Hacker News Reader

Comment by roenxi | Hacker News Reader

> ... and a lousy store of value

I expect this to be true eventually, but so far Bitcoin has been doing OK as a store of value. Unless people bought in the relatively short peaks, HODLers aren't losing crazy amount of money and one could reasonably anticipate that it'll reach $60k/bitcoin again in the near future.

There seem to be people convinced that the crypto types are coming out a long way behind but I'm not really seeing it in the prices. It isn't as stable as the gold market, but it is easy to draw loose comparisons and acquiring/storing crypto is a lot more normal-person-friendly. It also looks like a strong bet in politically uncertain situations; if there is one asset I'd want when fleeing a country it'd be crypto.

View on HN

People confuse a lot of things about volatility, risk, and long term valuation.

Bitcoin is an inherently good long term store of value, because it has deterministic and finite inflation schedule, which is also plausibly immutable (contrary to fiat cryptocurrencies, called "cryptos"). On the other hand, fiat currencies are a lousy store of value, because they have non-deterministic, but always positive inflation schedule, i.e. they are guaranteed to lose value in the long term. These are just objective facts about their inherent properties.

In addition, Bitcoin includes cryptographic property protection, making it a better store of value in jurisdictions where local authorities won't provide property protection, or the cost of property protection is high. For example, in many countries, it's illegal to own US dollars. Bitcoin is easier to hide and use discreetly, compared to anything physical.

Volatility is a property of the market, not a property of the asset. All things considered, bitcoin should get less and less volatile when time goes on, assuming that it continues gaining adoption. Which is given, as it doesn't have any competition.

> contrary to fiat cryptocurrencies, called "cryptos"

This is wrong. No one says this.

It’s pretty common in the Bitcoin community.

You're missing the forest through the trees. Bitcoin doesn't have value beyond what can be converted into real currency. Real currency is used to buy things. BTC isn't. The currency-BTC market IS the entire value of Bitcoin. None of the other stuff matters, because BTC is solely denominated in actual currencies.

BTC is non-inflationary? Doesn't matter. You only use it to buy USD or actual currencies. If there's less demand for BTC, BTC value goes down. And guess what? Demand is fickle.

The cyrptographic property protection is ok in theory. But try and point out somebody it's helped? And by that I mean a non-criminal/extortionist/money launderer.

> But try and point out somebody it's helped?

There are a few stories of how Bitcoin helps people in Africa in this short documentary: https://www.youtube.com/watch?v=r7lm7IHnKDw

I think you're trying to articulate the difference between price and intrinsic value?

> Bitcoin is an inherently good long term store of value

That really depends on the taxation rules in your jurisdiction.

What jurisdictions have favorable tax rules here? Just ones which don't tax income at all? Because afaik every jurisdiction which taxes income does it based on the value in some fiat currency. So suppose you buy $100 worth of bitcoin today and tomorrow the dollar experiences 100% inflation then if you sold your bitcoin for $200 you would end up with the same amount of value except you would owe taxes on $100 of "income".

It still makes bitcoin better than holding dollars (taxes are almost always less than 100% of gains). This seems to be an inherent problem with all "stores of value" and is usually why people choose to invest rather than "store".

I was talking to a very pro-crypto friend - part of my (sour grapes) issue with Bitcoin is that is actually a pretty impractical way to purchase items day to day - but he pointed out that this is more of a feature than a bug.

He likened it to buying and selling physical gold as a store of value, I hadn't thought of it that way before.

I am still stinging from not buying in when I first became aware of it (approx. $1 at the time) - but I honestly could have bought in at any point of the last 10 years (except the highs of 2021) and still come out in profit.

There's a large amount of copium regarding this.

In no way is it a feature that Bitcoin transactions are expensive. At best it's a negative that that's acceptable given the other benefits.

> but he pointed out that this is more of a feature than a bug -- he likened it to buying and selling physical gold as a store of value

This is a lot of cope and ex post facto justification. "Store of value which can't actually be used for real-world transactions" was absolutely not the rallying cry for Bitcoin for its first many years of existence, and people only pivoted to that when it became undeniable that Bitcoin was not fit for its original intended purpose. If it serves the new purpose well enough, then great, but don't let your friend fool you that everything is going completely according to plan.

> This is a lot of cope and ex post facto justification.

First sentence of the original paper:

> Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. […]

* https://bitcoin.org/bitcoin.pdf

> and people only pivoted to that when it became undeniable that Bitcoin was not fit for its original intended purpose.

These days it is likely(1) that the majority of Bitcoin transactions by number(2) are being done via the layer 2 system Lightning, which does have nearly instant payments and low fees. Transactions via Lightning are not recorded on the blockchain, even though you can easily hold funds in a non-custodial way.

I happen to be in El Salvador at the moment, and with the exception of the Chivo Bitcoin ATMs run by the government, every single vendor selling things for Bitcoin has accepted Lightning.

1) It's hard to know for sure, as Lightning transactions have quite good privacy, so it's difficult to get estimates of how many there are in total. But decent lower-bound estimates exist: https://bitcoinmagazine.com/markets/lightning-network-sees-r...

