Patrick Watson argues that if and when you could ever pay your taxes in Bitcoin - then and only then could you call it money

By Patrick Watson*

Everyone is talking about bitcoin, even people who otherwise know little about investing. That’s probably a bad sign for bitcoin.

Recently, I had a conversation with my 89-year-old father. He likes reading newspapers, so this year I got him a Wall Street Journal subscription. Now he’s up on the financial news.

A few weeks ago, he asked the big question: “What is bitcoin?”

I told him what I knew: Bitcoin is a digital currency, designed to be scarce, anonymous, and secure, that it’s price has gone vertical, that some people think it will one day replace dollars.

He was with me until that last part. A private, digital-only currency didn’t make sense to him.

I pondered that conversation driving home… and I think he was right. Bitcoin may be useful and valuable, but it won’t replace fiat currencies anytime soon.

Photo: Getty Images

Power Mining

Unless you’ve been hiding under a rock, you know bitcoin prices have gone bananas. I’m not even going to quote any numbers. Anything I say will be laughably wrong by the time you read this.

Could some virtual currency that only exists on a computer screen really be worth these crazy prices?

Maybe. If you think it will become a major medium of exchange, bitcoin is far underpriced.

That’s a big “if” we’ll discuss in a minute. First, let’s look at some more practical issues.

Bitcoins enter the digital world when someone “mines” them by solving certain math problems. Mining operations have turned from college students sitting at their laptops to huge enterprises that use massive computing power to run ever more complex math calculations. Some of the computers dedicated to solving those math problems fill entire buildings.

Photo: Getty Images

Bitcoin’s anonymous inventor, who called himself Satoshi Nakamoto, built scarcity into the system. Mining gets more difficult as time passes and the supply increases. No one will ever hit a mother lode and double the bitcoin supply overnight.

As the math gets more complicated and the computers have to work harder, bitcoin mining consumes an increasing amount of electricity. And that’s starting to be a problem.

Here’s science writer Eric Holthaus at Grist last week:

In Venezuela, where rampant hyperinflation and subsidized electricity has led to a boom in bitcoin mining, rogue operations are now occasionally causing blackouts across the country. The world’s largest bitcoin mines are in China, where they siphon energy from huge hydroelectric dams, some of the cheapest sources of carbon-free energy in the world. One enterprising Tesla owner even attempted to rig up a mining operation in his car, to make use of free electricity at a public charging station.

That’s pretty crazy, but it gets crazier.

In just a few months from now, at bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available, requiring new energy-generating plants. And with the climate conscious racing to replace fossil fuel-based plants with renewable energy sources, new stress on the grid means more facilities using dirty technologies. By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.

This is an unsustainable trajectory. It simply can’t continue.

Not to put too fine a point on it, but this is bonkers.

I have not independently verified these claims. In the comments section at the bottom of Eric’s article, many expert-sounding people dispute them. So maybe he’s wrong.

Still, the broader point seems right. Bitcoin mining and transaction processing consumes a lot of power, and we don’t have infinite amounts of it.

A trend that can’t continue, won’t—so something will change it. Here’s a partial list of possibilities:

  • Computers could get faster and more energy efficient
  • We could find new sources of cheap, abundant electricity
  • Bitcoin’s price could fall and make mining unprofitable
  • Another, less energy-consuming cryptocurrency could take bitcoin’s place
  • Governments could try to outlaw bitcoin and shut down the miners

Of those, government interference is probably bitcoin’s greatest threat. Governments don’t like the anonymity, because it facilitates tax evasion, money laundering, smuggling, and other illegal acts.

But there’s something even more basic to consider...

What Is Money?

You can’t talk about bitcoin for long before you get to the “What is money?” question.

My favorite answer: Money is simply the most liquid asset in a given place and time. Almost everyone accepts it as payment because they trust it, and they trust it because they know others accept it.

Could bitcoin or another cryptocurrency ever reach that status? Maybe, but it will have to cross a very wide moat.

Pull a Federal Reserve Note from your wallet. Look closely and you’ll see a legend about legal tender:

Photo: Mises Institute

Your dollar bill is legal tender for all debts, public and private. The government says everyone must accept it, so we do.

