Not so. They still allow speculation on BTC price volatility and "get rich quick" gambles is what drove most of Bitcoin growth in the past few years. If anything, the big exchanges make Bitcoin even more suitable for speculation than if it was on the blockchain, since you can trade way more if you don't have to wait several blocks for your trade to be confirmed.
> It is not at all clear to me that having more (relatively uninformed) speculators will lead to less volatility for such an instrument.
I am not sure how we can judge the informedness of the speculators or what we are comparing them against. But, each additional speculator improves the informedness of the market overall.
I don't think that can be true. Leaving bitcoin aside for a moment, if a new speculator comes into the stock market who truly believes (perhaps due to misleading marketing) that "stocks only go up". This is clearly not the case from an objective standpoint. How would the entrance of such a speculator improve the informedness of the market as a whole?
Do Swiss Franks pay dividends or other types of cashflows? If I have 50,000 CHF in a box in my cupboard, what value is it beyond a small amount of fuel to burn? At some point I will hope someone (perhaps someone in Switzerland) will exchange something I want for those pieces of paper.
On the other hand the Swiss Government could decide to make the money almost worthless, practically overnight (India did this with Rupees), by removing the main purpose of having the notes.
There is consistent demand by the Swiss government, in the form of tax collection.
You are so close to understanding the true value of bitcoin.
1. You mentioned loans, and I mentioned debts. Debts matter at least as much as taxes as a source of demand for fiat currency, since the government can "reassign" the ownership of property if debts are not repaid and the government will always determine debt payments in terms of its fiat currency.
2. Suppose the money is only distributed to citizens in the form of salaries. What do they do with it? Why does anyone they do business with -- merchants, landlords, whoever -- want it? One of the reasons why taxes and debt laws work well is that they are immediately relevant to almost everyone in a country (anyone who owns property owes property tax; anyone with a business loan must make their loan payments; etc.).
3. Suppose a country relies on resource wealth to stimulate demand for its currency. That country will compete in the global market for those resources and the demand for its currency, and thus the value of the currency, will fluctuate according to market forces. The price volatility would be a huge problem for the citizens of the country as they tried to use the currency in their daily lives.
So while in theory, under very particular circumstances, such a thing would be possible, in practice it would probably not last long. Volatility, weird distortions in demand, and other issues would render the currency hard to use and reduce its value in the local market.
My actual investments are in economically productive assets.
>At some point I will hope someone (perhaps someone in Switzerland) will exchange something I want for those pieces of paper.
The amount of businesses accepting Bitcoin as a means of payment is very small. The incentives to do so are almost nonexistent. Everyone is converting it back to a valuable currency, this is why the price of Bitcoin is highly volatile. There is no minimum demand for the currency. There is no economic system that is dependent on Bitcoin being less volatile.
The Swiss government creates minimum demand for the currency through taxation. The people living in Switzerland decide to adopt the currency and thus there is an economic system that needs the Swiss Frank to roughly maintain its value. Heck, small amounts of inflation are necessary because a currency that is generating a return is highly undesirable as a means of payment. Since it's losing value over time you are discouraged from using it as a store of value. The existence of an economy that is constantly exchanging currency for goods is thus ensured.
>On the other hand the Swiss Government could decide to make the money almost worthless, practically overnight (India did this with Rupees), by removing the main purpose of having the notes.
Yes and the beauty is that everyone would consider the currency worthless. With Bitcoin there would be extremists clinging to the belief that it would retain its value.
They are (foreign currency reserves), hence the swiss banks charging to store swiss franks. Indeed Hedge Funds (darlings of HN) make a killing out of currency speculation -- Black Wednesday and Brexit in the UK for example.
There's 61 currency funds listed here, I'm sure some are betting on swiss franks.
This is of course true, but it's also true for oil, buildings, pork bellies, and any other kind of property.