Hacker News Reader

Comment by ryandvm | Hacker News Reader

Bitcoin as an investment always struck me as a rather silly idea.

Bitcoin was supposed to be useful because it was a decentralized currency, but a functional currency should, by definition, not be a good investment (that is, something that increases in value more quickly than other assets in the economy).

If the relative value of your currency keeps increasing, then you don't want to spend it, if people aren't spending the currency then it is not in fact a functional currency, and if it is not a functional currency, then it ought not have any value.

View on HN

If one believes it is useful as a currency, but the world has not yet fully realized that and when it does it will stabilize in a much higher price than today, would you say it makes sense as an investment now?

I find odd that people already have final judgements about bitcoin's success after little more than a decade of existence, when even its issuance schedule is over a century long. Does it really make sense to expect an entirely novel currency/asset/whatever you wanna call it to find its definitive price in one decade?

Education should be free. Food should be healthy. Housing should be affordable. Ultimately, what economists think a currency should be doesn't matter. What matters is what people want.

And I suspect that most people, given a choice, would prefer to get paid in a currency that retains value over time rather than one which loses it.

This choice doesn't exist today. But it could exist in a future where Bitcoin's UX improves and its price becomes less volatile.

A currency could be a good investment if you expect the value backing the currency to outpace or be more stable than the value backing other currencies or assets.

But in my opinion, Bitcoin is not backed by a lot of value, rather it’s backed by a lot of cost, which is confused for value.

Enthusiasts wrongly believe that proof of work (the primary cost) is necessary to create scarcity (the primary value).

Proof of work is not necessary to create scarcity, so it’s a pointless cost, and scarcity is not valuable enough to be the primary value.

While scarcity is important to prevent inflation, we now have many cryptocurrencies which support scarcity. With that plethora of choices, the most valuable currency will be the one that producers and consumers (the real source if value) choose to transact in.

People will choose to transact in the currency that best supports transactions. This comes down to cost, speed, and features.

Yip, we have all the history we need in economics to know what makes a good currency. The problem with crypto is all the tech-utopians making it, never read any economics (or political theory); and all the financiers hyping it, never read any tech, so presume their education isnt relevant.

Bitcoin is a mirror image of bread-coins which subsequently rot. We know not to make currency out of bread (ie., items with negative time-bounded exchange value), I hope we have now discovered not to make them out of blockchain-slices.

> The problem with crypto is all the tech-utopians making it, never read any economics (or political theory) ...

Now that's some claim.

You probably disagree with me when I say that austrian economics [1] is indeed an economic school. Folks like Saifedean Ammous [2] appear to at least have tried reading up on some economics.

[1] https://en.wikipedia.org/wiki/Austrian_economics [2] https://lexfridman.com/saifedean-ammous/

It's something more old-fashioned than modern economics, it's a kind of moral-political economics. Which, I agree, lines up quite well with what Bitcoin is, as a project. A

The problem with the moral premises of this world view is their feudalist concequences, for reasons unknown to me, utopians of this type think that if a premise is true that they dont need to think about concequences.

In this case, if individualism is true, then feudalism cant possibly follow. But reality doesnt follow "ideas" in this sense.

If we create a system of individual ownership of fixed resources (land, crypto, etc.) then the few there first owns everything, and hence, feudalism.

I dont take this sort of "moral economics" seriously, since its not itself a serious sort of either morality, politics or economics. Its an attempt to deduce utopia from naive ridigid principles.

I don't get the message of your first three paragraphs.

Aside from that ..

> ... system of individual ownership of fixed resources (land, crypto, etc.) then the few there first owns everything, and hence, feudalism.

I doubt your claim here. Maybe there's some empirical evidence that these systems of individual ownership of fixed resources tend to lead to few individuals owning most of or "everthing", thus feudalism. But for one, we do have very high concentration of wealth in the current fiat system. (So the alternative to the system of individual ownership of fixed resources apparently does not appear to have a clearly better outcome.) And two, this possibly existing empirical evidence may just reflect what happened until now, but the world is changing and new circumstances may very well lead to new outcomes.

> I dont take this sort of "moral economics" seriously ..

I don't follow, where you take the "moral" keyword from. To me, Austrian Economics is just a (heterodox) take on economic questions that differs in some key views from the majority of the economics field and what they are currently teaching, publishing, giving advice to governments about or implementing as economic/monetary policy.

> Its an attempt to deduce utopia from naive ridigid principles.

Fair enough, if that's your perception of what AE is, it's totally valid. Such vague counter position (that doesn't address concrete claims) is hardly valuable as an actual critique, though.

> a functional currency should, by definition, not be a good investment

yeah, I've seen it said a currency that's a better investment than the economy it serves is a self-defeating abomination exactly because it incentivizes people not to participate in productive activity

>If the relative value of your currency keeps increasing, then you don't want to spend it, if people aren't spending the currency then it is not in fact a functional currency, and if it is not a functional currency, then it ought not have any value.

But it does so why do you think that may be?

Reply on news.ycombinator.com