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Comment by romanovcode | Hacker News Reader

All people who are owning Bitcoin are betting.

Agreed, I was just trying to say that currently, one of the most popular investment theses for Bitcoin is "Gold for millennials", not "anonymous paypal" or "decentralised stripe".

A post [1] shared a couple of days ago made a thesis that BTC price needs to grow for it to become a viable "store of value." Maybe this is what we are seeing.

"Market cap size is critical for adoption of a store of value. It needs to be large enough to “fit” even very large amounts of fiat, ideally without affecting the market. Gold market cap is estimated at 7 trillion USD, which means that even the richest people can move all their assets into gold and not move the market. (At least one at a time. All of them at once will move the market big time).

Bitcoin market cap of about 70B USD is not large enough for even one of the richest people on the planet. This implies that if the market cap does not grow, Bitcoin is likely to fail as store of value."

[1] https://grisha.org/blog/2017/09/25/bitcoin-value-2/

FYI Bitcoin marketcap as of today is 120B USD but your point still holds.

Ultimately that's true of any non-backed currency (and those too I suppose) isn't it, it's just the bet looks far safer for a country/region wide fiat currency.

I wonder if much of the medium term success of Bitcoin has been because the money put in couldn't be laundered readily in any other way, so whilst Bitcoin is a relatively high risk the alternative was just to dump the money without a way to use it?

No.

People actually use other currencies as a medium of exchange first, and store of value second (usually they purchase assets to store value long term).

Bitcoin is the other way round (at present at least).

I save more than I spend, so wouldn't I be mainly using it as a store of value rather than a medium of exchange?

Are you investing your savings? No. Are you just holding it in a bank with little or no interest, then yes.

Even holding it in a bank for low interest is investing. Using it as a store of value would be keeping it in your wallet or in a safe (as you would do with gold, for example).

Not really....not at these rates anyways. There isn’t much difference between putting your money in the bank or under your mattress, well, except for convenience and safety issues.

Yes, it is. If you keep the money physically it yields exactly zero and nobody is using it. If you lend the money (to a bank or someone else) you get some interest (or not, in some countries interest rates are negative) AND there is someone else who can use that money. Bank deposits are fundamentally different from “hoarding” gold or bitcoins.

Sure, but the banks don’t thank us much for the pleasure. Money, gold, bitcoins aren’t themselves stores of value, merely IOUs. To really store value (I.e. production), you need things like grain silos.

How is a bitcoin sitting in your computer an IOU? Who owes what to whom precisely?

Technically yes, you are treating it as a property rather than currency. Such a property is subject to positive and negative externalities (notably, inflation/deflation), and (where applicable) it is subject to taxation on transference (eg: inheritance tax, gift tax, etc).

From a purely economic perspective, cash is just another liquid asset. The distance from currency to store of value is quite short.

Physical assets are generally regarded as stores of value, however, in modern times, currency stability has resulted in currency supplanting durable goods as the primary store of value.

They're treating it as fiat money (which has more than one characteristic). Property has intrinsic value.

I save more than I spend, so wouldn't I be mainly using it as a store of value rather than a medium of exchange?

Yes, you would. I'm not clear what you mean by it here:

If you mean Bitcoin, you're agreeing with my point, it's a good store of value first (modulo price volatility and external risks)

If you mean Fiat, don't do that long term, use assets.

Most currencies suffer from inflation: it's more interesting to buy now than later because your wealth will go down with time.

BTC with its fixed supply works the opposite direction, devoid of inflation: you'd rather keep your BTC as a store of value that will increase, than spend it on goods you can still buy later for fewer BTC.

QED. It's designed as a good store of value, not a good medium of exchange which people want to spend.

I should have added "I agree" ;-)

If it's intended to be a store of value, it's an asset, not a currency. Like property.

I think I do not understand. If I possess a certain amount of currency, is it not my property?

And why would it matter what's the "intended" usage of it? Who determines intent? Might every holder of the asset/currency/property (whatever one calls it) have different intentions for it?

Property, as in real estate. :)

Things have meanings in legal terms that are different from conversational terms, you know.

You're always betting when you're investing. At least the odds are better than in a casino.

In some ways we all are but I think we are forgetting the most important aspect. Using it for payments. That utility use case is more important because at some point the price will go down

That is the problem with deflation. People expect that their money will be worth more tomorrow so they are more reluctant to spend it.

But if you use it as a currency you exchange money for bitcoin as soon as possible and use it when required. Money is always increasing so you try to earn more.

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