Nothing prevents us from accepting other currencies as well. You can trade chickens for cows, or vice versa, if everyone agrees. But you’ll still have to report any taxable gain in dollar terms and pay tax in dollars. That’s the “public” part of the legal-tender legend.

In the modern world, governments define money because they have the raw power to define how you must pay your taxes. They can and will use force to make you pay—and deadly force if you resist too hard.

The IRS doesn’t accept cows, chickens, yen, gold, or bitcoin. It demands dollars. Don’t have any? Get some or go to prison.

Photo: Getty Images

As long as we pay a significant part of our income in taxes,

  • We must all own whatever currency the government accepts as payment, in quantities sufficient to pay our tax obligations.
  • Business accounting must use government-dictated currency as the unit of account.

That means most people will default to using the same currency for personal spending and investing. This gives government-issued money an automatic advantage over bitcoin or any other competitor.

When national governments start accepting bitcoin for tax payments, you can fairly call it “money.” Until then, it’s simply another risk asset like gold, stocks, or pork bellies.

Is bitcoin a risk asset you should own? Probably not, unless you are prepared for some serious pain whenever the price heads south.

I don’t know when that will happen. Bubbles get way bigger than anyone thinks possible, but at some point, they all pop. This one will too.

*Patrick Watson is senior economic analyst at Mauldin Economics. This article is from a regular Mauldin Economics series called Connecting the Dots. It first appeared here and is used by with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Apparently bitcoin just surpassed the tulip mania of 1619-1622 to become the largest bubble in history. They should probably have included the Auckland housing market (2010-2016) on that bubble list in the article.

Bitcoin is confusing. There is a difference between Bitcoin and things like Tulip Mania, and housing bubbles. With those other bubbles the market can react and increase supply. Bitcoin is fixed at a maximum of 20 million units. We are in uncharted territory. I do think it will pop personally, but only because other crypto's are more functional. Crypto could replace money, however, it's going to be quite dysfunctional money because the ones that people will accept are deflationary by design, which means a lack of spending, which doesn't exactly help an economy work.

on the contrary, mathematically speaking there are an infinite number of possible cryptocurrency variations whereas tulips, like grains of sand on the beach, are finite in number. Every day there's a crappy ICO with some chump believing that that someone elses fictional pump and dump currency will be widely accepted by the masses, delusional.

Most of the ICO's will crash and burn. But many will maintain some kind of value.

I think there is an equilibrium for crypto. There will be winners and losers. The winners will likely be mineable like Bitcoin, however for people to want to participate it will likely have decentralised mining, with an algorithm that is optimised for consumer grade CPU's or GPU's. Every crypto is only as good as its sentiment. Just like physical cash. We are seeing a fantastic experiment play out. Watch closely. Invest sparingly and only after rigorous research.

The creator always stashes all the easily minable coins before the ICO. IF the coin looks half successful then the progression from CPU->GPU->ASIC is pretty quick leaving small players in the dust. I agree though, interesting experiment. I minded 10 litecoins ages ago on an old graphics card and was chuffed with myself for selling them for 380 euros about a month ago. I just check and now and 10 litecoins = 2340 euros. I actually felt sorry for the guy I sold them to because I knew they were garbage. The market is a hard beast to predict

You can prevent development of ASICs by designing the algorithm to suit the attributes of GPU's. You just need to make it so that it has high memory requirements. Then development of the ASICs will be less cost effective than just buying consumer grade GPU's. Have a look at Vertcoin, it's been going since about 2014, but is just starting to gain traction. The developers are also devoted to forking the algorithm if ASICs are developed.
No premine either. But they just had their halving. Keep an eye on it anyway.


A Nocoiner is a person who has no Bitcoin. Nocoiners (usually Socialists, Lawyers or MBA Economists ) are people who missed their opportunity to buy Bitcoin at a low price because they thought it was a scam, and who is now bitter at having missed out. The nocoiner takes out his or her bitterness on Bitcoin Hodlers, by constantly claiming that Bitcoin will crash, is a scam, is a bubble, or other types of easily refuted FUD. Nocoiners have little to no computer skills or imagination; even when they see the price of Bitcoin go up and its adoption spread they consider all Bitcoin users to be in a collective delusion, with only themselves as the ones who can see what is happening. This attitude comes from being steeped in the elitist priest cultures found at Harvard, Yale and Columbia, where anyone who is not part of their clique is treated with suspicion by default. The worst nocoiners are tenured academics and goldbugs. Nocoiners believe that the world owes them everything they want because they are part of an elite.

