Topic: Bitcoin is a great foreign currency - page 2. (Read 1950 times)
The value of a currency comes from circulation and acceptance. At this initial stage, the value of Bitcoin will increase when it is circulated as opposed to hoarded, which is going long and holding on to your Bitcoins. Ironically, the more people who are 'long Bitcoin' in this scenario, the worse it is for Bitcoin and thus the people holding it themselves. Spend your Bitcoins, make it more widely accepted. That's the only way for the 'currency value to increase'.
In another thread there was such a discussion: You can't purchase anything in US with euro, but it does not render euro worthless. All you need to know is that someone on this planet accept this currency as payment, then it should have some value. In fact, you might know nothing about euro, it might just collapse quickly because of those problems in southern europe, but as long as you can exchange it to USD, it has value...
In this sense, bitcoin is no difference than any foreign currency of a country that you have never been to. Just knowing that some people on this planet accept payment for this currency is enough, it is not necessary to use it to purchase anything around you, all you need is an exchange
And, just like USD still keep its value without gold backing it, as long as you can exchange a foreign currency to your local currency with a good rate, even no one in the world accepting payment with that foreign currency, you don't care
The only concern might be: If the people accepting that currency getting less, its exchange rate will drop. But the forex exchange rate is mostly affected by central bank's monetary policy, their rate decision and even market intervention. Comparing with their influence, the real economy's affect on exchange rate is very small
We all saw that when one country greatly increased money supply, the other country would immediately increase their money supply about the same scale, otherwise their currency would rise sharply in exchange and heavily hit their export
For those foreign currency traders, bitcoin is a foreign currency which has a superior property: Downside risk is always limited due to limited supply, in worst case you end up buying all the coins at $100 with a capital around 1 billion USD. But the upside potential is unlimited. This great property will surely attract lots of currency traders, it's almost a no risk strategy to always go long and double down until they bought all the coins, if that will ever happen
In this sense, bitcoin is no difference than any foreign currency of a country that you have never been to. Just knowing that some people on this planet accept payment for this currency is enough, it is not necessary to use it to purchase anything around you, all you need is an exchange
And, just like USD still keep its value without gold backing it, as long as you can exchange a foreign currency to your local currency with a good rate, even no one in the world accepting payment with that foreign currency, you don't care
The only concern might be: If the people accepting that currency getting less, its exchange rate will drop. But the forex exchange rate is mostly affected by central bank's monetary policy, their rate decision and even market intervention. Comparing with their influence, the real economy's affect on exchange rate is very small
We all saw that when one country greatly increased money supply, the other country would immediately increase their money supply about the same scale, otherwise their currency would rise sharply in exchange and heavily hit their export
For those foreign currency traders, bitcoin is a foreign currency which has a superior property: Downside risk is always limited due to limited supply, in worst case you end up buying all the coins at $100 with a capital around 1 billion USD. But the upside potential is unlimited. This great property will surely attract lots of currency traders, it's almost a no risk strategy to always go long and double down until they bought all the coins, if that will ever happen
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