The problem I think has something to do with its market value stability. We can clearly notice such problem at this moment. Currencies are created in order to promote equality with the world market, correct me if I'm wrong. This I think is the main reason why Bitcoin and other cryptos are having difficulties to be accepted in some countries simply because its market value drops at some time, as what we are witnessing at this moment.
You are wrong it's not regarding the value stability. Value stability will happen one day when everyone comes on the same platform of using cryptocurrencies but the deflationary nature of crypto can never be changed. Moreover difficulties is because the prices of goods would become cheaper every next day and not market value drops.
It's true that people are incentivized more to keep their Bitcoin over actually spending them, and we're seeing the effects as early as now, even while supply is still rising. There's no way it will work as a replacement to fiat with the way our economy is set up, where growth is driven by debt and spending -- the question is, why would we need Bitcoin to replace fiat in the first place?
Bitcoin was never meant to replace dollars, kill banks, or save economies. It's there so you could have money you could do whatever you want with, whether that's spending, hodling, or anything in between, while fiat can go ahead and do its thing. While Bitcoin absolutely should be viable for daily spending (people who want to go down this route wouldn't care about deflation anyway), it doesn't necessarily have to be used that way.
Bitcoin I think was created to be used as a currency and a currency means something which could be used as a means of settlement. So if you want to say that Bitcoin was not created with an intent to replace dollars then you are really mistaken.
I think by using bitcoin as a currency, it will need all approval from all countries and the governments which I think they will not easy to agree for accepting bitcoin.
Actually, no. We already use Bitcoin as currency, and that without asking a government for permission. Merchants can also accept Bitcoin without permission from their governments. If you start to wait for governments to finally give you that approval of use, you are not aware of what Bitcoin is meant to combat.
Bitcoin is permissionless money.
In all honesty, I have not much against fiat as money on a daily basis. It works exceptionally well as long as you don't have too much long term exposure in form of savings. It's of course different if you live in a country such as Venezuela, but furtunately speaking, I live in Europe and don't have to go through the problems Venezuelans go through.
In the end, everyone has to decide whether or not Bitcoin is a good currency based on where they live, and what they need it for. In some cases fiat comes out as the better option, but there are plenty of situations where Bitcoin is the better option to go for.
Bitcoin sounds like a better option at a microeconomic level but there is no way that it can live upto that good on a macroeconomic level which is the problem with bitcoin in the very first place.
In case of deflationary currency such as Bitcoin, as we are giving our aggregate demand at current price levels. Or in layman terms we are buying at certain price level. Say for example( a completely hypothetical situation), Wheat . You can buy 1kg of wheat for 1 bitcoin today. Now imagine that we grow in our economy and it leads to better production of wheat due to increased efficiency in production. Now we would have more wheat to sell. However, the supply would increase and demand will not because people still have the same 21 million bitcoin in circulation. So now we will have more wheat and the prices would go down and down. But in such case people will begin to hoard money. The will not spend their bitcoin in anticipation of it prices declining tomorrow. This would lead to even more deflation as demand would decrease even further. Thus creating a spiral which we often call the deflationary Spiral. I think this is why thinking bitcoin as a mainstream currency could pose a lot of problems for all of us.
PS: Supply of goods( Aggregate Supply) and supply of money are separate things
Demand of money and demand of goods( Aggregate Demand) are two separate things
Do you agree or refute?
i don't expect to see a future where bitcoin is a
national currency. at most, it would be part of a basket of assets (along with gold, silver, etc) that back a fiat currency. so it's probably unnecessary to view bitcoin in a vacuum, as if the whole of economic growth would be restricted to its supply.
your arguments also lead to the age old debate between keynesians and austrians. i'm not sure i feel like injecting myself into that debate!
Bitcoin to be a national currency takes time, because it needs to go mainstream first. To reach such a level it is not simple, because when countries start using bitcoin it will affect their own currency go low in value. Maybe when more countries move to the digital trend bitcoin might get importance as a currency. Until then it is much preferred to be assets similar to gold, silver and other valuables.
There is probably less than 1% possibility of Bitcoin becoming a national currency. I cannot even imagine a sovereign country declaring a currency not of their making, not under their direct regulation or supervision, and not issued by them to become a national currency. The most that can happen to Bitcoin is for it to become the global currency, bridging together all kinds of national currencies. One can travel or send money all over the world without the need to go through different national currencies.
Actually, I am not against making it a national currency or even with it but the point is if this is not the goal then what do you mean by Widespread Adoption? Because I don't see a great future with cryptos and fiats going hand in hand.