-Urban Dictionary

"...when they see the price of Bitcoin go up.."

you mean in DOLLARS? ah, so bitcoin relies on the faith in fiat currency to hold.
So ask yourself when the power blackouts begin, should i hold chickens or bitcoin?

Not sure about the chicken idea in the dark. The young boys next door found out that lighting a chicken is neither as easy as they hoped for nor really light giving. Quite unsuccessful in the end and more an exercise in futility than good lighting in the dark.

When the power goes out, just don't hold dollar. Everything else should be fine.

Yes currency does rely on faith and Bitcoin is inversely related to the dying dollar, hence its appreciation. This process will only esculate. Power blackouts can not affect bitcoin as it is not locally stored but on the global blockchain. With power outages I would be more worried about crippling business and hospitals and chaos that would errupt. This would never be allowed to happen.

I hold no bitcoin and yeah I look back on the days when I could have got in for $100-$300 .. but then I realise I probably would have sold when that doubled to $600.. At $17k I'm pretty sure I'd have sold everything long ago and been laughing at myself as I continue to watch the price inflate.

How do I know this? I got in on the hilarious Martin Jetpack in IPO. I purchased at 20c, knowing that it was going to be one hell of a pump for a few days. I sold out at 50c and then watched the price track to $3, then fall back down .. to where it is now in the 10c range.. I dumped at a profit, but hell, never laugh at a profit.

What I am confused about, is what is the value (other than capital gains) does bitcoin hold?

Everyone I am talking to is popping champagne because the price of bitcoin is sky rocketing with no end in sight (there never is in a bubble). No-one's spending and hell why would you? A $5 coffee today will be the equivelant of $20 tomorrow. So people are buying for speculative gains and no other reason.

When you have the cabbie getting in on this, people selling their houses to continue these capital gains .. sure some people will get rich, but until someone shows me the liquidity of spending this as money I'll wait this one out until it stabilises at least. (Maybe I'll put in a grand when the price corrects itself, I'm sure it'll come back down and then go back up as it has done many times).

No I don't have any sh*t Bitcoins. You can put any label that suits but I really don't care.

You cared enough to reply nocoiner.

I care enough to read your comment. Bitcoin doesn't work, stick with the tried and proven

Worked for me =)

But to your point your, I agree stick to what you know.

This ridiculous definition might be proof the Urban Dictionary has been taken over my conspiracy theorists. Time to buy shares in concrete bunker wholesalers and baked bean producers.

I think there is a difference between missed opportunity and potential opportunity.
Good on the people who bought early and made some serious money (if they ever convert it to usable money).
But what is more interesting is whether buying Bitcoin at the current price makes sense. Is the current price based on real value, or is it based on the perception that the value will keep doing what it has done in the past?

People are seeing this as worth more tomorrow than it is today. No-ones holding bitcoin to spend.

Yes. But speculations are always like this.

What a laugh, just a shame that those developing for crypto have the education the def abuses. What is even funnier that anyone in tech can see how poorly it is performing due to the scaling issues and exchange service dropouts. I was never meant to fail this badly this soon. The devs need more resources to add in the scaling layers, and fast. With just one small team it is going to get worse before it gets better and can handle the user transaction demand. Even with the exchanges now they openly admit to severe and cutting downtimes. The NZ Bitcoin reddit even has users being burnt just as often trying to get their money out and paying tax. With luck and the blind faith of many it will stay the course. But it is just as likely that the dev teams have further issues, (just like the multi signature introduction). I am lucky not to have been burnt in a big way yet but even then there were several others after. Some exchanges do not have guarantees for service availability. Shopping for new ones to try but at best the records are shocking and the stats abysmal (even for occasional speculation). Like with any investment do the research and extensively.

