How I Learned to Love Bitcoin, by Doug Casey

Doug Casey analyzesBitcoin and other cryptocurrencies at caseyresearch.com:

In this article, I’d like to explain how I learned to love Bitcoin. Why it’s a wonderful thing. Its potential as a speculation. How the government is going to co-opt it. And how this is all likely to end.

I was first introduced to Bitcoin several years ago in Cafayate, Argentina. A young Belgian guy came to visit, I bought him lunch, and we discussed Bitcoin. He was a very early enthusiast. He gave me a physical Bitcoin as a souvenir. They’re now collectibles, but the digital codes are inscribed on them. I still have that Bitcoin. It was worth $13 at the time.

I wish I had listened to his argument more carefully, because I could have made millions. Over 300-1 over just a few years… that’s rare indeed. I was inclined towards it philosophically, but outsmarted myself on an investment level. Because Bitcoin was pitched to me as an alternative currency, and I failed to see all of its advantages in that role.

My original objection was that Bitcoin isn’t backed by anything. It’s really a private fiat currency. It’s very much like the Zambian Kwacha, the Argentine peso, the US dollar, or any of the other 150-plus currencies in today’s world. It’s a floating abstraction. Unlike state currencies, though, its acceptance isn’t enforced by laws. But, on the other hand, its quantity is limited. But would that be enough to get large amounts of people to use it as a currency?

I missed something when I said, back then, that it had no value. It’s a fiat currency, yes, but it has much more practical value than any other.

A currency has to be a good medium of exchange, and a store of value. Even a few years ago, both of those things were wild speculations when it came to Bitcoin. I tried to analyze the situation rationally, using Aristotle’s five characteristics of a good money.

Aristotle defined the five characteristics of good money in the 4th century BC. And his analysis is as accurate now as it was then. It must be durable, divisible, convenient, consistent, and have use value in and of itself. Based on that, Aristotle believed gold and silver were best suited for use as money. Let’s analyze how Bitcoin does by these five criteria.

To continue reading: How I Learned to Love Bitcoin

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5 responses to “How I Learned to Love Bitcoin, by Doug Casey

  1. No, Bitcoin is not a fiat currency, it can not be used to pay compulsory taxes.
    Bitcoin can collapse fast loke a tulips investment while fiat money have half-lives of more than one week.

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  2. Pingback: How I Learned To Love Bitcoin | Western Rifle Shooters Association

  3. Pingback: Big Bitcoin Investor Believes Bitcoin Might Still Go to “Zero,” Just Riding the Momentum, by Wolf Richter | STRAIGHT LINE LOGIC

  4. Casey makes a fatal flaw in his analysis. He is confusing divisibility with increase in supply of money.

    Divisibility solves the problem of one person hoping to trade a couple babnanas for a computer keyboard. The keyboard is worth twice as much as the bananas, but if we cut the keyboard in half to trade, it’s useless. Non-divisible. Creating coins that have different weights, and therefore different values, solves the problem.

    If a society has 100 tons of gold to use as money, they can make the coins as big or small as it makes sense relative to the goods that are exchanged. Trade a big coin for a portrait of Ranya Bardiwell; a small one for a model train set. The total 100 ton amount does not change – the money holds its value.

    When Bitcoin is “divided,” it would not be splitting 100 tons of it in different weights, it would be adding another 100 tons overnight. There is no fixed physical amount to divide. Increasing the supply like that causes everyone to consider other forms of currency or money.

    One day public fiat currencies will fail – as always. Maybe people rush into private crypto-currencies at first, but after trading one turd for another, they’ll flock to the things that have been money for 5000 years of the history preceding them.

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  5. Pingback: How I Learned to Love Bitcoin, Part II, by Doug Casey | STRAIGHT LINE LOGIC

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