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Comment by autokad | Hacker News Reader

I was having a conversation about bitcoin, and I was saying the fact that the price goes up so fast means people cant/wont actually use it as a currency. I think someone bought a pizza with 10k bitcoin? thats now 70 million $. Even in the last year it has moved up so fast, and if people think it will continue to grow 'because of adoption', people cant actually 'adopt' it and use it as a currency, because todays bitcoin is worth a lot less than tomorrows.

then i realized, i was describing deflation.

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It definitely means people won't use it as a unit of account (for debts, budgets, etc), which is one primary use for a currency...

But I don't think it means people won't spend it or trade it for some other currency or asset. If you held a bunch of bitcoin while the price in USD doubled, and you happened to want a new smartphone, you're sure you wouldn't buy one?

If you were absolutely confident the price would quickly rise even more, maybe you would prefer holding, but if you really want the phone and you think BTC/USD has some risk?

I'd spend dollars on the phone, because the same BTC might buy 10 phones in a few weeks.

> the same BTC might buy 10 phones in a few weeks.

Which is kind of crazy and defies all logic - cryptocurrencies can be manufactured without any limit, even Bitcoin can be cloned and rebooted, creating a new currency space/ledger that's fresh.

You can print out a piece of paper that says "TEN US DOLLARS" on it, but if the corner store or the bank won't take it it isn't really the same as $10.

Will you buy pizza with BTC right now?

Yes? Being BTC doesn't change the value of it.

When you buy a pizza with USD, do you think "hmm, maybe I should invest this into BTC instead?"

It's the same opportunity cost whether you spend from your BTC account or your USD account! You're choosing between "should I buy a phone or 0.1 bitcoin with these dollars?"

I think the presence in the market of an asset that many people believe is continually underpriced would have a general effect on spending, not just on the utility of that asset as a medium of exchange...

>> It's the same opportunity cost whether you spend from your BTC account or your USD account!

Only if obtaining BTC is frictionless and fee-free, something far from universal.

Other motivations exist when using deflationary currency other than hoarding. I don't believe btc deflation is bad.

Fiat currency can also rise and fall 10% in a single day. Problem is that moving the market that much in every day is impossible due to a huge market cap, which BTC does not have.

All cryptocurrencies are not user friendly. Cold, hot wallets, privacy issues, what is the best way to store them, how not to accidentally lose everything etc.

Mass adoption depends a lot on user friendliness which a bunch of cryptographers aren't concentrated on solving.

So, it won't be used as a currency not because of its deflationary nature but because it's just not as convenient as fiat currency.

Scaling issues are also a big blocker. Currently, BTC transaction fees are higher than those imposed by banks. It's no longer a cash, just a store of value.

Core devs are behind a private company, trying to milk the blockchain even more, which will also lead to bitcoin not being used as cash, but they'll sell their own sidechain and offchain solutions, probably just to enterprise.

Blockchain tech is great tech. Cryptocurrencies like Monero are absolutely brilliant. But I'm doubtful of mass adoption, mostly because torrents, free software, as amazing as they are, and convenient for superusers, don't have mass adoption too.

You are describing an insane rate of deflation. People do very different things with currencies that evaluate a more normal 3% an year.

Deflation is not a bad thing. Instead of throwing away their money at junk, people become more discriminating and buy what they actually need at the moment. Thats terrible news for our economic system short term, but great news for all of us and the planet long term.

I have used Bitcoin for purchases in the past. I try not to do it so often because of the exact thing you mentioned, but I feel like this is something that could improve with time.

If Bitcoin does get mass adoption and becomes THE worldwide currency then that also means that the volatility will decrease significantly to the point where I wouldn't have any problem transacting using Bitcoin.

I realize the idea of that actually happening is pretty insane and it is probably more likely that the value will go down to zero, but it is hard to predict the future.

How would volatility decrease in case of mass adoption?

When Bitcoin was $10 a $1 move in price was a 10% change.

When Bitcoin was $100 then a $1 move in price was a 1% change.

When Bitcoin was $1000 then a $1 move in price was a 0.1% change.

If Bitcoin gets mass adoption then the price per Bitcoin could be $50,000 (assume $1 trillion market cap) or higher. At that point a $1 market movement would be a 0.002% change. To get the same 10% movement as at $100 would require a $5,000 market price swing which while possible is less likely.

It means a lot more money would have to be bought or sold to cause the same percent movement in price.

Bitcoin is already much less volatile today than it was in the past.

> If Bitcoin gets mass adoption

That a big IF. And with the transaction costs it has, I don't see it getting mass adoption any time soon.

yeah, but why is $5,000 less likely. Is there some fundamental reason?

You could always replace the bitcoins that you used...

Or people who are sensible, are incentivized to sell or buy things because they know the crazy bubble won't last. Thus creating adoption in a deflationary model.

Isn't that deflation?

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