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Author Topic: Will cryptocurrencies like Bitcoin ever gain mass adoption?  (Read 44506 times)

Offline pipsbuster

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Will cryptocurrencies like Bitcoin ever gain mass adoption?
« on: April 07, 2018, 10:44:24 PM »
I personally don't see how businesses can rely on a currency which fluctuates so much over such short periods of time.

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #1 on: April 07, 2018, 10:49:18 PM »
It's a good question. For the answer, you might want to study monetary theory and specifically develop your knowledge on why people desire to use monies in any complex economy.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #2 on: April 07, 2018, 11:11:59 PM »
It's a good question. For the answer, you might want to study monetary theory and specifically develop your knowledge on why people desire to use monies in any complex economy.

What does that theory say with regards to why they should prefer extremely volatile imaginary money over government-backed stable currencies?

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #3 on: April 07, 2018, 11:27:24 PM »
Volatility is an undesirable quality of any money so all else being equal, a volatile money will be less desired than a money that displays stable and predictable purchasing power over a period of time.

Of course, all else is not equal. This is why government monies historically have a consistent pattern of becoming highly undesirable when monetary policy makers lose control of an inflationary money's inflationary cycles. They become highly volatile and lose value in ways that become increasingly unpredictable.

Over the long term, we should probably think about why monies are useful. A common misconception I hear about money is that it is valuable because people simply imagine it to be so and enter into a shared and voluntarily accepted mass delusion that a dollar buys a certain amount of goods or services. This is incorrect. Money is valuable because it allows us to rationally index wealth. This is why precious metals have in the past made for relatively stable monies because they have qualities that make it easier for them to rationally index value. Those qualities are,

  • Fungibility
  • Durability
  • Divisibility
  • Portability
  • Anti-counterfeit.

Without all of these qualities, a money is highly unlikely to index value well. Without fungibility, no one might know how to value individual units of money. Without durability, indexed wealth could not be stored for later use. Without divisibility, purchases become harder and fractions of indexed wealth become difficult to keep track of. Without portability, indexed wealth is difficult to move to new owners. If money is easily counterfeited, this can cause runaway price inflation.

Cryptocurrencies present all of these qualities so we must ask, why are they so volatile? Well, if you had a useful money that was limited in supply and introduced it to the world and saw a population of just 100 use it, what do you suppose would happen to the value of that money if then 10,000 people desired it? All else being equal again, the demand would have increased 100 times seeing the value skyrocket by about 100X right? As the value of the currency held by the hundred increased rapidly, the 100 individuals would have to start making decisions about exchanging their new money for other wealth or to hold on to it. This would cause price fluctuations and then probably a value drop after the sharp increase. This has been a recognizable pattern for several years in crypto now.

So as people come into the crypto economy and exit with value increases and reductions, you see the user pool increase and contract but always increasing on net over time. If this is what causes volatility then it means that as long as crypto keeps growing, volatility will continue relative to how big and frequent the growth spurts of the user base are. This is why payment processors are a required evolutionary step in this process though user adoption would still be possible even without them. I imagine it would take a lot longer.

Anyhow, like a child growing into their clothes, cryptocurrencies are growing into their markets and you should expect to be buying new clothes quite often and for quite a while to come. Once Crypto finally fits into its adult clothes, volatility will have subsided considerably by then. It's a chicken and egg thing. What comes first? More users or less volatility? Neither does really; they both come together.
« Last Edit: April 07, 2018, 11:34:46 PM by CanadianPsycho »

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #4 on: April 07, 2018, 11:40:31 PM »
As I am not much into conspiracy theories and don't live some place like Venezuela, I have no problem using government-backed fiat currency controlled by a central bank accountable to its country's population. Yet I would feel terribly uneasy using imaginary electronic money effectively controlled by someone anonymous like "Satoshi Nakamoto" who still owns a major portion of Bitcoin.

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #5 on: April 07, 2018, 11:49:07 PM »
Bitcoin is not controlled by Satoshi Nakamoto. That's not how the currency operates on a technical level. He does theoretically own quite a bit of Bitcoin which could cause short term shocks in the marketplace that would be severe, but it's more likely that Satoshi discarded the keys when they were basically worthless and people were sending each other thousands of Bitcoin as tests. Personally, I'm sympathetic to the view that Satoshi was Hal Finney who sadly died some years ago. He was a great person.

I'm also not into conspiracy theories. I don't know why you brought that up.

