
Nouriel Roubini: Bitcoin Is a ‘Ponzi Game’  - ghosh
http://blogs.wsj.com/moneybeat/2014/03/10/nouriel-roubini-bitcoin-is-a-ponzi-game/
======
carsongross
Bitcoin is almost exactly the opposite of a ponzi scheme:

[http://en.wikipedia.org/wiki/Ponzi_scheme](http://en.wikipedia.org/wiki/Ponzi_scheme)

"A Ponzi scheme is a fraudulent investment operation that pays returns to its
investors from existing capital or new capital paid by new investors, rather
than from profit earned by the individual or organization running the
operation. Operators of Ponzi schemes usually entice new investors by offering
higher returns than other investments, in the form of short-term returns that
are either abnormally high or unusually consistent."

There is no controlling operator paying out investors and there is no claim
that a bit coin is going to generate any sort of profits in the form of
interest or capital appreciation. The short term returns have been unusually
_inconsistent_.

You can say that bitcoin is in a _bubble_ , you can criticize it as a
_currency_ , you can criticize its social goals, you can criticize its
technical implementation, but to call it a ponzi scheme is blatantly
incorrect.

That Roubini, one of the very few mainstream economists to predict the 2008
collapse, is so imprecise with his language gives some indication of the state
of todays economics profession.

~~~
splintercell
Any rising investment, if seen in a proper timeframe(with proper rationale)
could appear to be a Ponzi scheme.

For example between Feb 2009 to Sept 2012 the price of Apple stock went from
$100 to $700. Did the profits of Apple go to 7 times in this time? Not really.

But if you were to only see Apple's stock in this timeframe, AND don't
understand Apple's business model, but merely heard that Apple's stock is
rising and you should invest in it, then it would appear that older investors
are being paid off at the expense of the newer investors.

Noriel Roubini could also very specifically perceive the question about
bitcoin as "I heard a lot of my friends are getting rich through bitcoin,
should I invest in bitcoin to profit from it?", and then he gives the answer
that he gave.

~~~
andrewla
> Any rising investment, if seen in a proper timeframe(with proper rationale)
> could appear to be a Ponzi scheme.

I know you're not disagreeing with the grandparent post here, fundamentally,
but this really irks me. A Ponzi scheme is a particular type of scam that is
pretty well defined.

> ... it would appear that older investors are being paid off at the expense
> of the newer investors

I guess this is the core of it; the definition uses the passive voice and thus
is open to this interpretation. I think it's clear, both historically and
looking at examples, that the definition would be more clear as:

    
    
        A Ponzi scheme is a fraudulent investment operation, where the operator
        pays returns to its investors from existing capital or new capital paid
        by new investors, rather than from profit earned by the operator.
        Operators of Ponzi schemes usually entice new investors by offering higher
        returns than other investments, in the form of short-term returns that are
        either abnormally high or unusually consistent.
    

Here I've modified the language slightly (and I've edited the wikipedia page
as well, but we'll see if that holds up). In the Apple example, there is no
operator, so there's really no chance that it is a Ponzi scheme. Similarly for
the Bitcoin case.

You can make the argument that Bitcoin (or Apple stock) is a scam of some
sort; a "pump and dump" seems the most apt analogue. Calling it a Ponzi scheme
seems an invitation to this exact kind of semantic tomfoolery that I'm posting
here.

------
vijayboyapati
\- It's false that bitcoin isn't a means of payment. People DO use it as
payment.

\- It's false that it's not a medium of savings. It has reservation demand
which is the only reason it has a price. It does not matter that it has "no
assets in it", whatever that confused statement means. The dollar also no
longer has any asset backing. The medium of savings role exists while people
perceive there is value in holding a monetary good in the hope it will
appreciate in the future. They perceive it will appreciate because it has
comparative advantages to other goods which serve a similar purpose. Bitcoin
has many comparative advantages to other monetary goods. In particular, it
allows the transfer of value to anyone, anywhere in the world, near
instantaneously, with low transaction fees, without the need for a trusted
intermediary such as a bank. This has literally never been possible before in
the entire history of civilization.

