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After a turbulent week, a bitcoin was still worth about $ 40,000 on Friday. That’s still quite valuable, as bitcoin fans wanted to emphasize.
There is nothing in the code that governs cryptocurrency, however, that answers the question: how can bitcoin be turned into money if you don’t want it to be so valuable?
It is certainly true that even with this week’s decline, the long-term value of a bitcoin has been estimated. In 2008, it was just a PDF that contained an idea. The PDF was traded at a local zero price, considerably lower than current levels. The 13-year performance is impressive for any asset. Ground floor performance should be achieved at Amazon or Apple level. A group of Swedish hackers in the Malmö chamber first explained bitcoin to me in 2011 and told me: I regret it.
Bitcoin doesn’t seem to be just some asset. It seems to be global money. Depending on who you ask, it will become the standard medium for all transactions or the final settlement of other types of money, like the dollars that banks can hold in their Fed reserve accounts. This means that it cannot gain value. It should be as useful as money for more people. That’s not the quality you need to ask for Apple shares.
Whether Bitcoin is money or not is a scholastic exercise. It’s money now, for some people. There are transactions that are appropriate and are already in use. In 2011 I was in Sweden for a day where there were only 12,000 transactions a week. In May 2017, that number reached 300,000 transactions a day. Since then the band has moved around that level – volatile, but moving sideways. The value of Bitcoin, however, has continued to rise from just under $ 2,000 in 2017 – volatile but, you know, up. As money, bitcoin is more valuable, but not more useful.
Its usefulness may be limited by the designs. People who favor bitcoin as the future of money like to say that, unlike the dollar, there is no central bank that can respond to or screw up bitcoin. But behind bitcoin is the governance structure, as real and clear as it is in the Federal Reserve.
It follows the code called by the Fed Statement on Longer Term Goals and Monetary Policy Strategy, which updates, about a decade later, when the internal cultures of macroeconomists at MIT, Harvard, and Berkeley begin to think differently about money. Right now the Fed’s cultures and cultures believe that the dollar should lose value in the long run against other assets by an average of 2 percent a year.
The code generated by Bitcoin has limited the maximum number to 21m. This means that the design will make them more valuable forever. You can change the code, but like Faith, you have to change the culture to change the code – you have to convince a lot of people to use the new code. Here, too, the culture of bitcoin is rooted in the solidity of money, believing that the best money becomes more valuable over time. It encourages people to “hodl” each other – to hang on to their bitcoins and never sell them. If you hodl, you have diamond hands. If you sell it, you have paper hands. If you don’t call anything, it encourages you to have fun while being poor.
When you’re in a hodl, you’re getting richer, but you’re not. That’s good for bitcoin assets, but the problem is money for bitcoin, because what you do is keep you out of the markets. This is a challenge as old as money. Theognisek, K. a. VI. A Greek poet of the century, he wrote that wise men know bad gold and silver, and that no one will “take a worse exchange when it must be better.” Aristophanes, the satirist of Athens, stated that “coins full of Athenian pride are never used while brass coins are passed from hand to hand.”
Robert Mundell, the Nobel Prize-winning economist who died a month ago, documented such references over centuries of a single idea, and Thomas Gresham XVI. He achieved the maxim that is usually given to the English merchant of the century and to the former adviser to the Crown: the poor. -quality money pulls high quality money out of circulation. Why would you spend something more valuable?
The code and culture of Bitcoin, in the long run, are designed to get out of circulation. This leaves the hodlers stuck to a problem of collective action. Sell, or change the code, and reduce the value of your assets, making them as useful as money. Hodl, and save the code, and appreciate your goods. Money culture is a monetary policy. Diamond hands are Gresham hands.
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