Yes I am a Nocoiner, neither happy or sad about it, nor am I a Socialist, Lawyer or MBA Economists. Neither am I bitter that I don't own any Bitcoins or any other of the 100 plus Crypto currencies.

I am however interested to see how this unfolds and the willingness of some to gamble hard earned NZ$ or US$ or Euro's etc. on them.

I want to say that I don't gamble but that is not true, as I have a large percentage of my hard earned wealth as risk today, in our House (which could go up or down in NZ$ value), in the stock market, in NZ$ themselves which go up and down against US$ and Euro's etc. everyday.
But those gambles are perhaps more defendable as i can (and do) live in the house if the price increases or decreases i am un affected, the same said for the NZ$'s the value in New Zealand doesn't change a dollar is still worth a dollar and i can buy locally produced goods and services regardless of the change in exchange rate with the US$ or Euro.
Investing in the share market is a far greater risk as the value of the share can decrease to zero if the company goes bust, but i can manage that risk by spreading across multiple companies and studying the companies themselves, determining whether they will be profitable in the long or short term and whether i am willing to gamble that they will increase in value or pay a dividend in the future.

There is no need to invent a new word or tell people that they don't understand, or paint yourself as being smarter than the rest of us.

If you own some Bitcoins go for you, I hope you are successful with them.

I however am not willing to take the risk.

One final thing i would say though is to look at where the bitcoins are most traded and do some research at what triggers should impact either an increase or decrease in activity. I understand that South Korea accounts for 50% of the global activity, so any negative event there could have dramatic consequences.

Kind of ironic that Bitcoin is a digital currency and by February 2020, may use as much electricity as the entire world does today just to mine it. One would think if mining the digital currency consumes this much electricity then any stable power supply would be at risk which is the fundamental requirement to use and trade digital currency. At this point I would prefer to be holding a physical item to be traded be it gold, chickens or paper currency.

A recent article by Motherboard compared Bitcoin’s electricity usage to Visa’s Electricity usage. The post claimed that Visa’s datacenters can process 1000 times more transactions per second with the same amount of electricity that bitcoin uses.

The argument seems fair but the reality is different. Bitcoin’s power consumption has nothing to do with bitcoin’s throughput. Bitcoin can process same amount of transactions with 1000 times less electricity than it is using right now. More electricity does not mean more transactions processed per second. Bitcoin’s scale is limited by its technology rather than electricity. More miners means more security for the bitcoin network and not more transactions processed per second. The electricity consumed by the bitcoin miners goes towards securing the bitcoin’s blockchain’s immutability.

"Also rather than comparing bitcoin to Visa or any other company, Bitcoin should be compared to the traditional money or internet since bitcoin is not a company rather it is a network. And we all know that securing bitcoin leaves far less footprints than producing and securing cash or securing the internet.

As Andreas Antouplous says, “Immutability is not a waste of energy. Christmas lights are a waste of energy”

Bitcoin is one crypto currency. Blockchain is the technology of which Bitcoin poorly implements it wastefully. Even NZ payment switches can perform thousands of times better than Bitcoin and it does not use even a single percent of NZs power. Plus transactions are free. Unfortunately for investment the exchange tools are flashy, but the back end is ugly. Better spread across a few coins or be ready to. Some exchanges allowed more withdrawals through switching between cryptocurrencies rather than trying to transact through Bitcoin. I.E. when looking to realise some of the value when the transaction queue is large some exchanges do processing through their services instead so you could make the withdrawal with say Litecoin.

Hmmm, chickens as a traceable currency. Interesting. There are not many currencies you can deep fry with a positive outcome.

Forget the gold, chickens and paper. Buy shares in electricity generators or retailers if these electricity consumption reports are true.

Chickens. Chickens are good.

Sorry, I can't hear your chickens over the sound of my 1,500% ROI.

Get back to us when you convert the bitcoin to a real currency. Until then there is only a highly volatile theoretical ROI.

Well I just did just that today, I converted some of my BTC and BCH into NZD... Its pretty easy to spot the nocoiners in this thread.

I have never understood why nocoiners assume that people who have a stake in bitcoin have bet the farm on it? I have already retrieved my original investment plus a good profit and am just watching what happens to the rest. Even if hits zero tomorrow I have taken returns far greater than any other asset class than I have access too.

