El Salvador abandons Bitcoin as legal tender

I come to these threads expecting criticism about bitcoin being funny internet money run by a small group of shady characters.

But most of the comments are about how stable currency and stores of wealth are actually bad! It kind of sounds like we think bitcoin is working.

If USD is inflating and Gold is staying still, is gold “deflating”?

What do you call someone who bought a pizza with BTC last year? Paper hands? Shouldn’t they have hodled and not had pizza? How can this be a currency.

> stable currency

You lost me at stable currency. BTC is a speculative asset. Gold is a speculative asset. Neither are stable currencies.

If you'd like to speculate and INVEST in BTC, go ahead. But I'm quite frankly tired of people claiming it to be a currency.

> Shouldn’t they have hodled and not had pizza?

but then starved to death while hodling?

I don’t know that’s what I’m asking! Should you only spend your money in life or death situations in a btc economy?

I don’t own any btc. But I’m wondering why there is so much FUD about currency that doesn’t inflate.

Ok. But my point is many of the comments are attacking the idea of a stable currency - not btc.

The problem is a currency which is also considered a precious good. It’s like using diamonds as the medium of exchange. Gold is far from the most valuable commodity, and silver even less so. So I think it means we should use some other crypto than BTC if we want to have it be a currency.

The utility of the money is in how you spend it. Your same question could be asked about the S&P.

Why would anyone sell? Well at some point in your life you want to use the money to accomplish your life goals

You should not sell your shares in the S&P 500 to buy pizza unless your financial situation changes drastically for the worse or I guess maybe you are near death. As I said in the other thread, the problem is that btc is too desirable in the market to be a functioning currency and using it for pizza or impulsive daily purchases is a nonstarter in reality.

But you’re wrong. People sell S&P and BTC everyday even if they aren’t dying.

This is time value of money. If I wait 20 years instead of buying a house, I can have more money. But that’s 20 years of my life I didn’t live in the house I wanted.

I could invest more in S&P and not go on vacation, but then I won’t have as much time to go on vacations.

Goods and services now can be more valuable than money later, and that’s why people sell. And that’s why deflationary currency is fine.

I notice you mentioned big ticket purchases which I specifically did not mention. Your argument looks a bit different if you replace houses and vacation with lattes and sneakers. We live in a consumer economy where a marginal drag on purchasing activity due to currency deflation would probably be pretty disruptive to put it mildly.

If you’re arguing that people would think harder about their purchases and frivolous spending would decline. I agree. And I think that’s a benefits

If you’re asking if people would not use their deflating currency to buy lattes and sneakers, I disagree. People like sneakers and lattes more than money. They prove this everyday by buying them instead of s&p.

There is an issue of the cost of a transaction - which nis bad for btc and s&p. Nobody wants a tax form for buying a pizza. But the regulatory environment creating high selling costs is orthogonal to the deflationary property.

More than money, yes. More than precious bitcoin?

The argument simply is that exchange should be frictionless and deflationary currency will slow the velocity of money. I guess you agree this will lead to reduced prosperity and economic activity, though you call it frivolous purchases. Your comment about preferences doesn’t play into it; this is about mechanics of exchange, and a precious asset is an inefficient medium for commerce which would lead to reduced economic activity because not only do you have to factor in the opportunity cost of buying a good or buying some other good (sneakers or s&p), now you also have hodling, zero economic activity, as a 3rd option with its own expected return and opportunity cost to forgo. When I buy sneakers, the s&p 500, or btc, my dollars don’t disappear. A counterparty receives them and they stay in the economy. If you pay me in btc and I just hold it, then that money effectively does disappear from the economy.

And I’m not even mentioning all the macro issues of not being able to provide liquidity in the form of new capital in times of crisis.

> More than precious bitcoin?

I’m advocating for stable currency. Not bitcoin.

> you agree this will lead to reduced prosperity

I agree that it will reduce the velocity of money and maybe “GDP”. But not prosperity, individuals being able to save wealth into the future is a better life outcome than more goods changing hands.