\- It's true that bitcoin is not currently a unit of account. This mostly has
to do with the fact that it's still nascent and needs to increase in
liquidity. As it does more and more entrepreneurs who are primarily accepting
bitcoin (it will start with the miners) will begin to calculate profit and
loss in bitcoin terms

\- It's true bitcoin is used for so-called criminal activities. But so too is
the dollar. In fact, the dollar isn't just used for buying illegal drugs, the
dollar is used to funnel gigantic sums of tax payer wealth to well connected
bankers when their businesses fail. Which is the bigger crime, Nouriel?

\- Bitcoin isn't susceptible to hacking - individual bitcoin businesses are
susceptible to hacking such as the incredibly incompetent MtGox, which
deserved to fail. Blaming Bitcoin for the incompetence of a particular
business is like saying the dollar is a failure because Lehman Brothers
collapsed. To me that is a much worse "hack" than anything that happened with
Gox.

\- And no, Bitcoin is NOT a ponzi scheme. Bitcoins are a monetary good whose
price fluctuates with demand on the market just like any other monetary good,
such as gold.

~~~
baudehlo
| It's false that bitcoin isn't a means of payment. People DO use it as
payment.

But places that accept bitcoin aren't holding on to it. They transfer
immediately to local currency (because their suppliers can't be paid in
bitcoin). So currently* bitcoin is more a means of money transfer than it is a
currency in itself.

* This might eventually change if suppliers are willing to accept bitcoin too.

~~~
splintercell
> They transfer immediately to local currency (because their suppliers can't
> be paid in bitcoin).

That is correct, but the question which arises, why are companies introducing
this level of complexity for no reason? Why are people hell bent on paying for
goods through bitcoins?

Yes its true that currently its a means of money transfer but there is no
reason why companies won't just start holding bitcoins. There is no added
utility offered in USD which cannot be offered by bitcoins. Once enough market
for bitcoin appears people will switch to holding in dollars.

~~~
JohnTHaller
Well, except for that whole thing about there being no secure place to store
bitcoins as they come in. You can store them with a third party, but that
often ends badly (Flexcoin, Mt Gox, Poloniex, etc). You can store them
yourself, but having your money be stolen by a simple server breach is not an
attractive prospect for a company, whether startup or established. It wouldn't
be quite so bad if there were any regulation or legal structure or any way to
get your bitcoins back when they are stolen, but there isn't.

~~~
splintercell
> Well, except for that whole thing about there being no secure place to store
> bitcoins as they come in.

Yes, that's also a fact. Bitcoins have revealed a really unprepared facet of
technology. Information security. Bitcoin or not, the fact remains that we
don't have a fool proof way(other than going offline) to keep the data secure
for an average man. Sure smart people can keep their data secure, but common
man(who wants to use bitcoins) is unable to do so.

Talking about bitcoin and regulation is like talking about anti-bullying
regulations. If it may make you feel better that your kid is protected by
anti-bullying regulations, or you could prevent things online by merely making
a law against it, then you're delusional.

------
bdcravens
There are elements that are definitely Ponzi.

This weekend I played with altcoin mining. The goal of course to figure out
how to turn those coins into money I can spend. Aside from maybe LTC, no one
is taking altcoins for payment or exchanging for fiat; you convert to BTC on
an exchange like Cryptsy, and then sell the BTC on Coinbase, etc.

At present, you can mine with the same hardware you could use for BTC 3 years
ago, so it's attractive. Eventually, though, you'll run into the same issue as
with Bitcoin: difficulty increases. If you use a Multipool, you get around
this by shifting from altcoin to altcoin, based on profitability. (usually a
direct product of coins with lower difficulty, which tend to be newer)

In general, all alts will increase in difficulty to the point where they're no
longer profitable; the only way multipool mining can be profitable over any
period of time is new coins coming out. That's pretty much the situation we
see today. Eventually it'll collapse, as most Ponzi's do.

~~~
joepie91_
Everything that knows the concept of an "early adopter", has "elements that
are definitely Ponzi".

That doesn't make it a Ponzi scheme.

~~~
bdcravens
I'd agree. It's entirely possible to be an early adopter on something that
proves to have real value, and reap rewards from taking that risk.