So anyone who diversifies and understands the tech development is a nocoiner. Get out of here, many of us were going to the early Bitcoin development sessions where free wine and beer was flowing liberally. Now it is like a ball and chain around blockchain tech development. It gives the tech a bad image, especially after the scaling splits. Unfortunately so do the faithful trolls who are too delicate to handle the technical details.

and here was me thinking governments like to control their monetary supply...
then im guessing you would let me buy your house and pay you in bitcoin?
And you'd confidently sit on this digital ledger while taking a year to find a new house? or 5 years?

But i know, there's only a limited amount of it. get in quick, for a limited time free steak knives ....

I don't think you know how monetary supply works

And yet you are probably wrong.


So there is absolutely no chance at all that you don't know exactly what Mr Eggs knows and doesn't know.

If I was younger I might order whatever fantasy cool-aid you are drinking.

That's Miss Eggs


whereas i know you dont know

I know you don't

First month futures fee free as well. But there are quite a few varieties out there. With the amount of blind faith, poor technical and financial education and fake news floating around, (much like the Amazon Bitcoin rumour), it makes me think that this bubble might hold a wee bit longer, especially since for such a large proportion it is "baby's first currency trading and speculative buying". It does depend on the government reactions. Given China, US, Australia and Japan it could go either way. Not to being used as a currency but as a short term investment with high volatility and poor reaction times. Anyone could make and loose money from that. It just pays to do a lot of tech reviews and risk analysis. nzbcx and kiwi coin regular downtimes is a bit of a bugger but they are constantly in a process of expansion right now and will almost have enough resources to handle the load.

Pay your taxes? Seriously? You mean like the old days? You're going to judge bitcoin according to its use in taxation?

You're asking us to forget globalisation, base erosion, profit shifting and the rest of it. Just a few days ago, we learned that 36% of the largest public companies and multinational entities in Australia paid no tax in the most recent financial year. It'll likely be much the same in New Zealand.

Pay your taxes? From a corporate point of view, as an idea in the boardroom, it sounds like something from ancient history. To judge bitcoin by its suitability for tax purposes is to miss the point. If bitcoin isn't accessible to taxation, you may be promoting its most valuable feature. But, no, the writer can only mean individual taxpayers or smaller New Zealand outfits - those that haven't cottoned-on to globalisation. The very last thing a globalised financial instrument or structure is concerned with is paying tax.

We're constantly assured by our politicians that globalisation is a good thing, the way of the future, unavoidable, of benefit to us all, etc. Well this is how it looks. Secretive, greedy, anti-social, beholden to no authority, contributing as little as possible to life, running rings around that old idea of taxation. Bitcoin may be just one more rung down the ladder.

Ancient history AND due by March 31st, 2018.

No, Ralph, what'll be due end of March is quarterly settlement with a multinational accountancy practice and multinational legal advisers.

If you wish to strain the gnat and drink the camel, here is the schedule. None of this can be paid by any crypto currency of course.

Your missing the point nocoiner

Given his claim was taxation is ancient history and my point was it's also currently due I think you might look in the mirror.

Again, missing the point nocoiner.

Explains why you are a nocoiner I guess.

Thank you for your pointless and empty words, lol.


And you *still* can't pay your tax in any cryptocurrency.

Don't need tax have crypto

Awh maybe Grendel is not making enough off his coins to claim as income yet. Go easy on him. His wee knowledge of tax requirements might only extend to something his parents & employer have to do for him still.

Shhh.... your giving away too much information. The nocoiners know too much already.

Sounds like someone is committing criminal tax evasion and needs to check up on the Bitcoin reddit, (because it takes the faithful to convince the faithful) for advice that yes YOU DO HAVE TO PAY TAX WITH BITCOIN.

Sorry about the caps, it was for those in the cheap seats who don't have their accountant clued in.

No, Pacifica. You do not 'have to pay tax with bitcoin'. You may need to pay tax on bitcoin earnings, but that's another issue. My point is that if bitcoin transactions come to enable even more secretive multinational corporate transactions, sovereign states such as ours will see even less tax paid. The data on multinational tax shielding released this week in Australia (and in NZ it may not be much different), shows the issue clearly. The further advantages of cryptocurrencies to multinational interests are obvious.

