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Originally Posted by Hammer
I would suggest Bitcoin should be viewed as a store of value. Perhaps in a similar vein to a precious metal. As the world as moved online it seems that physically storing a precious metal is cumbersome and outdated. No doubt there is a generational divide, people hate change. It seems to me people like to fall back on their experience and knowledge of the world as it was, rather than what it is now. You won't find too many young people buying gold. I think the market cap of gold is around 12 trillion, to Bitcoin's half a trillion. As time goes buy I suspect that gap closes.
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I know this post is a little old, but I wanted to think about it before I respond.
How is a store of value different than a currency? That's exactly what precious metals are often used for. I'll consider changing my mind of crypto the moment I see people en masse buying physical products or goods and services with Bitcoin etc. Precious metals have value for various reasons, but one of those is that they are physical resources that you can make goods out of. There is a tangible product.
This is not a case of 'it's new, I don't like it'. It's a case of there's a fundamental difference between buying a stock in a company that makes knick-nacks or high technology or provides a vital service; buying a physical product like a house or a car; consultants providing knowledge/expertise; and investing it something which has no inherent value in and of itself.
I'm very futurist-minded, but I think there's good futurism and unfounded futurism. The world changed when we invented agriculture because we had a stable food supply to support a larger population and following on from that various social, political, technological etc. advances emerged. The world changed with the invention of the internet and other associated technologies, and still is in the information age, as interconnectedness increased, greater access to information and knowledge, new ways of cooperation, etc. came about. And there are many other such moments. I don't see any such promise with crypto. I think blockchain is a groundbreaking and important advance in it's own right, but that's as far as it goes.
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Originally Posted by Hammer
One huge problem with any store of value has been increasing supply. We are seeing it now with fiat currency in particular, and to a lesser extent with metals. They can be mined, and increase the supply, which decreases the value. There will only ever be 21 million Bitcoin (around 19 million are currently mined). Less actually, as some are lost and will be gone forever.
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Isn't this as much an asset as it is a problem? Being unable to get more of something vital is not always good. Deflation in any economy can be catastrophic.
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Originally Posted by Hammer
Things will start to flatline over time. It will become more of a store of value than an investment. Who knows if it will pass the test of time, but for now it is working as intended.
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The last part is the problem IMO. The way I see it, it's a lot more likely it is
not working as intended. That is, a lot of people have invested in it, but it's not actually doing anything meaningful. Say I happened to inherit a crapload of Bitcoin or I had been an early adopter and had a ton of it. What could I do with it beyond find someone willing to buy it from me? Can I use it directly to make a down payment? I haven't seen Bitcoin alongside PayPal or MasterCard in any online vendor. I don't think there's an option for me to use it any physical store. There's just nothing tangible there. If I buy something really dumb like the beanie baby that was mentioned or a pet rock or something nostalgic like a stamp or card collection, it might be a bad investment or it might not. But there's a physical something that I have which I didn't before.
And meanwhile of course, the mining process itself is very harmful to our environment, so it's not just a purely speculative exercise