Question of the Day
I am a merchant. At long last I decide to accept Bitcoin for whatever I am selling.
Does that matter to the price of Bitcoin? When and How?
Two Cases
- As the merchant, I hold Bitcoin received for my goods or services.
- As the merchant, I trade Bitcoin for dollars, yen, Euros, or something else.
Case number one is price neutral to Bitcoin. Case number two is net negative for Bitcoin.
Why?
- In case one, there is no net increase or decrease in the desire to hold Bitcoin. The person holding the bitcoin changes, but there are no price pressures either way.
- In case two, the Bitcoin seller would rather have goods or services than Bitcoin. But the merchant does not want to hold Bitcoin either. This represents a net negative desire to hold Bitcoin.
The above holds true for gold, dollars, and every commodity. Money itself is a commodity but commodities are generally not money.
What Is Money?
Money is a commodity whose primary function is a medium of exchange. Money has three properties. Medium of exchange, unit of account, store of value.
The purpose of this post is not to start a debate over money, so I will stop there.
Case Number One
Let’s return to case number one above: The merchant not only accepts Bitcoin but also holds it.
In isolation, that is price neutral, as stated above. But if an increasing number of merchants not only accept but accumulate Bitcoin over time, that would likely be positive for Bitcoin.
If that was happening to any significant global degree, price of Bitcoin likely would not be behaving as it is.
Bitcoin Accepted Here
What happens if increasing numbers of merchants accept bitcoin but do it hold it.
Arguably nothing. Accepting Bitcoin does not create transactions. However, accepting Bitcoin gives Bitcoin holders easier ability to sell their Bitcoin for goods and services.
As noted above, unless the merchant holds the Bitcoin, the action is net negative to Bitcoin.
A few Bitcoin holders make meaningless transactions jut to prove they can.
In practice, most merchants don’t want to bother and most bitcoin holders do so for price appreciation, not to buy a cup of coffee or pay rent so “Bitcoin Accepted Here” does approximately nothing.
Can Someone Abandon Fiat For Bitcoin?
No. People have written they have done so but appearances deceive.
What happens in practice is essentially case two above. To pay a mortgage, rent, buy a car, insurance, or anything else, unless the merchant holds the bitcoin it’s a two step process in which bitcoin is swapped for fiat and that fiat is used to buy goods and services.
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It makes no difference whether this happens by the Bitcoin holder or the merchant who receives the Bitcoin one second later. The result is the same.
It is only possible to escape fiat if every merchant takes and holds Bitcoin as money. The odds are zero that Bitcoin will replace fiat.
The process of attempting to pay in Bitcoin is price negative to Bitcoin. Then, if the Bitcoin seller has any price appreciation, they owe capital gains on the appreciation.
Having to pay capital gains is very negative for increasing Bitcoin use even as pseudo-monetary transactions.
Bitcoin Poorly Suited as Money
In comparison to dollars, euros, or yen, Bitcoin is very illiquid. Relatively small transactions can move the price quite a bit.
Bitcoin also serves poorly as money if merchants will not take it and hold it. Given that people have to pay capital gains on appreciation serves as a strong deterrent to transaction adoption.
Delusions Continue
Cathie Wood says Bitcoin will be worth 1 million per coin by 2030.
But that’s nothing.
$10 Million for Bitcoin is Bearish
Allegedly, buying approximately $700 worth of Bitcoin now will be worth $10 million later, at least. But unlike Cathie Wood, no time frame is given.
It is beyond ridiculous to make such absurd claims.
I watch these desperate cheerleaders every day on Twitter making increasingly preposterous claims. That one tops them all.
Binance’s Alleged Crypto Audit Failed, Not Even Its Auditor Would Vouch For It
Meanwhile, back in the real world, Binance’s Alleged Crypto Audit Failed, Not Even Its Auditor Would Vouch For It
Also note Global Squabbles Erupt Around the World Over the Remaining Crypto Assets of FTX
Not to worry, 1BTC = 1BTC soon to be worth tens of millions of dollars. How much will Michael Saylor be worth? Someone do the math for me.
Oh, one more small thing. Governments can do nothing about this. It’s guaranteed.
The Crypto Crash and Why It’s Impossible For “You!” to Cash Out
In case you missed it, please understand that it will be impossible for “You!” to cash out at $1,000,000.
This post originated on MishTalk.Com.
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