests; it’s not very good at holding value – this is an argument for both up and down. If your WizzBangCoin is going to be worth 30% more in a day – even though it nominally would benefit you – that doesn’t enhance its reputation as a stable store of value. Put another way, why would you want to spend something today that might be worth 30% more tomorrow? And the downside direction is self-evident – why would I want to keep my monetary savings in a vehicle that might lose 50% of its value in a few months?

Bitcoin may calm down into something that resembles a ‘normal’ currency – but that hasn’t happened over its lifetime and there doesn’t seem to be any overt catalyst for it to do so currently.

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StukiMoi

3 years ago

Reply to jfpersona

In debasement driven everything-bubbles, even Bitcoin is all over the place. Especially Bitcoin. It seems to fit the thiingz-are-like-diiiferent-now-hype-narrative du jour, if possible, even better than AI, Battery cars and the like. How could bunch of technical sounding jargon, references to math, and the all important up-up-up not make the Fed welfare Queen army al giddy with excitement?

Volatility is certainly not good. But in the long run, even +-50% ad infinitum, still beats -2% every year. For anything purporting to be any sort of store of value. And merely -2%/year is, by now, a pipe dream in debasement-theft-robbery dystopias.

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dbannist

3 years ago

Without exception, every person who has told me I need to buy BTC or other crypto has used as their primary argument to convince me to buy it that it will go up in price.

When your only argument is that it’s going to go up in price and not some fundamental thing, then they are the greater fool for buying it and deserve whatever pain is certainly still coming.

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Doug78

3 years ago

Bitcoin is in penny-stock territory now when it comes to reputation. There will still be people to play it for the thrills but merchants will avoid it. If you pay you suppliers with hard currency then the last thing you need is to be paid in a highly volatile and unpredictable fake currency.

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StukiMoi

3 years ago

Reply to Doug78

“..with hard currency..”

Now aren’t we living in the ’90s. As in 1890s…..

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Doug78

3 years ago

Reply to StukiMoi

Do you prefer to keep your saving in the Iranian Rial, the Vietnamese Dong, the Venezuelan Bolivar or my favorite the Uzbek Sum? The club of reserve currencies, or hard currencies if you like, is rather small and has nothing to do with the 1990’s nor the 1890’s. You should look up the definition of hard currency. Bitcoin doesn’t and probably never will become a hard currency because it is backed by nothing.

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StukiMoi

3 years ago

Reply to Doug78

Bitcoin is backed by scarcity. Which is why Gold is also a hard currency.

As long as Bitcoin’s math holds, it’s even more guaranteed than Gold to not be overwhelmed by a storm of gold-dense meteors. As well as also being easier and cheaper to transact in, for far and away most actors and transactions. Perhaps not as easy to save in, though. At least not for passing on to the next generation, if daddy’s cause of demise is Alzheimer’s….. Most people, at least most people not in a position to realistically be very confident in the math and algorithms underpinning Bitcoin; may also be more willing to risk a meteorstorm, than having overlooked something in an equation somewhere…..

Dollars are sometimes, perhaps for the past week?, slightly more likely to retain their current level of scarcity for another week, compared to Sums. Who knows? There’s no mathematical guarantee. No physical guarantee. Just blind faith. In a gaggle of self serving conmen. Who are; at best; promising to rob someone productive somewhere; before succumbing to admitting all they are sitting on top of, is one great con. That’s not a currency. Certainly not in any way, shape nor form a “hard” one. Not in any timeless, “problem solved” way. Instead it is, again at best, at most a pyramid scheme. Perhaps not even that.

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jfpersona

3 years ago

Reply to StukiMoi

“As long as Bitcoin’s math holds, it’s even more guaranteed than Gold to not be overwhelmed by a storm of gold-dense meteors.”

Wait…Wut?!

The death of gold is because the earth is going to be struck by gold meteors? And this is why Bitcoin is better?

I’m willing to entertain that Bitcoin might turn into something in the future. But let’s not just jump directly into fantasyland when it comes to discussing it.

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StukiMoi

3 years ago

Reply to jfpersona

Math/Logic can guarantee stuff. Something no amount of mere empiri can’t. That really starts to matter, once the constructs you build on top of something which is supposed to be “guaranteed”, gets complex. But yes: The chances of a sudden, massive decrease in the cost of obtaining more Gold, is probably unlikely enough that it can be presumed to be nil.

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Captain Ahab

3 years ago

But if I trade goods/services for Bitcoin, and loan the coins to FTX, I can get 30% interest (at zero risk).

Alternatively, it makes sense to stop trading goods and services and just buy Bitcoin, and loan it to others.

Better still, get a home equity loan and buy bitcoin, and loan it others.

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StukiMoi

3 years ago

Reply to Captain Ahab

“…..and loan the coins to FTX,”

If you have anything to do with any institution with any relation to the undifferentiated idiot parade referred to as “finance” these days; you are being robbed. If you are connected enough; or appear to be a sufficiently useful idiot: Enough others may be robbed as well, with you being handed some of that loot. Such that you just narrowly, for awhile, _may_ seem to net out ahead. But that’s it.

None of which has anything to do with neither Gold, Bitcoin, currencies, economics, nor even Dollars per se.

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oee

3 years ago

it is a negative for the seller of the good or provider for the service. The price on that algorithm fluctuates so it is not a store of value. The buyer is essentially getting something for nothing.

The seller would have to convert the bitcoins to dollars at a cost so even that the seller loses money on the transaction. It is best to skip the step and receive dollars.

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