stevensfo wrote:I have to admit that it's an interesting concept, but I'm not sure I fully understand what is supporting the value of bitcoin. If it were so safe, wouldn't the exchange rates be less volatile?
We always read about Gold and Fiat money, and now we have Bitcoin. All have their weaknesses, though I believe that people tend to push gold over Fiat money, even though gold is, at the end of the day, only worth what someone will pay for it, whereas the pound, dollar and euro are at least dependent on the economy, stability and safety of those countries, with their many millions of citizens.
Re. Bitcoin cards, I realised last year that there are cards that do the same thing with gold:
https://glintpay.com/https://www.veracash.com/Disclaimer: I don't have these cards, but simply try to keep up to date. I'd prefer to have the gold in my sticky little hands.
Steve
I confess that I didn't want to write a huge post upon supply and demand. I took shortcuts in my argument by talking about the £ rather than BTC.
Anything, absolutely anything, that has a inelastic supply and suffers a change in demand see's price volatility. The same would be true if the demand was static but the supply changing.
We are currently seeing this with gas and things dependent upon gas. The supply is constrained, so the price has gone up. The government would like more gas, so offers Shell, BP et-al tax relief for investments intended to increase the supply.
We have seen the same with gold and silver.
Why don't we see such volatility with fiat currencies? Well we do, just not usually in large amounts with any of the major currencies. Though I am old enough to remember black Wednesday. NOBODY wanted pounds back then.
Instead of "volatility" we have "inflation" and would have deflation, were that allowed. As deflation is not allowed we must have constant inflation. An Austrian economist would argue that it's inherent in a increase in the money supply. That is to say that just as gas gets cheaper when more gas is produced (ie the dash for gas a decade ago) money gets cheaper as the supply is increased.
Bitcoin is more volatile than the $ or £ but have you looked at the difference in market size? In simple terms a relatively small number of buyers or sellers can move the "price" of bitcoin while to do so with the £ or $ needs HUGE amounts of buyers or sellers.
Does bitcoin have a value beyond that attributed by those who use it? Not really.
Anymore than any fiat currency does. Examples can be seen all over the world where foreign fiat is valued more than their local currency. Indeed I remember spending FEC in china, and there were shops that only accepted FEC, which prevented most locals from buying things from them. The "value" of such fiat is more usually dependent upon the rate of money printing that the government does, than the productivity of the countries economy.