Yes working man, that is in the link provided repeated multiple times. Which is what I mentioned above Many think earnings, income, and commodity & trading taxes don't apply when in fact they do. So a person using Bitcoin to by an alt coin or to withdraw in money would still need to pay tax on that trade given a realised amount of profit. Often many forget, just because tax is not built into the trade platforms or on the withdrawals it does not mean it does not apply. It actually just means for many new to investing there is a lot more work when the tax due date comes around. After all for many exchanges they could have easily built features in to simplify it for their users but that would have involved a modicum of effort. It is simple enough to do, even to inform users of their requirements by law, but even just that is too much for these teams who cannot even set a promise on basic service availability.

How about if the reason Bitcoin succeeds is because the IRS taxes US currency and yet the USD is used as a global currency. If an Argentinian is buy coffee from an Ivorian, do they want the means of exchange to be subject to scrutiny by the IRS?

Once the speculative wave is largely over the obvious place for crypto-currencies (in my opinion) is in supply blockchains.

It is hard to see where it fits outside of that in the long run. If any government decided to use a crypto-current for any wide purpose I suspect they would create their own.

One technical aspect I have not seen speculators address is the problem of ageing. Encryption standards significantly evolve over a ten year period owing both to the increases in computing power and the weaknesses discovered in the algorithms. If no maintenance is done on any given crypto-currency then at some point someone will decrypt it and then have the option to print as much as they wish.

lol... I really don't think you understand how any of this works.

1) A block chain based fiat currency is still a fiat currency.
2) Crypto isn't a code that you unlock and have access to all of it.

You might want to do some more research

You sound like a 12 year old, but none the less.

1. The point is that a blockchain can be created that does NOT use fiat currency. To say the same thing another way (might help you) - because block chains can be relatively closed supply chains that often cross international and currency boarders they lend themselves to a 'chain' currency. There is no reason that currency could not a crypto-currency.

2. Anything that can be Encrypted can be Decrypted. Think about the consequences of an encrypted currency that is no longer encrypted.

You might want to think before you speak.


You have no idea what you are talking about. The funny part is that you think you do.

Go do some actual research.

The really funny part is you thought nocoiners was a real word.

Go get a real dictionary.

I think you need to look up the word 'colloquial'

You really need to do more research

Ouch Grendel, you really do not have any idea what you are talking about. Even the reddit trolls could read a basic blockchain wiki. Perhaps you should practice a bit more on reddit first. Build yourself up to the point you know what a server is and how the code functions then move out to talking. Running your mouth off this way is just tragic. Even the 10 year olds in our family have read a few articles on the subject. Perhaps you need to find someone to hold your hand and show you how to look for information online. Essentially several crypto currencies can be stolen and even created en masse through knowing the keys. That is by design (hence the desire for randomness and the secrecy). Even multi sig was a part of two epic hundreds of millions loss events recently. If you have your keys anywhere on your device they are at more risk. Once you have a significant amount say the 1% who own more than 90% of Bitcoin you can cause major price fluctuations on trades. I find it disturbing how people say they distrust banks yet run to exchanges with open arms failing to see what big teeth they have.

Indeed, there are several government and corporate services which would benefit from a decentralised system for recording transactions. But the scaling and security still need to be better. There is obviously a high degree of trust required in the network and in maintaining the code bases. However the user rate atm where scaling issues arise is rather high. So perhaps a system where long transaction times are acceptable and in a small population base like NZ it would be easy enough to implement relatively secure systems, (certainly compared to much of the current security), that have no monetary benefit in mining so the energy efficiency and desire to hack is brought down. Applications like the management of passenger air travel in NZ, or recording power transactions, logistics or government registries etc. With smart contracts the tech can be even more versatile (like many see with the kitty breeding, although the damn crypto kitties slow the network).

Newsflash the transaction history is available. It is only partially anonymised in that you can track to the wallet. But then there are the exchange logs, as well and the amounts. In fact given exchanges can be unreliable for a coffee many have actually turned to physical exchanges of Bitcoin and gentlemen's deals on large quantities. Even Bitpay goes through USD. So actually the IRS has an even greater tool than online accounts for tracking. However they still have difficulty with tracking physical cash.