Altcoin mining for conversion to Bitcoin, however, has the marks of Ponzi:
returns (altcoin:bitcoin exchange rate) that require a steady stream of new
investment (new alts, as old alts become unprofitable) that provide little to
no value other than providing the return.

------
yummyfajitas
Roubini isn't laying out the full argument. Bitcoin has low value as a means
of exchange _currently_ , but that may change in the future.

If speculators are correct that it may go up in the future, it is in their
best interest to bid the price up now and collect money in the future. That
would make BTC not a speculative bubble, but merely an asset that speculators
have properly valued.

If you want to argue BTC is or is not a bubble, do it right. Choose a theory
of money, e.g. Baumol-Tobin. Then come up with predictions about future
transaction costs, the size of the BTC NGDP, and the price level. Finally, use
your theory of money to predict the value of BTC.

If that disagrees with the current speculative value, you've got a real
argument.

(For those unfamiliar with the macroeconomics terms I used, I explain it all
here:
[http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.h...](http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.html)
)

~~~
craigyk
who cares about your fancy pants arguments when it doesn't even pass the smell
test? It has a lot of strikes against it: 1) deflationary 2) slow 3) energy
hungry

~~~
dia80
Since bitcoin is very new it is genuinely hard to tell if it will be
eventually seen as brilliant innovation that was destined to be successful or
get compared to the Dutch tulip bubble etc.

You raise valid concerns but there are counter arguments to them all so I
don't think such a glib dismissal is warranted. From pg's essay[0]

 _The first time Peter Thiel spoke at YC he drew a Venn diagram that
illustrates the situation perfectly. He drew two intersecting circles, one
labelled "seems like a bad idea" and the other "is a good idea." The
intersection is the sweet spot for startups._

[0] [http://www.paulgraham.com/swan.html](http://www.paulgraham.com/swan.html)

------
abstrct
TL;DR: Man spends 5 minutes thinking about Bitcoin on a plane and comes to
conclusions which may or may not be correct. Shares them with people because
he is super duper important.

~~~
smacktoward
I'll just leave this here for you:

[http://en.wikipedia.org/wiki/Nouriel_Roubini](http://en.wikipedia.org/wiki/Nouriel_Roubini)

You can agree or disagree with his argument, but snidely dismissing him as
someone without expertise who mistakenly thinks he is "super duper important"
is silly.

~~~
joepie91_
"Expert" or not, the arguments he's making here are not only obviously wrong,
but also almost certainly uneducated.

Judge what somebody says, not who he is.

~~~
aroch
None of his observations are wrong, how they are uneducated?

~~~
joepie91_
All of them are wrong. See also
[https://news.ycombinator.com/item?id=7373804](https://news.ycombinator.com/item?id=7373804)

EDIT: They are uneducated, in that any cursory research into the concept and
history of Bitcoin would make it blatantly obvious that his remarks are wrong.
There are two possibilities here; either he is being willfully ignorant, or he
simply hasn't done his homework well enough. Given his reputation, I'm betting
on the latter. The "uneducated" bit simply derives from him literally not
having educated himself on the matter.

------
grej
And in other news, global debt now exceeds $100 Trillion dollars - up 40% over
the last 7 years: [http://www.bloomberg.com/news/2014-03-09/global-debt-
exceeds...](http://www.bloomberg.com/news/2014-03-09/global-debt-
exceeds-100-trillion-as-governments-binge-bis-says.html).

Which is the bigger Ponzi?

~~~
skywhopper
Ponzi's not really the right word for either thing.

The huge growth of debt is a sign that inflation has been too low for too long
in too many places. As long as the ECB and the Fed treat 2% as scary-high
inflation, paying back debt becomes far more difficult.

To start solving the debt problem, the central banks should start targetting
4-5% inflation for a decade or so, and allow it to go a little above the
target, rather than trying desperately to hold it down to less than 2%. This
would reduce debt while encouraging investment and economic growth, which
would bring down unemployment, which would help pay off debt. It's a virtuous
cycle.

In contrast, Bitcoin is a deflationary currency. Deflationary regimes favor
hoarding, make it impossible to invest, and ultimately benefit only the
wealthy. Reasonable levels of inflation on the other hand favor economic
growth, investment in real assets, and they favor the productive working class
over the idle rich.

