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Comment by birdsbirdsbirds | Hacker News Reader

Hasn't the drop in value at the beginning of the year shown that bitcoin doesn't have an inherent value?

The price just reflects how much people want in and out.

It seems like many people expect the dollar to collapse, so many people want in. When all of those people have exchanged their dollars for bitcoins, who is going to exchange them next? If no more people are in line, the value will drop back to where it was at the beginning of the year.

The beauty of a fiat currency is that you can maintain its value simply by adjusting supply. Is there any sign that there is an over-supply of dollar which would justify leaving the dollar until it is crashed?

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An asset being speculated on does not rule that it does not have inherent value. Every asset has a speculative component, just look at the stock market.

> The beauty of a fiat currency is that you can maintain it's value simply by adjusting supply.

There is very little attractive about the idea that a group can devalue currency on a whim. That's exactly why people opt in to Bitcoin.

> Is there any sign that there is an over-supply of dollar which would justify leaving the dollar until it is crashed?

Yes. Have you seen M1[1] this year?

[1] https://d3fy651gv2fhd3.cloudfront.net/embed/?s=unitedstamons...

>There is very little attractive about the idea that a group can devalue currency on a whim.

You can turn this around: There is very much attractive about the idea that a group can maintain the value of a currency on a whim.

>> Is there any sign that there is an over-supply of dollar which would justify leaving the dollar until it is crashed?

> Yes. Have you seen M1[1] this year?

There is definitely more supply, but is it too much? Can't this be the result of decisions that maintain the value?

If that money is just somewhere on the books, but people don't have more money to spend, then the value of things remains stable.

The value of money depends not only on the amount of available money but also on the velocity with which it is spent. As far as I know, credit cards have increased the velocity by which people are spending money which increased the supply of money and stimulated the economy.

Now, during this crisis, do people spend money with the usual velocity? If not, then that reduced speed has to be compensated by supplying more money.

Congratulations you just described every commodities market.

This is a limited supply asset that inherits some properties of all other asset classes, some better now, some better after software updates.

Cyclical volatility is not controversial amongst commodities traders. Bitcoin happens to attract a lot of stock market traders though, who gain confidence by listening to other stock market traders, which is weird.

> Hasn't the drop in value at the beginning of the year shown that bitcoin doesn't have an inherent value? The price just reflects how much people want in and out.

By that logic, there is no maximum either.

Only in an artificial situation.

Usually, the value of all bitcoins combined shouldn't be able to exceed the value of all assets of all economies. What could you buy with those coins if not those assets?

You can achieve an arbitrary value though if somebody needs to buy an arbitrary small fraction of a bitcoin for some value. But that would only happen if e.g. someone's life depends on acquiring that small fraction.

Hmm, you may be right. Perhaps the maximum for Bitcoin is the value of all assets of all economies. But then you would be leaving out the service sector ;)

If it starts to crash where would anyone reel in the supply of fiat _from_ in order to tighten the supply? The stimulus is the only thing keeping people afloat right now.

How about taxes and increased interest rates?

That would actually lower economic activity overall which would cause even more pain than people are in right now. Also with the worsened economic conditions the overall tax income even at the higher rates would fall leading for either the need for more stimulus/dollar creation or even worse pain.

It's not going to be quick or easy even getting back to a balanced state, much less actually getting to the point where the money supply can shrink.

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