2) Of course, by value it's very likely that on-chain transactions dominate, as there are lots of very high value, multi-million+, transactions out there.

I sold my bitcoin recently after trying to find a practical method to use it. I paid my taxes which were about 50% from the earned amount.

In my opinion it's useless as a currency as no one uses it for anything worthwhile.

I could have converted the BTC to another crypto currency .. but I would have the same problem. How to buy something with it?

Why'd you buy it in the first place if your only perception of its value is to use it to buy something else?

Why not just buy the thing you wanted to buy?

I bought it cheaply to experiment with digital currency .. but then got a wife and kids and forgot about it.

> except the highs of 2021

Au contraire!

Interestingly, even if you had started purchasing at the *all time high* (~US$69,000) on 8 Nov 2021, if you consistently purchased daily, weekly, or monthly, you would still be up something insane like 37%, outperforming basically all other market sectors.

You can check this yourself at a variety of DCA calculators (NB I noticed at least one [https://dcabtc.com/] was broken and didn't have any price data for the last 6 months)

Saylor always buys the top.

Is the rationale behind this statement that you’re doing DCA and you’ll come out ahead in the multi year timeline?

He borrows against his BTC to buy more BTC. That is a much better long term play when you are holding an asset that is of a fixed total size. When you buy becomes irrelevant.

When was the last time you used bank reserves to purchase anything? Even the stuffiest traditional finance systems have layers.

> but so far Bitcoin has been doing OK as a store of value

No, it hasn't. A store of value is supposed to be stable, it's about volatility. By that same reasoning you could argue that Apple or Tesla stock, or even the stock market in general, is a great store of value. But nobody would ever call it that, because it is far too volatile on a daily basis.

Trying to argue that a vague long-term uptrend in prices makes something a store of value is just more intellectually dishonest cope by cryptobros who are desperate to defend this useless technology.

Volatile compared to what? Dollars. The us government is able to steer dollar as it likes but that comes with violence, it's not "naturally" stable

>a vague long-term uptrend in prices makes something a store of value

A stable and 100% predetermined issuance schedule, along with its scarcity, it's what makes Bitcoin a good store of value. The steady uptrend in prices is the consequence.

>useless technology.

Just because it's functionality is limited it doesn't make it useless. A store of value that doesn't require boring the planet, or building empty houses, seems like a great improvement to me. I think that you are conflating the cryptobro culture, with the true value that Bitcoin brings to the table.

> A store of value that doesn't require boring the planet, or building empty houses, seems like a great improvement to me.

Boring holes isn't tenable but using 15 GW of power is acceptable?

Energy will continue to get cheaper and less scarce over the long term. This is a bad argument.

It seems more efficient than what it is replacing:

>This brings the gold mining industry’s 2020 total to 265 TWh of energy used and 145 Mt of CO2 produced if we use the DePaul study’s numbers and account for 1750 tons of jewelry.

https://www.nasdaq.com/articles/a-comparison-of-bitcoins-env...

> A stable and 100% predetermined issuance schedule, along with its scarcity, it's what makes Bitcoin a good store of value. The steady uptrend in prices is the consequence.

"Steady"? What definition of "steady" are you using?

It peaked at US$ 75,000/BTC in Spring 2021, dropped to $40,000/BTC in Summer 2021, went up to $80,000 in Autumn 2021, did a continuous slide down to the $30,000 range in late 2022 and stayed there (dipping all the way to $22,000), it's now been in the $35,000 range for the last few months of 2023, and has jumped to $45,000 range recently.

* https://finance.yahoo.com/quote/BTC-USD/

IMHO that's even more ridiculous than gold (at least in the same time period):

* https://goldbroker.com/charts/gold-price/usd#historical-char...

> has jumped to $45,000 range

$35,000

The 4-year moving average is only up:

https://buybitcoinworldwide.com/charts/4-yr-ma/

* https://finance.yahoo.com/quote/BTC-USD/

I am not sure why did you pick random numbers that are not supported by your own chart to illustrate your point. BTC did not reach $75K or $80K, it dipped below $22K, and it is not at $45K now.

> A store of value is supposed to be stable

Have you looked at the price of gold over the last 50-100 years?

> ...Unless people bought in the relatively short peaks...

That's a bit minimalistic, no? The "short peak" of $50-60k (around 50-100% more than the current value) lasted something like 6 months AFAIK? To be a store of value, you would hope those fluctuations would be nonexistant.

Store of value should be for everyone, not just the unlucky ones...

"crypto types" isn't just bitcoin, and most crypto currencies, and most NFTs have crashed to basically zero.

You are right that bitcoin, and a couple of others, are staying strong.

The effect though, by natural flows, is the things are collapsing are almost automatically the fringe plays. At worst, soon forgotten. Something similar happens in the stock market, the winners are so large and win so hard that the losers are almost irrelevant.

All the crypto I own are behaving with downright steady prices. It has been a boring ride for me so far. The risk of me losing large value quickly seems to have more to do with my questionable key-keeping practices than the market.

> most crypto currencies, and most NFTs have crashed to basically zero. That's just plain untrue.

Reply on news.ycombinator.com