~~~
shawabawa3
> To start solving the debt problem, the central banks should start targetting
> 4-5% inflation for a decade or so,

Wouldn't that just cause lenders to increase their interest rates?

> Deflationary regimes favor hoarding, make it impossible to invest,

Most sound investments yield returns way above inflation, and they would also
yield returns way above deflation

> and ultimately benefit only the wealthy

Unlike the current system?

~~~
hnnewguy
> _Wouldn 't that just cause lenders to increase their interest rates?_

Yes it would. Only unexpected inflation will affect debt repayment rates (in
theory).

------
aggronn
Everything he said is technically true, besides the ponzi scheme jab, which
isn't really his main point. Until you pay rent, taxes, and get your paychecks
in bitcoin, the bitcoin currency pretty much only exists as a method of
payment.

------
DennisP
Pretty much all these objections boil down to "it's new and not many people
are using it yet."

------
omegaham
One problem that I think is salient about Bitcoin is that it's just _not that
useful_.

It's supposed to be a currency, but no one's actually using it for currency.
They're just gambling on it, hoping to take advantage of other people's
mistakes to make their own money. It's a zero-sum game, and it's destructive.
People are just playing around with the electronic version of Monopoly money.

The driving force behind currencies is a large organization or group of
organizations that work to keep it reliable. The dollar is kept stable because
the federal government is large, established, and pays in dollars. With more
and more people using the dollar, it becomes even more stable, to the point
that other countries can use it for transactions.

Bitcoin doesn't have that. People don't have any assets tied in with Bitcoin
the way that they do with dollars or Euros or yen. And why would they, when
it's so volatile that a bank account of Bitcoins will change its value by 50%
in a day?

Proponents of Bitcoin say that its benefits are that it's decentralized,
unregulated, and doesn't have to rely on a government to ensure that it's
stable. I actually think that these are bad traits for a currency to have.

~~~
vijayboyapati
The fallacy here is that a monetary good requires some separate use. As a
money per se, bitcoin is very useful. As I wrote in this thread, it allows the
transfer of value to anyone, anywhere in the world without an intermediary.
This has _never_ been possible before, and it certainly impossible with the
dollar. There are several markets for which this innovation has profound
implications

~~~
maxerickson
By the numbers, most people need an intermediary to move even a modest amount
of bitcoin. They don't have any.

You can say there is no dependence on a single intermediary.

This is a quibble, but I think it's an important one, for example, a lot of
the arguments about using bitcoin in Argentina or whatever ignore the part
where Argentinians don't have a whole lot of bitcoin to start using.

------
api
Are all currencies ponzi games?

Seems to me that the deciding factor is: what percentage of Bitcoin's
transactions are actual transactions for actual goods and services vs. what
percentage are transactions related to speculation on Bitcoin itself. That is
very hard to measure, especially since at least a double-digit percentage of
transactions belong to the illicit economy.

~~~
sodastream
Isn't 80% of world wide used currency all speculation and only 20% used in
services and products ?

I'm talking about the trillions of derivatives market ..

~~~
pjc50
That depends on whether you mean "M0" or "M3".

Retail payments are now a little over 50% electronic:
[http://www.paymentscouncil.org.uk/media_centre/press_release...](http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/1219/)
, so that's bank money rather than paper/metal currency.

Forex trading is huge: [http://finance.yahoo.com/news/forex-market-size-
traders-adva...](http://finance.yahoo.com/news/forex-market-size-traders-
advantage-044400707.html) : again, held on account rather than actual notes
and coins changing hands. That's not even counting derivatives, but
derivatives usually net out (for every put option there is a call option) and
don't necessarily require settlement.

However, there's enough of a real market and taxation demand denominated in
the US dollar that it's not going anywhere any time soon. The ECD made enough
of a commitment to Euro liquidity that it's not going away any time soon.

Bitcoin's market cap is still tiny enough that it could be demolished by a
single bored FX trader in an afternoon; but there's no real way to profit from
that, as doing so would also demolish the fragile exchanges by which you might
cash out.

~~~
sodastream
Interesting. Thanks.

