Bitcoin is bullshit. What do I mean by this? The concept is intrinsically stupid. It is intended to solve a nonexistent problem: the problem of fiat currency, which isn't a problem. Fiat currency is good. Fiat currency is right. Fiat currency works. It clarifies, cuts through... It plagiarizes the essence of...
Anyway, bitcoin-buggery is nothing more than gold-buggery for the technologically inclined, and it is just as silly.
What does a "good" need to be in order to be useful as currency? It needs to be a stable store of value. If it is going up in price relative to other currencies, anyone holding it would be stupid to spend it, so it is useless as currency. If it is going down in price, a merchant is stupid to accept that good as payment, so it is useless as currency. Why don't merchants take stocks as payment? Stocks are goods, but they're volatile, so they aren't useful as currency. You know what else is volatile? Fuckin' bitcoin. The difference? Stock has value. It is a share of a company, translating to part-ownership of that company's assets. Bitcoin? It can only have value as a currency, but its volatility makes it useless as currency.
So it is completely fucking stupid and useless. Yes, the great paradox of bitcoin is that even when its price is going up, those increases demonstrate the stupidity of bitcoin.
This is an asset bubble being created by people buying bitcoin, not to use it as currency, but in the hope that they can then sell it to some other schmuck at a higher price, hoping to do the same thing to the next schmuck.
Turtles all the way down.
That's a fucking ponzi scheme. That's how asset bubbles are created. This is stupid. This is bullshit.
And bitcoin can never be more than a minor niche currency, even when the price eventually stabilizes somewhere. Why not? No government will ever accept tax payments in bitcoin. If they did, they'd run the risk of a Greece-style crisis. Governments need to denominate their debt in a currency that they control. So, they will only accept tax payments in their own currencies. That means bitcoin is permanently fucked.
What does that do to consumer transactions? All legal transactions in bitcoin are intrinsically inefficient and always will be. In order for anyone to conduct transactions in bitcoin, the purchaser, who is paid in their country's home currency, must convert that currency to bitcoin, and then the merchant must convert some of that bitcoin back to their country's currency to pay taxes. If this is all within one country anyway, that's two currency conversions for no fucking reason. Everyone is volunteering to pay transaction costs for no reason. That's intrinsically inefficient.
Who does that? People who pay transaction costs to make ideological statements (techno-libertarian-types, for example), or people who are trying to hide their transactions because that's the point. If your goal is either to conduct an illegal transaction (drug deals, for example), or just to avoid taxes, then sure, cryptocurrencies serve a purpose. But, if you are a rational, law-abiding person, cryptocurrencies aren't just pointless, they are costly and stupid. You actually lose by using them, just because the government won't take tax payments in them. Which they never fucking will.
Why not? Greece.
What happens now? Volatility continues for a while because people are speculating. Some make money, and some lose money. What distinguishes this asset bubble from other asset bubbles, though, is the ideological component. Bitcoin-buggery is nothing more than the modern manifestation of goldbuggery, and that can keep re-inflating a burst bubble in a way that makes this asset bubble different from others. There also really is a use for certain segments of the population for a crypto-currency. Crooks, for example, really like this shit. International trade is trickier, but pricing the asset is hard. That can't happen, though, until the stupid, fucking speculators get out of the market.
Ask yourself: have you ever shopped and found yourself unable to purchase something because all you had were dollars, and not bitcoin? No. (Well, unless you were looking for some really shady, illegal shit). Is that ever going to change? Not unless the US government collapses or some other major economic calamity occurs. That's why bitcoin is bullshit. Links below if you want to read through the extended explanations. This thing went on longer than I expected, but that was kind of the point.
Part I: The paradox of bitcoin's rise in value
Part II: What you will never be able to do with bitcoin, and why it matters
Part III: Transaction costs and the irrationality of using bitcoin
Part IV: Who uses bitcoin, amid transaction costs?
Part V: Bitcoin, gold and the money supply
Part VI: Bitcoin and international trade
Part VII: On government-controlled currencies
Part VIII: Expressive versus instrumental benefits for using a currency
Part IX: Bitcoin and the collective action problem
Part X: Bitcoin in perspective
Part XI: When will the bitcoin bubble burst?
Part XII: Currency and ideology
Part XIII: Ideology and asset pricing
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