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01/24/2022

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I agree with your assessment that crypto is more a store of value than a medium of exchange. However, I think the upside success has had a greater impact on the failed adoption as a traditional currency. Cryptocurrencies, like Bitcoin, are typically deflationary in nature. There is a fixed supply of Bitcoin and each day people lose access to their private key, thus eliminating units from the ‘money supply’ forever. In addition to this, demand is increasing and speculators continue to drive the price up. The vast majority of those who buy Bitcoin today make the purchase in the hopes that it will increase in value. The issue is that while potentially a good investment, rational bitcoin owners will not spend money today that will be worth more tomorrow. As a result, Bitcoin might become gold, but probably not a commonly used medium of exchange. To conclude: No one wants to be the Bitcoin Pizza Guy. https://www.marketwatch.com/story/bitcoin-pizza-day-laszlo-hanyecz-spent-3-8-billion-on-pizzas-in-the-summer-of-2010-using-the-novel-crypto-11621714395

I agree with your assessment that crypto is more a store of value than a medium of exchange. However, I think the upside success has had a greater impact on the failed adoption as a traditional currency. Cryptocurrencies, like Bitcoin, are typically deflationary in nature. There is a fixed supply of Bitcoin and each day people lose access to their private key, thus eliminating units from the ‘money supply’ forever. In addition to this, demand is increasing and speculators continue to drive the price up. The vast majority of those who buy Bitcoin today make the purchase in the hopes that it will increase in value. The issue is that while potentially a good investment, rational bitcoin owners will not spend money today that will be worth more tomorrow. As a result, Bitcoin might become gold, but probably not a commonly used medium of exchange. To conclude: No one wants to be the Bitcoin Pizza Guy. https://www.marketwatch.com/story/bitcoin-pizza-day-laszlo-hanyecz-spent-3-8-billion-on-pizzas-in-the-summer-of-2010-using-the-novel-crypto-11621714395

It seems logical that bitcoin isn't having a meltdown like the title suggests, but rather is experiencing their natural volatility. Since bitcoin isn't tied to a government guarantee, then there is naturally high risk right? There is not risk free rate attached to bitcoin or a government (federal reserve) accepted amount of bitcoin like there is a t-bill with money/currency.. Thus, until a government backs it - there will be this naturally high amount of volatility.

Excellent post and comments. I think the upcoming crypto regulation is might give the government more control over crypto trading and that can be both good and bad. I foresee the correlation to Nasdaq to keep increasing over the time as it is regulated. These regulations would also give investors/traders more of a guarantee and that might drive up the value again

https://time.com/nextadvisor/investing/cryptocurrency/why-crypto-regulation-is-good-for-investors/

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