------
dperfect
[https://en.bitcoin.it/wiki/FAQ#Is_Bitcoin_a_Ponzi_scheme.3F](https://en.bitcoin.it/wiki/FAQ#Is_Bitcoin_a_Ponzi_scheme.3F)

As mentioned in the link, Bitcoin certainly has tremendous value beyond simply
making early adopters rich. If you don't believe it, I encourage you to listen
to some of Andreas Antonopoulos' arguments about Bitcoin as a network vs
Bitcoin as a currency. Bitcoin provides a vast number of benefits as a
technology beyond simply being a "currency."

~~~
rm999
He probably made a mistake evoking Ponzi's name (although he never actually
called it a Ponzi scheme, which it clearly isn't). But I think when people
bring up Ponzi and bitcoins, the idea is closer to a bubble mentality where
adopters are buying bitcoins to profit, not to use it as a currency ("bitcoin
isn’t means of payment as few transactions in Bitcoin. And given its
volatility all who accept it convert it right back into $/€/¥"). This, at the
moment, is correct from what I can tell - it's much easier to spend cash than
bitcoins on legitimate things. People aren't getting bitcoins for, say, the
same reason an American going to France will get Euros.

There may be theoretical technological benefits to crypto-currencies, but they
don't practically exist for most people who want to legitimately spend their
money today. The only useful application I've seen so far are the microtip
dogecoins on reddit.

~~~
dperfect
Practical applications of Bitcoin (as a network) are popping up all the time,
but it's true that they are still in their infancy. That doesn't mean the
value isn't there.

If value were judged purely on current implementation or common practice, then
most of the startups mentioned on this site would never have the chance to
become anything worthwhile. We invest in great ideas that hold promise because
sooner or later, those ideas will take flight and become part of our lives.
Bitcoin is no different.

------
pkrumins
I'm just going to make this statement here on Monday, March 10th, 2014, that
Bitcoin is going to fail within the next 2.5 years.

~~~
sigstoat
and how do you determine whether or not bitcoin has failed?

~~~
pkrumins
It will be worth nothing.

~~~
alextgordon
Nothing? I'm prepared to buy as many bitcoins as I can @ $1.

~~~
shawabawa3
Sure, that's because currently they're worth ~$600.

I'm a big fan of bitcoin, but even I can see that they could potentially
become worthless. However, the odds of that are incredibly small (it would
need either a breakthrough in cryptography or a critical bug to be discovered)

------
aresant
He says "It is btw a Ponzi game and a conduit for criminal/illegal activities"

Bitcoin's first "killer app" was clearly silk road which was doing ~$40m/yr
(1) and the criminal economy for drugs alone is in excess of $320 billion (2).

If you were to model a future where BC's primary use is for criminal/illegal
activities I wonder what the value would look like?

Of course providing the allowance that the Overstock's / pubs / merchants
continue to provide the smokescreen to allow BC's to be socially / regulatory
acceptable.

(1) [http://www.dailydot.com/business/silk-road-monthly-sales-
bla...](http://www.dailydot.com/business/silk-road-monthly-sales-black-market-
drugs-study/)

(2) [https://www.unodc.org/toc/en/crimes/organized-
crime.html](https://www.unodc.org/toc/en/crimes/organized-crime.html)

------
josu
This compilation of tweets shouldn't be on the front page. Tweets don't belong
outside of twitter.

------
Aqueous
at times like this i wish the supporters of bitcoin hadn't wedded themselves
so thoroughly to libertarian ideology. they've turned this into a ideological
debate when in fact it should just be treated like a cool new technology that
could benefit everyone. i say this as someone who thinks bitcoin has the power
to change the world but also believes that markets need regulation in order to
prevent massive destruction due to volatility.

that said roubini is completely wrong about btc, just like krugman, and both
need to change their thinking about what constitutes a currency.

~~~
pessimizer
>that said roubini is completely wrong about btc, just like krugman, and both
need to change their thinking about what constitutes a currency.

Care to explain why, or is this just your self-affirmation mantra?

~~~
Aqueous
No need to be snarky. BitCoin is clearly already being used as a currency - it
is being used in exchange for goods and services as a form of liquidity. This
means it is a store of value, it is a medium of exchange, and while it isn't
yet a unit of account - as others have said here, this seems to just be a
matter of adoption. Of course things aare priced in dollar when the dollar
remains the world reserve currency.

