So I responded to a thread in the economy section, I know of some of us Indians who never leave the India child board so here is my reply from
I am no expert, but I can see that you got a few things right there and a few things wrong.
So the coin which should be used as a currency is unable to preserve value which makes it basically useless as currency because the main purpose of a currency is to hold some value relatively constant so it can be used in daily exchange of goods and services.
Correct no argument.
Please explain again why decay is an advantage for a currency and why anyone would accept a decaying currency in exchange for goods and services when presented with a choice between a more and a less decaying (and therefore volatile) currency.
Why would anyone choose the more decaying currency in an exchange of goods/services over a less decaying one - let alone invest in it?
See inflation and decay are two different things.
In economics decay could be comparable to the Great depression of 1930's or the Financial Crisis of 2008.
In both these cases the decay was not only of the store of value but also the purchasing power of that stored value. If you wanted
something that would normally cost $10, suddenly having $10 for you wasnt enough to buy that
thing, not only because the price of the dollar fell but the cost for producing that
thing significantly rose and that too globally.
Traditionally, inflation on the other hand is a necessary evil, without it there would be almost no value to your currency, just imagine, if you had 1 snickers bar, and provided you have grown up as a man that likes to share stuff with his family, you would naturally share, pieces of that Snicker bar with your family. Now provided everything in this equation remains the same but instead of 1 snicker bar you are given 10 snicker bar then you would have more bars to share with your family.
This situation ended up good for your family in the short run, every one got at least one or more bars but that bar's value was reduced. (even though neither of you are paying for it) So the next time you get 1 snicker bar it wont be enough because now your family expects at least 1 bar per member.
Same is the case with currency, if everyone had more money in their hands, the value for their money would be reduced.
If I remember correctly they even made an episode of Simpsons or Family guy on this topic.
Inflation by definition is the sustained and slight increase of surplus of money which directly results into the sustained increase of prices of goods and commodities.
Why is it necessary ? well that is a debated topic, say you wanted to buy a Horse, the price is $100
But by the time you collected $100 the price has
inflated by 20% and the price is $120.
So now you would rather wait for the price to come down to $100 instead of working more harder to get that extra $20 fast enough so you can buy the Horse. So when you choose to rather wait for the price to come down, it has a deterrent effect on the whole economy, because you as a labor are choosing not to work in hopes of the price falling down again, hence, a steady inflation rate discourages this 'waiting around' and encourages people to work harder in order to afford what they want to buy, in this case the 'Horse'.
Offcourse the rate of work vs the rate of inflation would have a parabolic graph and you would be
eventually be able to buy your horse.
JUST for reference this is a parabolic curve :
So according to the 'experts' inflation is necessary to keep business in profit and to keep the ratio of Potential Labor Force vs Actual Labor Force lower.
Basically Inflation = Profits in Business = More employment opportunities.
So inflation's relation with Bitcoin is also very similar but not the same, in bitcoin the amount of coins generated is limited so
theoretically there is an inflation of bitcoin value overtime, as in the purchasing power of BTC is steadily increasing with the amount of bitcoins being minted (mined) is gradually decreasing.
Take Dogecoin for example, initially the price of the coin went 'TO THE MOON' but now the prices are steadily falling. Why ? because they decided to make unlimited amount of Dogecoins.
Its kinda like a pawn business. The rarer it is, the more valuable it gets.
Now if you ask WHY the price is falling ? well it has to do a lot with the frugal nature of economics, as many say economics is a part psychology.
I discussed this in another thread :
Good to hear that, people must buy at this low price, and then we can count some profits.
I'm sure that btc price will rise again sometime.
Oh you silly people, STOP THIS SILLINESS OF YOURS.
Bitcoin is not gold that you buy it and wait for it to rise in price because when it does rise all you silly guys would do is dump all the coins and create a bigger crash.
Just do day trade, Bitcoin is a currency so trade it like it is one and not some rare commodity.
^ No. One of the few reasons I hold is because I'm afraid I would screw up at day trading. :-)
That has always been the issue with Bitcoin traders, we are not trained to trade in FOREX. We are computer nerds trained in writing lines of codes. Cryptos need to be passed as currencies and more mainstream trading platforms need to recognize them.
What do you mean trade? in the markets or buy stuff with it?
And why it has to be what you say it has to be? It is what people make out of it. If people want to hold it they can do it freely. If you believe it will go up why would you buy some lame shit with it when you can use dollars.
LOL get your facts straight bro. I am not Hitler or Kim Jong-un I am not TELLING people to do anything.
I am just TELLING people the difference between the right and the wrong use of a currency.
By Trade I meant currency trading as in FOREX = Foreign exchange.
You can for sure tame a wild tiger cub and keep it as a pet, but you cant call it a true wild cat. I hope you get my point.
Bitcoin was meant to be a currency NOT a commodity, treat it like a commodity and it will burn you.
This is my reasoning of why the price of BTC is so volatile. Now dont interpret my post as a commandment. You are free to eat bitcoins or wipe your gf's ass with it or even wear it as a piece of clothing lol (by printing it)
A few days later at current prices ...
Bitcoin price now drop we can't see any increases . When will we see the big pump ?
Are increasing numbers of HYIP sites an indication of anything? Do they drag the price down because people get ripped off?
I would think the opposite could be true. It could be investment groups hedging a bet that btc will go up soon and the are trying to accumulate before the surge.
Bitcoin price now drop we can't see any increases . When will we see the big pump ?
who knows, might be nxt yr or maybe after 3yrs or more. Nobody really knows...
...
Mmm!!
And I thought that maybe I had timed my last purchase of gold for BTC badly when BTC was in the $300s.
Of course, I should have considered buying gold when BTC was in the $600 and $700s...
* * *
Looks like the Big Wave that hit was for sub-$250. We will see in the coming weeks and months.
I agree with some above comments that essentially NO ONE can predict BTC price well. With charts or without. Your guess is as good as mine. Or the other way around maybe...
Well ,I anticipated the things a bit .
And yes no one can predict the precise price up to decimals... Traders can say you the general trend ,the approximative lows and highs.
Then my final reply :Remember when I pointed out that holding BTC for as a commodity is risky ?
This is exactly why I said it.
As soon as people are seeing that the price of their 'commodity' is falling, they are dumping the commodity in the market creating a huge back log of sell orders which creates a downward pressure on the graph essentially pulling down the market.
If everyone used btc as a currency to buy stuff and do margin trading like any other forex these crashes would have been much less significant. Keep in mind the price of BTC will rise with the increase in it's usage, holding btc for price rise is opposite of that.
So should you
invest in a
decaying currency ? NO, You should not be investing in ANY CURRENCY with intentions of holding it and selling it for a high value. A Currency is not a commodity and remember, with inflation the value of a commodity rises with the decrease in the purchasing power of your currency (virtual or real).
I hope this answers SOME of your questions and once again, I am not an expert so dont use my opinion as a yard stick.