> and a precious asset is an inefficient medium for commerce

You are conflating liquidity with deflation. To be a currency it has to be liquid, we agree. We also agree btc is not as liquid as cash. But deflation or stability is orthogonal from liquidity.

> now you also have hodling, zero economic activity,

Already addressed. People want money to buy goods.

> my dollars don’t disappear.

The value isn’t lost in the exchange but it’s lost everyday due to inflation. And by “lost” I mean transferred to government projects.

> that money effectively does disappear from the economy.

No it merely is saved for a future consumption date. If we average consumption needs of participants in the economy there is no reason to expect a monotonic hoarding effect. That would mean consumers are not satisfying their desires for goods.

Here is one last framing. The economy is not money, it’s goods and services. Money is just a tool for claiming them. So what does an inflationary currency do to help the economy? Does it cause more people to get out of bed and create new goods and services? No. It just transfers claims to resources to someone else.

> You are conflating liquidity with deflation. To be a currency it has to be liquid, we agree. We also agree btc is not as liquid as cash. But deflation or stability is orthogonal from liquidity.

I’m not; you have a limited view of what inefficiency means. The currency can be liquid and still inefficient for exchange due to other kinds of overhead such as opportunity cost of spending the currency itself.

The economy is not money but a frictionless (opportunity cost wise NOT liquidity wise as you keep trying to divert to) currency is better for facilitating exchange and access to goods and services.

I think a perfectly stable currency could be OK too but that would require incredible management on the monetary side to maintain that equilibrium. And absent being able to hit that bullseye it’s been proven, as much as things like this can be, that a stable little bit of inflation with a fiat currency is much stabler and leads to more prosperity than a currency bound by finite resources external to the economy.

Isn’t it enough that you can buy gold or whatever or bitcoin with your depreciating dollars? Why the fixation on it being a currency?

Maybe it's improved but when i played with btc and made 3x and freaked out and bought a secondhand pixel with my $800 stake in milliBTC the friction was huge. I paid unpredictable vig getting $ and I had very indirect access to sell price which was being constantly fucked over by whales playing.

A true economy of low friction btc transactions for pizza has never existed at the scale banks do pay wave. Its hypothetical frictionless, not actual. I'm willing to bet even legalised state coins will be tracked, frictive and taxed.

Totally. The practicalities of BTC or any crypto as currency today are also a big problem. On top of the fundamental whyyyy of it all. If you can easily convert to/from USD to crypto or other desired store of value doesn’t that provide the required buffer against inflation? Why imbue the currency itself with value? I know societies used to do it that way but that’s not really an argument for doing so in the present day on its own…

If BTC was widely used as a currency then it would not be subject to nearly as much speculation. I don't know why this needs to be pointed out.

Is that a fact? Any substance you'd care to offer or just leaving that assertion hanging?

Intuition. If the majority of bitcoin usage was for transactions involving services and goods instead of speculative investment, there's a pretty strong case for a wager that the impact of speculative investment on its price would decrease.

I don't personally believe this will ever happen. BTC has too much legacy cruft. The "digital gold" narrative won out. Day-to-day transactions will happen in a newer, perhaps not invented yet crypto.

I agree but that’s like saying if my grandma had wheels she’d be a wheelbarrow innit? BTC is not set up to ever be a reasonable currency. Agree digital dollars is where we’re headed.

You could and should ask the same question about stock shares - and indeed there’s an entire profession with centuries of history around that – but it’s a fundamental error to ignore magnitude. The stock market is based on real value and that avoids wild swings when nothing has fundamentally changed - even through the mortgage bubble my portfolio made made gains because people still needed to buy food, cars, phones, clothing, etc. and if did even a little research it had been easy to spot companies whose fundamentals didn’t support their valuation. In contrast, a pure fiat currency like bitcoin has value only from social consensus and has far more volatility.