This idea that a currency needs all features of historical currencies to be
considered a currency is ridiculous, and doesn't accommodate a "start-up"
currency which is something we've never seen before - at least not globally.
At the very least the definition of currency ought to change to something
like: "A currency possesses at least 3 out of 5 of these qualities."

None of these qualities are permanent, unchanging qualities. That seems to be
the other critical mistake economists are making - failing to see the forest
for the trees. That comes from an institutional mindset where only governments
(or government-connected organizations) can issue currency and so currency has
the aura of permanence.

~~~
joepie91_
> At the very least the definition of currency ought to change to something
> like: "A currency possesses at least 3 out of 5 of these qualities.

Actually, if you look at the definition of "currency" from various sources,
you'll come across stuff like this:

"1\. Money in any form when in actual use as a medium of exchange, especially
circulating paper money."

([http://www.thefreedictionary.com/currency](http://www.thefreedictionary.com/currency))

... and for "money":

"1\. A medium that can be exchanged for goods and services and is used as a
measure of their values on the market, including among its forms a commodity
such as gold, an officially issued coin or note, or a deposit in a checking
account or other readily liquefiable account."

([http://www.thefreedictionary.com/Money](http://www.thefreedictionary.com/Money))

The problem doesn't seem to be that the definition is incorrect; the problem
seems to be that people assume their own definition based on what they're used
to, rather than adhering to something you'd find in a dictionary - commonly
the motivation appears to be using "it's not a currency" as a (fallacious)
reason to express their dislike of something like Bitcoin.

------
weatherlight
All fiat currencies have the potential to be Ponzi scheme.

Our current system is a Ponzi schemewhere you can help pay down the debt by
printing money?

This shifts wealth up.

numbers don't lie.

[http://en.wikipedia.org/wiki/Income_inequality_in_the_United...](http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Measurement)

[http://www.bloomberg.com/news/2014-03-09/global-debt-
exceeds...](http://www.bloomberg.com/news/2014-03-09/global-debt-
exceeds-100-trillion-as-governments-binge-bis-says.html)

------
joepie91_
Might as well post my comment here as well...

\--

It would be great if economists started coming up with _genuine_ criticism
regarding Bitcoin, rather than obviously false statements, misunderstandings
that have been corrected a million times before, and fallacious reasoning.

I mean, virtually everything he said is explicitly listed on
[https://en.bitcoin.it/wiki/Myths](https://en.bitcoin.it/wiki/Myths) – that’s
how often these things have been brought up and disproven.

~~~
blatherard
I looked at the wiki page and I don't see anything that addresses these points
(I'm omitting points that seem to be covered):

\- Bitcoin is not a unit of account as no price of goods and services is set
in Bitcoin unit nor it ever will.

\- Bitcoin isn’t means of payment as few transactions in Bitcoin. And given
its volatility all who accept it convert it right back into $/€/¥

\- Bitcoin isn’t a store of value as little wealth is in Bitcoin and no assets
in it

