While the dollar loses value at a predictible rate, BTC is all over the place, which is bad. Let's look at the chart of the USD against BTC all lose their value at a low and most importantly fairly predictible rate. On the other hand, well-run currencies like the USD, GBP, CAD, EUR, etc. Avocado fruit is not good money because avocadoes loses value very fast. I'd have to consume my payment before it becomes brown, squishy and disgusting. When you create economic value, you don't want to be forced to use up the value you created right away.įor instance, if I fix your washing machine and you pay me in avocados, I'd be annoyed. We'll expand on this in the next point:ģ. We can't say that a 0.4BTC table was a 0.4BTC table in 2017. If I buy a $1000 table today or in 2017, it's roughly a $1000 table. We can say it's because of lack of adoption, but really it's also because the market value of BTC is so volatile. We denominate BTC in terms of how many USD they're worth, so BTC is a unit of account presently. A unit of account is what you compare the value of objects against. How many additional hurdles do you have to go through? How many fewer options do you have than if you used a regular currency? How much overhead (time, fees) is there?Ģ.
You can test BTC's usefulness as a medium of exchange for yourself right now: try to order a pizza or to buy a random item with BTC. There are significant transaction fees and transaction waiting times built-in to BTC and these worsen the more popular BTC get. When everyone accepts the same money you can buy something from someone even if they don't like the stuff you own.Īs a medium of exchange, BTC is not good. Before money we had to barter, which led to the double coincidence of wants problem. There are 3 main economic problems money solves:ġ. Or rather BTC doesn't act as money and there's no serious future path for BTC to become a form of money. Let's unpack it and jump into the economics Bitcoin: This was a deliberate corporate strategy to adopt a bitcoin standard.” “This is not a speculation, nor is it a hedge. However, this statement from MicroStrategy CEO Michael Saylor exists to make it clear he's buying into BTC for all the wrong reasons:
If you have a huge pile of of cash, you probably should be doing other things than leave it in a bank account to gather dust. That gives the money back to the shareholders, and from an economic perspective the money can get better invested in other more promising companies. When a company has a pile of spare money it doesn't know what to do with, it'll normally do buybacks or start paying dividends. Today we'll discuss in excrutiating detail why this is not a good idea. Read it there if you can, there are footnotes and inlined plots.Ī couple of months ago, MicroStrategy (MSTR) had a spare $400M of cash which it decided to shift to Bitcoin (BTC).
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