I understand the quoting now, thanks. I agree with you that its not technically a currency since it's not issued and circulated by a government but I disagree with the OP that it is not ready to be a "store of value" because of a single volatility event.
There are many who would argue it is a good store of value since it can't be manipulated by the issuing state's monetary policy or susceptible to the poor fiscal management of the issuing state.
There have been many volatility events. Given that governments have the ability to practically outlaw it if they choose, that makes it quite risky as a store of value.
Several of the major volatility events in the past of bitcoin were related to Chinese government announcements or rumors regarding regulation/legality.
Sure one can transfer bitcoin without governmental approval (or against restriction), but that annoying need to convert to and from fiat in order to trade for other goods and services means that the governments still have a great deal of influence over bitcoin.
Sure but I was speaking to the OPs assertion that this particular event is proof that it is not suitable as a store of value.
>"Several of the major volatility events in the past of bitcoin were related to Chinese government announcements or rumors regarding regulation/legality."
Right but this is to be expected given that China recently has been the largest market for Bitcoin by volume no? [1]
>" but that annoying need to convert to and from fiat in order to trade for other goods and services means that the governments still have a great deal of influence over bitcoin"
Is that any more annoying or any more inconvenient than having your hard-earned savings devalued by your government?
> Is that any more annoying or any more inconvenient than having your hard-earned savings devalued by your government?
I wouldn't recommend holding fiat currency as savings, except for perhaps 2-3 months of salary equivalent in case of emergencies. The rest should be stored in other assets based on your risk profile.
But it is currently a fact of life that we must exchange our cryptocurrency for fiat if we want to buy goods and services most places. While the number of merchants accepting bitcoin is growing, it's still quite small compared to the number of merchants who take local currency.
Just to expand on the point: there's two models of currency: fiat and commodity. Commodity money is obviously linked to an existing commodity, and suffers from massive swings since there's no way to insulate it from "news". BitCoin, of course, isn't backed by a commodity, so the natural thing is to assume it's a commodity in an of itself. The "mining" terminology supports this view, obviously. As a commodity, it most closely resembles Gold, in that its value doesn't seem closely correlated to the value one can extract from it through industrial use.
Fiat money has its plusses, though. Directly related to the fact that governments _can_ manipulate them is the possibility of reputational currencies. Here, a state has managed its fluctuations and taken actions when prompted for sufficiently often that "news" affects them much less than commodities, since the markets assume the state will act well before it becomes an issue (this also damps good news, since to a certain effect the good news was "expected").
A good study in this phenomenon, and how to break it, is what's happened to Britain since the referendum. It has lost a lot of value, obviously, but also its volatility has gone sky-high.
Going back to OP's point, a well-managed fiat currency can be a better store of value than any commodity. Entertainingly, Sterling has lost a similar amount of value to BitCoin, but it took much longer and is regarded as a disaster. Although, like BitCoin, you'll be able to find fans swearing the exact opposite.
There are many who would argue it is a good store of value since it can't be manipulated by the issuing state's monetary policy or susceptible to the poor fiscal management of the issuing state.