Am I missing something?

~~~
joepie91_
Odd. I certainly recall these points being covered there (or somewhere on the
wiki, anyway), but the closest I can find now is a passing remark in
[https://en.bitcoin.it/wiki/Myths#Shopkeepers_can.27t_serious...](https://en.bitcoin.it/wiki/Myths#Shopkeepers_can.27t_seriously_set_prices_in_bitcoins_because_of_the_volatile_exchange_rate)
...

In absence of an accurate description on the wiki, here goes:

"\- Bitcoin is not a unit of account as no price of goods and services is set
in Bitcoin unit nor it ever will."

When Bitcoin first started out, virtually _everything_ sold for it was
denominated in BTC. Some places still do this, but due to the volatility of
Bitcoin right now (which is really just a result of a small market gaining
traction, and is unavoidable for a new non-government-backed currency) it is
more practical to denominate in USD - either visibly or behind-the-scenes.

This was not the case when Bitcoin started out, and will almost certainly not
be the case in the future - as the transactional market for Bitcoin continues
growing, it will eventually stabilize in terms of value, and things will be
widely priced directly in BTC again. See also next answer.

"\- Bitcoin isn’t means of payment as few transactions in Bitcoin. And given
its volatility all who accept it convert it right back into $/€/¥"

No requirement exists that a means of payment must exceed a certain arbitrary
transaction volume, so that argument is invalid right off the bat. Whether
it's a _common_ means of payment has nothing to do with whether it's a means
of payment _at all_.

BTC are currently commonly exchanged back into other currencies after receipt
- and again, the claim is false, it is definitely not "all" \- to cope with
the aforementioned volatility of a "young currency" BitPay, Coinbase etc.
serve as "stabilizers" \- they allow for adoption to increase during a
volatile period, thereby solving the chicken-egg problem of volatility and
adoption; over time volatility will decrease (as it has already been doing) as
the adoption grows.

TL;DR direct-exchange services such as Coinbase and BitPay are really just
temporary coping mechanisms that are absolutely necessary for Bitcoin to grow
through its first adoption period.

"\- Bitcoin isn’t a store of value as little wealth is in Bitcoin and no
assets in it"

"Young currency" applies, again. And again, whether it is a _reliable_ store
of value _right now_ , has nothing to do with whether it's a store of value
_at all_.

If I had to summarize the arguments made, these are the big mistakes that are
being made:

\- "It's not a reliable/useful $concept, so it's not a $concept at all."
(obviously incorrect; unable to separate opinion and definition)

\- "Very few people use it, so it's useless" (self-fulfilling prophecy,
basically, and classic social adoption issue)

\- "People don't denominate things in BTC, so BTC is not a currency"
(irrelevant, that is not what the definition of "currency" is)

\- "The news said that it got hacked / is only used by criminals, so surely
that is true" (appeal to... not even sure what to call it, authority? biased
source?)

------
NateDad
Why do economists think we care that bitcoin isn't a currency or store of
value or unit of account or whatever other economics 101 term?

We call it a currency because there's no other good name for it.

How about instead of telling us everything it isn't, they just tell us what it
is? I'm guessing the reason they don't, is because they don't know either.

~~~
NateDad
Oh, and every "economist" (intentionally in quotes) that calls bitcoin a Ponzi
scheme should have his credentials revoked... just like a geek who says his
iPhone ran out of memory due to all the pictures he took.

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enscr
He isn't the first & definitely not the last to say that. Some things are best
left for time to decide. When it comes to generation defining concepts, many
of the "expert" comments are as accurate as a coin toss. Pick up any major
economic event in history & look at what percentage got it right. What does
that say?

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lcuff
Completely unpersuasive.

Bitcoin, or some other digital currency, will enable the selling of wisdom
(different than information) in a free market as Ted Nelson originally
envisioned when he coined the term "Hypertext", which isn't what the current
web is, btw.

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sunseb
Bitcoin is a scarcity-based currency, it's kind of a deflationary spiral,
people save and don't spend their bitcoins.

We desperately need a digital currency, it's the future... How could we solve
this issue ?

~~~
joepie91_
I don't see how a deflationary currency is a problem.

As far as I can tell, the only ones who benefit from the "money has to be in
constant circulation" adage, is those who gain a profit off every transaction
made. Money is meant to be a representative token to make trading easier; I
fail to see how it makes any sense to "encourage spending" in itself.

~~~
maxerickson
A really big factor is that people get upset when the number describing their
wages goes down.

Businesses are also disinclined to lower their prices (this isn't a rule, sure
businesses lower prices, it's a description of long term aggregate behavior).

Both of those things are things that must happen for an economy to function
with a deflationary currency.

~~~
joepie91_
> A really big factor is that people get upset when the number describing
> their wages goes down.

I doubt whether that is still the case in a (hypothetical) economy that is
largely deflationary. In the current context, sure - but to me that seems
largely a result of people being used to inflation, and I doubt that that
association lasts if inflation is no longer the standard situation.

> Businesses are also disinclined to lower their prices (this isn't a rule,
> sure businesses lower prices, it's a description of long term aggregate
> behavior).

Can you elaborate on that?

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6thSigma
As more companies are building on bitcoin and more merchants begin accepting
bitcoin, the network effects increases. The network effects are what makes
bitcoins valuable.

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PleaseBeSerious
That is why you want to get in early.

