If businesses are expected to conduct large transactions in Bitcoin, its price has to be high, owing to the fixed supply. Otherwise there will literally wouldn't be enough Bitcoin available to make transactions work.
That said, I think cryptocurrency ought to be cheap, so people don't hoard it. All this speculation hype has been fantastic for awareness, but I hope it dies down so that people can start actually transacting in cryptocurrency.
"I think cryptocurrency ought to be cheap, so people don't hoard it."
More importantly it needs inflation. I just don't see how a currency with builtin deflation can ever be used for anything but a value store. I still don't get why this isn't more widely discussed. Am I missing something?
It’s discussed at length by its critics. IMO bitcoin proponents can’t avoid this problem and mostly hand-wave it away with vague statements or long treatises about how the banking system should (but doesn’t) work.
Blockchain is great tech and bitcoin is a wonderful speculation tool/pyramid scheme but the current situation is an anomaly (as the transaction speeds and prices are showing).
You're right. I recently thought, if a bunch of very very wealthy people asked someone to create a new digital swiss bank account for them, this could be the result.
Agreed on that point as well. The irony is that controlled inflation is perfectly possible with a cryptocurrency: just keep the block reward constant over time, don't decrease it. I'll never understand the "fixed supply" thing.
I think in a few years though people will stop referring to the currency in bitcoins and refer more to Satoshi's. A Satoshi could still be a spendable unit. Although with the fixed supply it could still be too expensive to spend.
I've also heard about idea that Bitcoin could mearly be like your savings account at your bank. You would then transfer that into another digital currency to buy stuff.
An alternate digital currency would have to be more convenient than Bitcoin for transactions -- enough to make up for the transaction costs of transferring Bitcoins in first place.
But that does nothing to address concerns of hoarding. Either people come up with a way to have inflation in Bitcoin, or it's going to be hoarded. This is Gresham's law, and can't be appealed.
Realistically, I think Bitcoin needs leadership and marketing if it is to grow as big as other currencies, because I don't see people referring to their everyday money as "satoshis".
To paraphrase AMC's HCF, I believe Bitcoin is not the thing, it's the thing that gets us to the thing.
Transferring to another currency to spend your money seems awfully inconvenient. You have transaction costs, time delays, and have to worry about exchange rates. How is that better than the current system?
Keep in mind that you need to know the duration of transactions as well as the volume. Eg, the time between an employee getting paid and the employee paying rent, or a construction project being funded and the materials purchased.
If $1 trillion worth of transactions happen per year and each transaction lasts a month you need around $100 billion in currency. Ten years between transactions and you need $10 trillion. If there is less than a day between money being received and spent you need maybe $3 billion worth of currency to support a transaction volume of $1 trillion per year.
Fama would say it's priced accurately given the known information about it, but he would also agree that the price should change as more information is discovered about the nature of bitcoin. The efficient market hypothesis isn't about the price being "right," it's about it reflecting the available information.