What I want to know is has the value of a bitcoin moved in relation to what it can actually buy (in practice - not by converting back to dollars), i.e. has there been any inflation/deflation of how far a bitcoin will go in buying a basket of goods?
After all, that is what a currency is used for. I think ham n eggs made the most relevant point above: why are we judging its value in dollar terms? Unless it really is just another commodity to be traded in dollars.

If it is to be viewed as a currency, then this price should be viewed as an exchange rate between NZD and B. Normally if the NZD is going very rapidly downwards against another currency it could mean that the NZD is seeing hyperinflation (which it is not), or the other currency is seeing hyperdeflation.
Surely deflation is terrible for a currency, as it discourages people from spending that currency, if they know that prices will drop in future (especially at this rate). I would think this is terrible for Bitcoin, as it tries to establish itself as the currency of choice.

"Unless it really is just another commodity to be traded in dollars."

We value NZD in USD. Does that mean its not money? lol nocoiners

currency is a function of government
everything else is a commodity and will eventually trade as a commodity

Dead right Mr Eggs. The fact we have to convert any 'commodity' to a fiat currency to settle/realise its final value is revealing to rational thinkers everywhere.

what's wrong with commodities?

Nothing. It's not a value judgement it's just a category.

taxation is more annoying to account for, especially with a trade.

You miss the point. It does mean it's not money if you only value it in USD, as opposed to its own level of inflation.
One of the aims of a good currency is stability.
I think it's great if you have made money on buying a commodity that has rapidly risen in price.
What I am trying to argue here is whether this is money, as per the topic of the article.

Ohh... I see. Yeah its not money way to volatile for that. But I never said it was.

Pump and Dump baby!

"We value NZD in USD. Does that mean its not money? lol nocoiners" said Grendel.

Like I said, I never made mention of bitcoin as a currency there. only NZD and USD?

You were trying to argue that it is money. Otherwise what was the point of the comment?

You are jumping to conclusions.

So what was the point of your comment? It obviously had you laughing out loud.

You stated;
"I think ham n eggs made the most relevant point above: why are we judging its value in dollar terms? Unless it really is just another commodity to be traded in dollars."

My point was we value NZD with USD implying that one of these is a commodity. Your logic not mine. And that made me lol

Yes. Lets look 2 years ago (say) bitcoin was worth (say) $2000US, today its worth $16600US.

(also just look at it as another tulip mania, which then explains the charts above)

So 2 years ago a decent PC was $2k, are we really saying that in effect I can buy 8 PCs or that really the value of a PC has collapsed to $250 in bitcoin terms? (or we can use say gold, same thing)

That just looks nuts, unless its really just a commodity and not a currency and at that point well it really does look like tulip mania.

Then we see comments like it can still go up 20 times,

and I go huh?

A few years back we had it with gold, "its going to 3000, 5000, 10000!" and then when it didnt "the Govn collapsed its price and cost me a lot of money" conspiracy nutjob theory....

Surely its a ponzi scheme working on the principle of greed and there will be a bigger sucker than you.

"terrible for Bitcoin" I think so myself....pity, it had some potential as a currency.

Yes I think this will kill any chance of becoming a true currency.
Can any bitcoiner tell me whether you can walk into a computer shop and buy a computer using bitcoin. Or indeed can you exchange your bitcoin for anything other than dollars?

You can sort of make payments through Bitpay, or online but the transactions in the background are not actually occurring until later and the fees can be substantial at that level. Plus often on the cards there is a fixed limit to make payments with, a couple only go up to a grand which is way to low for a decent spec phone & camera let alone a computer. Perhaps check out if there are deals on overstock or a shopify site.

Yes but then there will still be speculators who make it out, even with the exchanges buying up huge amounts and delaying withdrawals and purchases. It is a an easy market to manipulate and keep stoking. They just have to be careful not to burn the house down while doing so, like creating distrust in their user base, or getting caught for fraud like many ICOs and exchanges. It is a bit of a minefield for investors though because normally they rely on there being more protections and regulations to reduce the fraud at least a little bit. Governments are moving a bit too slowly to keep up. So every country may have a different approach right now and so knowing whether any exchange operates within the law is pretty tricky. Hence there needs to be a huge amount of trust and due diligence because there will be little legal recourse if the account gets frozen or the funds disappear. When the Parity bug froze millions in accounts due to dropping code support for them it was a bit of a bugger. But at least the team is stating they will look for a solution to re-enable the accounts. However in cases like this there is no requirement for them to do so or pay the difference.