I'm glad you don't live in some place like Venezuela but lots of people do. I'm happy that they have tools like crypto to help them somewhat.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #6 on: April 07, 2018, 11:53:55 PM »
I wouldn't like to take guesses as to whether "Satoshi" discarded those keys when it comes to my financial security.

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #7 on: April 08, 2018, 12:02:45 AM »
Indeed! That's a reasonable reason to be cautious at the very least. I tend to agree with that which is why other cryptos like Ethereum, DASH, Monero or whatever might be of greater interest.

Fun fact, Bitcoin used to hold dominance of more than 90% of the market trading volume in the entire cryptocurrency space. Today the BTC share of that market stands at just 45%. It's been as low as 32%. Bitcoin may not last over the long haul if outcompeted and I think that's a very real possibility which obviously would mean Bitcoin itself doesn't gain mass adoption.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #8 on: April 08, 2018, 12:08:55 AM »
All other major cryptocurrencies (those that you mentioned and more) closely follow Bitcoin's rate. Makes me think there's nothing to them but the Bitcoins that were paid for them (for which, in their turn, real money was paid).

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #9 on: April 08, 2018, 12:17:12 AM »
So...I just made note of the fact that at a LOW point of dominance, Bitcoin took almost a third of the entire market for trading volume. So...yeah...most crypto assets track Bitcoin closely. Considering I just explained that Bitcoin is the primary market instrument, that shouldn't be surprising.

As for there simply being Bitcoin behind the other crypotos, with all due respect I think that's short sighted. The monetary value of the cryptos that are bought and sold with Bitcoin (they are increasingly being de-linked from BTC) is linked to value in the crypto-economy as a whole. If someone buys a Bitcoin for $7,000 for instance and then buys some other crypto with it like DASH, the exchange for DASH does not create a new $7,000. It creates $7,000 of increased price pressure against DASH and decreased price pressure against Bitcoin. So that means that the Bitcoin has to be backed up with some value injection in the system to create demand for Bitcoin. Things like computers, cars or just good old cash.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #10 on: April 08, 2018, 01:00:30 AM »
Most alts are not sold for fiat directly, only via Bitcoin. That's because only Bitcoin (and not other cryptocurrencies) is regulated as a commodity in jurisdictions where crypto exchanges operate. So first there has to be a bump in BTC/USD when one buys Bitcoin with dollars, then there's a subsequent bump in ALT/USD when one buys the alt with those dollar-bought Bitcoins. All value is measured in USD because that's the only part of the equation with real value. Relative to those purchases, Bitcoin network's internal value created through Bitcoin transactions is negligible, whereas the US Dollar network's internal value is immesurably greater. That's why all the Bitcoin "whales" measure their wealth in US Dollars, not in Bitcoins regardless of their current dollar value.

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #11 on: April 08, 2018, 01:17:14 AM »
Almost none of what you just said makes sense. Why do you think only BTC is regulated as a commodity? There is a variety of regulatory structures that all address crypto currencies, not simply Bitcoin.

And yes, people who hold lots of crypto (and a little bit of crypto) typically measure their value in dollars because dollars are the common unit of account. I'm not sure what your point is.

Like I said, cryptos are typically traded against Bitcoin which is typically bought with fiat. None of that is zero sum trading. If you Go from fiat>crypto>crypto, the crypto>crypto trade is a trade that utilizes fiat measured value injected into the crypto economy typically (bot now exclusively) via Bitcoin. I'm not sure what kind of point you're trying to make here.

If your point is that dollars are used more than cryptos, then...yes? But again, I'm not sure what you mean to say by pointing that out.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #12 on: April 08, 2018, 11:03:16 AM »
My point is without the injected fiat, crypto would be nearly worthless in fiat terms because of its negligible internal economy whose fiat value is a minuscule fraction of crypto's current total fiat value.
« Last Edit: April 08, 2018, 11:06:20 AM by pipsbuster »

Offline CanadianPsycho

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #13 on: April 08, 2018, 01:57:12 PM »
Fiat is just a wealth indexing tool and people use that tool to allocate wealth to the crypto economy. What you just said is like saying that cars would be worthless if people didn't buy them with money.

Offline pipsbuster

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Re: Will cryptocurrencies like Bitcoin ever gain mass adoption?
« Reply #14 on: April 08, 2018, 03:34:21 PM »
Fiat is just a wealth indexing tool and people use that tool to allocate wealth to the crypto economy. What you just said is like saying that cars would be worthless if people didn't buy them with money.
Cars have a clear immediate utility. Buying Bitcoin is like buying a Lambo in a country with bad roads.

 

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