The philosophical thought process behind currency has been around for centuries, and has continually evolved. Aristotle gave three functions of money: a means of exchange, measure of value, and a store of value for future transactions.
Cryptocurrencies meet Aristotle's three functions of money, but there is still a link missing from this cryptocurrency chain. Averroes added a fourth: a reserve of purchasing power. Not only does money serve as a store of value, but money could be spent at any time without having the need to be sold.
This is where cryptocurrencies fall short, and it seems that this could be one of the reasons that we see such sell offs in the cryptoverse. Cryptocurrencies have come a long way since their conception, and have done well (so far) under the 2017 lime light. In order for cryptocurrencies to reach the end goal of a being a true form of money, we will need to see adoption for payments receivable (such as retail) sector. Until then we will continue to see sell offs as people need to use government backed currencies to pay for goods and services.
What cryptocurrencies do have going for them is having the ability to cross borders seamlessly. If someone from Russia offered the average American payment in Rubles, the American would be less willing to accept the Ruble, despite it being a government backed currency. If the Russian offered a payment in Bitcoin, the American might be more willing to accept that payment of Bitcoin. Also, the Russian could be sending a payment from anywhere in the world while the American could be anywhere else in the world. This transaction could be as simple as sending an email (imagine how complicated we thought emailing was when we first heard of the idea).
American audience: We live in a country where our native currency, the US Dollar, is recognized around the world. If an American dollar travels to Mexico, a Mexican merchant might be more willing to accept a US Dollar. If someone tried offering me a British pound (which is currently valued at 1.38 USD, the US Dollar is at it's lowest level in three years due to a priced in hawkish fed) as a form of payment; I wouldn't accept it. It would be a pain for me to exchange a physical GBP for a USD.
When accusing Bitcoin of being silly, American's (and other members of first world countries where cronyism isn't as common) must consider the fact that there is governmental instability across the globe. The US Federal Reserve has an inflation target of 2%. Less fortunate people deal with hyperinflation*, Zimbabwe** is an extreme example of hyperinflation.
2017 had some scary times for people of Zimbabwe and Venezuela. As economic uncertainty in these two countries helped push Bitcoin to a higher price. During the Zimbabwean coup last year, BTC was trading in America at ~$8,000 while in Zimbabwe, the highest price paid for BTC was $16,000 (both in US Dollars).
There are some cryptocurrencies that are deflationary, Bitcoin is one. While the US Federal Reserve sets out to hit their inflation target of 2%, Bitcoin is deflationary. Inflation means that the value of currency drops, deflation means the value of currency increases. This is the argument for Bitcoin as being a store of value, since (theoretically) it will gain value over time.
This isn't a chart of Bitcoin's price, this is a chart of your US Dollar losing value. So much for monetary policy. Source: FRED St. Louis Fed
This is a chart of Bitcoin price over 1 year, suggesting the inverse of the USD, and that Bitcoin is playing catch-up. In 2008, the US Dollar began a significant depreciation as the US Fed put money into the system. As more American's and Institutions became aware of this, Bitcoin gained market share verse the US Dollar. As Bitcoin has gained value, the US Dollar has lost value.
Side note: Just because it is a cryptocurrency, doesn't mean it is decentralized. Decentralized means that there is no government/group/company that controls the money supply or manipulates it. Under a decentralized cryptocurrency, no governmental body or company can manipulate the coin supply. Most cryptocurrencies do have governing bodies that control the coin supply.
*the devaluing of a currency, is generally cause by a central bank flooding the market with their currency.
**Zimbabwe has experienced hyperinflation since the 1990s. A loaf of bread now costs ~35 million Zimbabwean Dollars
follow on twitter @postmattern and @CrypTokenNews
Cryptocurrencies meet Aristotle's three functions of money, but there is still a link missing from this cryptocurrency chain. Averroes added a fourth: a reserve of purchasing power. Not only does money serve as a store of value, but money could be spent at any time without having the need to be sold.
This is where cryptocurrencies fall short, and it seems that this could be one of the reasons that we see such sell offs in the cryptoverse. Cryptocurrencies have come a long way since their conception, and have done well (so far) under the 2017 lime light. In order for cryptocurrencies to reach the end goal of a being a true form of money, we will need to see adoption for payments receivable (such as retail) sector. Until then we will continue to see sell offs as people need to use government backed currencies to pay for goods and services.
What cryptocurrencies do have going for them is having the ability to cross borders seamlessly. If someone from Russia offered the average American payment in Rubles, the American would be less willing to accept the Ruble, despite it being a government backed currency. If the Russian offered a payment in Bitcoin, the American might be more willing to accept that payment of Bitcoin. Also, the Russian could be sending a payment from anywhere in the world while the American could be anywhere else in the world. This transaction could be as simple as sending an email (imagine how complicated we thought emailing was when we first heard of the idea).
American audience: We live in a country where our native currency, the US Dollar, is recognized around the world. If an American dollar travels to Mexico, a Mexican merchant might be more willing to accept a US Dollar. If someone tried offering me a British pound (which is currently valued at 1.38 USD, the US Dollar is at it's lowest level in three years due to a priced in hawkish fed) as a form of payment; I wouldn't accept it. It would be a pain for me to exchange a physical GBP for a USD.
When accusing Bitcoin of being silly, American's (and other members of first world countries where cronyism isn't as common) must consider the fact that there is governmental instability across the globe. The US Federal Reserve has an inflation target of 2%. Less fortunate people deal with hyperinflation*, Zimbabwe** is an extreme example of hyperinflation.
2017 had some scary times for people of Zimbabwe and Venezuela. As economic uncertainty in these two countries helped push Bitcoin to a higher price. During the Zimbabwean coup last year, BTC was trading in America at ~$8,000 while in Zimbabwe, the highest price paid for BTC was $16,000 (both in US Dollars).
There are some cryptocurrencies that are deflationary, Bitcoin is one. While the US Federal Reserve sets out to hit their inflation target of 2%, Bitcoin is deflationary. Inflation means that the value of currency drops, deflation means the value of currency increases. This is the argument for Bitcoin as being a store of value, since (theoretically) it will gain value over time.
This isn't a chart of Bitcoin's price, this is a chart of your US Dollar losing value. So much for monetary policy. Source: FRED St. Louis Fed
This is a chart of Bitcoin price over 1 year, suggesting the inverse of the USD, and that Bitcoin is playing catch-up. In 2008, the US Dollar began a significant depreciation as the US Fed put money into the system. As more American's and Institutions became aware of this, Bitcoin gained market share verse the US Dollar. As Bitcoin has gained value, the US Dollar has lost value.
Side note: Just because it is a cryptocurrency, doesn't mean it is decentralized. Decentralized means that there is no government/group/company that controls the money supply or manipulates it. Under a decentralized cryptocurrency, no governmental body or company can manipulate the coin supply. Most cryptocurrencies do have governing bodies that control the coin supply.
*the devaluing of a currency, is generally cause by a central bank flooding the market with their currency.
**Zimbabwe has experienced hyperinflation since the 1990s. A loaf of bread now costs ~35 million Zimbabwean Dollars
follow on twitter @postmattern and @CrypTokenNews
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