It appears that the shoeshine boy tip moment is nigh, based on some of the comments here!

This thread is really flushing out the nochickeners.

A lesson in why history repeats.


nice observation.
much the same way the endless sail city real estate threads soon bore us no(d)auckers

But chickens are awesome animals, (just a little bit cannibalistic and intent on the pecking order). Plus eggs and compost, (perhaps a bit too much compost but good for the pumpkins).

We turned most of our bitcoin into real money late last week. We missed out on a bit of spike after that, to the tune of $100k but honestly, we just had too much to lose and the growth was looking very bubbalicious so are not feeling butt hurt about it.
We have maybe $20k left in bitcoin, same in bitcoin gold and some in bitcoin cash (which has actually be depreciating. We are going to go long on all that. Maybe 5-10 years. See where it goes.

Sounds like you are loaded. So why are you bored enough to be commenting here? I’d be living it up.

I'm going against my mums advice here (if you don't have anything nice to say then don't. .. ), but the above comment highlights the difference in mentality between poor and wealthy people.

Good returns, besides everyone buys and sells at different times. Nothing lasts forever. Even assets get moved when we die. Even switching across and back is just part of the practice. Shame they cannot yet automate faster transactions but it is what it is. An investment market until significant development & governance is added. Even online assets without direct translation are still worth holding in some areas, just ask WoW and Eve online players.

Interesting take on it all from Mark Jeftovic.

RTWT. And Part 1.

The money shot:

What is exciting is that the centralized, bankster controlled monopoly over the issuance of money itself is finished. It’s over. Even if they successfully manage to co-opt some major crypto-currencies or issue their own, Gresham’s Law will assert itself as capital managers will select a truly decentralized crypto-currency wherein they control, or have the option to control, their own private keys to safely store their wealth while they’ll use the government version to pay taxes, etc.

I think the central bank system is only loosely in control of the national banking system but they are far from finished.
Probably economically unsound but they are adicted to QE and will do so any time it suits.
QE is a blunt instrument for promting growth and the surplus to some extent will be used for gambling on property, cryptocurrencies, shares, tulips, anything goes.
But QE will continue to chase growth in my opinion so there is no need for any bubble to pop.
Party on everybody.

You'd have to wonder how it could be successful mainstream as a currently when the value of it is so volatile.
Also the whole being untraceable thing works in it's favour for dodgy transactions that people don't want traced such as on the dark net, but in a world where traceability is a good thing, that seems to almost work against it.

Gosh there are a lot of boomer doom and gloomsters here.

Sour their preoccupation with rotting wooden shacks made them miss the greatest investment opportunity of their lifetime?

It's not too late.

You sound exactly the same as the annoying housing specuvestors... and you are showing the same illogic as well.

Tulip mania indeed.

I am a bit confused here. You have stated a few times or more about the unaffordability of housing. Yet you are talking about boomers missing the greatest "investment" opportunity of a lifetime, with the inference being that savvy millenials such as yourself have instead taken advantage of this investment. If you have been in on this investment long enough to have ridden this "greatest opportunity" then you should easily have enough at this point to buy something in cash anywhere in the DGZ.

My expectation is that when coiners finally run out of greater fools and find that their "investment" can be even less fungible than housing, (with the entertaining potential for untraceable theft), they will learn to avoid crypto just like boomers learned to avoid equity investment after 1987.

Sounds like this article was written by a no-coiner

It is highly speculative.....but my speculation was rewarded by converting my block-coins into Amazon "gift vouchers" the last Black Friday sale. So anything now is fun-for-profit from my angle, whilst learning about the real world applications of each crypto-coin species.

On a side note, when will gold have real world utility besides looking pretty.....?

Are you using an electronic device to make those comments, guess what, there is the use case for gold.