Two Ways of Looking at Cryptocurrencies
From
jeffrubard@gmail.com@21:1/5 to
All on Mon Apr 23 19:42:56 2018
In the last few years, Bitcoin and "cryptocurrency" in general have been on the world's mind; enterprising investors have realized immense gains with little outlay by buying into tokens based on "blockchain" privacy technology early and then selling them
at many times the initial investment. The world of traditional finance, though it has been in recent decades anything but "staid", has *actively* looked down on the emerging online investment market (now at $400 billion, 5% of the $20 trillion market
capitalization of the New York Stock Exchange); a host of famous investors, economists, and government figures have been *highly* cautionary about the supposed advantages of the new technology, which requires no centralized authority to guarantee the "
validity" of holdings. What's to think about this?
To *my* mind, there are two uses of money particularly relevant to considering the worth of cryptocurrency, that of *store of value* and that of *medium of exchange*; and the fact is that Bitcoin and the more volatile "alt-coins" reflect a duality in the
inherent character of crypto trading which shows promise for *one* use and *not* the other. [Full disclosure: I am a birth US citizen and rather proud of the "greenback", among our other accomplishments in modern history; I have never invested in any
coin and I do not intend to, but the importance of crypto trading for the world economy generally merits all our attention.]
Bitcoin is the "highest-priced" coin, which in the stock market indicates stability and communicates that "holding" the asset is a good idea over-and-above the fluctuation of quarterly returns and dividends. If the goal of the crypto investor was to have
a "store of value" not subject to the vagaries of government policy and perhaps subject to a modest increase in value over time, this would suggest themselves as reasons to invest in it rather than a "rollercoaster" coin like Ethereum or Ripple. Is it
well-suited to that purpose? No, it isn't, and thereby hangs a tale: that is to say, *no* cryptocurrency has an advantage over traditional assets as a store of value. Let's begin at the beginning: gold and silver, in addition to being "precious" and
therefore valuable in small quantities, as metals maintain their physical form year after year and have *always* had a further utility for things like jewelry and utensils (one which is *not at all* irrelevant in the history of money).
In other words, the reason they became worldwide currency is that *you could believe in them*, no matter who you were; modulo adulteration, a hunk of gold or silver from any governmental entity was of value to you. Then came the era of "fiat" paper
currencies, but it is an obvious and terrible solecism for the crypto world to dismiss the dollar, yen or euro as "fiat" money, since *faith* is actually even more of the essence in cryptocurrency; a bank note from a great government is backed by its "
full faith and credit", that is to say the entire living society of that nation or group of nations, and that is "something you can believe in" fairly readily. For example, many world citizens have been sharply critical of the actions of the US
government during its period of dominance, but the *stability* of our nation has made US Treasury bills a *very* attractive investment option for those who did not seek to lose their holdings.
Abstracting from the minor costs associated with holding wealth in the form of currency from a great government, blockchain coins offer *no* improvement (certainly when the complicated prestidigitations that can be done to offset the "direction" of a
country, like those done by George Soros, are taken into account). On the other hand, many investors -- particularly those who want to see the great gains made by crypto "visionaries" -- are looking for "dynamism", and this is the other side of the coin,
if you will: as a *medium of exchange* (and this is of course not only the mere technology of a coin, but the "ecosystem" of opinion and trends that has grown up in the course of crypto investment) it is of some value to the "business-minded". In other
words, coins are media of *exchange* quite literally: the dynamics of coins and the strategies used for investing with them "communicate" the general outlay of the world economy in a way which we all would do well to take notice of (and this capitalist
dynamic is of course not absent from the complicated financial instruments like derivatives found in traditional finance).
I am merely observing here, not offering investment advice. (However, I will counsel that the tale of Baron von Münchhausen pulling himself up out of quicksand by his hair retains a certain validity in life today; if what you are trying to do is *
impossible*, there is actually no means technically sophisticated enough to do it.)
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From
Unknown@21:1/5 to
jeffrubard on Sat May 12 10:56:42 2018
On Tue, 24 Apr 2018 19:07:02 -0700, jeffrubard wrote:
On Monday, April 23, 2018 at 7:42:58 PM UTC-7, jeffr...@gmail.com wrote:
A quick postscript: the "greenback" was an achievement indeed -- the US
once had a variety of bank notes issued by various authorities. It was
not a great era.
If you have surplus to your present needs of rice, and you sell.
[exchange for a state guaranteed note] to me, you justly expect
in the future to be able to exchange the "note" for a similar
"value" of rice or other items.
LEGAL TENDER means the law and the MILITARY stand behind the
value of your "note/certificate".
In contrast: cryptocurrency is equivalent to <Trump shit-hole>/
Zimbabwian dollars.
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