License to print money... BitCoin?

I fear eventually Bitcoin et. al. will be revealed to have been tulips all along.

Quote: Nareed

... will be revealed to have been tulips all along.

At the peak of tulip mania during the Dutch Golden Age, in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsworker. In February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt. The event is generally considered the first recorded speculative bubble , and tulipmania is a common buzzword.

The prevalence of the Bubonic plague may have both created the mindset that allowed people to invest the way they did, but it may have also caused the sharp decline in prices.

The 1637 event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay.

Quote: Pacomartin

The event is generally considered the first recorded speculative bubble , and tulipmania is a common buzzword.

And there have been many since.

Even gold prices collapse, but gold does remain a store of value. So if virtual currencies are a viable store of value, let them collapse. they'll still be worth something afterwards. If they're beanie babies or tulips, watch out. The collapse will wipe out a lot of real value. And I don't think beanie babies were ever valued at $100 billion.

Quote: Pacomartin

At the peak of tulip mania during the Dutch Golden Age,

All it will take is one good scare and
it's history. I've said it from the start.
Only two things make real money,
precious metals, or countries with
good economies. Bitcoin has neither.

Quote: Evenbob

Only two things make real money, precious metals, or countries with good economies. Bitcoin has neither.

Perhaps the value of these crypto currencies is overexagerrated. Banknotes and Coins are the petty change of the real money in most countries. The overwhelming money in a country is "commercial bank money" which is defined as the holdings in accounts with the commercial banks. Such money is by definition a claim on these banks.

So if banknotes and coins are only petty money of a country, bitcoin's market value is still less than banknotes and coins of most small nations.

The Market cap of all crypto currencies broke $100 billion on June 6, 2017.
Combined banknotes and coins expressed in billions of USD as of 31 December 2015 are as follows
$1424.92 United States
$1210.42 Euro area
$856.55 Japan
$250.80 India
$117.05 Russia
$103.09 United Kingdom
$76.31 Switzerland
$73.92 Korea
$72.02 Mexico
$58.78 Canada
$57.75 Brazil
$55.28 Australia
$52.99 Saudi Arabia
$47.98 Hong Kong SAR
$40.65 Bitcoin <===================
$36.06 Turkey
$27.18 Singapore
$25.55 Ethereum <===================
$10.47 Ripple <===================
$8.59 Sweden
$6.15 South Africa


However, as some nations replace banknotes and coins with crypto currencies, the stateless crypto currencies may become more accepted.

Quote: Pacomartin

which is defined as the holdings in accounts with the commercial banks. .

Which is linked directly to the economy
of the country the bank is sanctioned
in. Look at Germany in the early 20's.
It took a wheelbarrow of paper money
buy a loaf of bread. You can buy real
10 million $ 1922 Reichmarks on Ebay
for a buck apiece.

Quote: Evenbob

Which is linked directly to the economy of the country the bank is sanctioned in.

I think we are arguing the same point.

After a decade, bitcoin is worth more than the banknotes and coins of Turkey. Even Turkey has a lot more broad money than just banknotes.
Bitcoin is never going to be a threat to real national currencies.

However, I am also arguing that we may see national crypto currencies instituted in Sweden, Denmark, norway and possibly other countries in the next two years. That will elevate interest in bitcoin and ethereum. So some people could make a killing here.

Quote: Pacomartin

The Market cap of all crypto currencies broke $100 billion on June 6, 2017.
Combined banknotes and coins expressed in billions of USD as of 31 December 2015 are as follows
$1424.92 United States
$1210.42 Euro area
$856.55 Japan
$250.80 India
$117.05 Russia
$103.09 United Kingdom
$76.31 Switzerland
$73.92 Korea
$72.02 Mexico
$58.78 Canada
$57.75 Brazil
$55.28 Australia
$52.99 Saudi Arabia
$47.98 Hong Kong SAR
$40.65 Bitcoin <===================
$36.06 Turkey
$27.18 Singapore
$25.55 Ethereum <===================
$10.47 Ripple <===================
$8.59 Sweden
$6.15 South Africa

However, as some nations replace banknotes and coins with crypto currencies, the stateless crypto currencies may become more accepted.

Ethereum edges up closer to Singapore.

$41.18 Bitcoin <===================
$27.06 Ethereum <===================
$10.15 Ripple <===================

Banknotes in USD (more recent numbers)
$4.90 Sweden
$5.29 Norway
$9.69 Denmark

One interesting possibility is if the Scandinavian countries adopt national crypto currencies to replace banknotes you may be able to easily store your savings in another country's currency for a relatively low transfer fee. If you are bullish on Norway, you could change your Swedish crowns into Norwegian crowns with a swipe on your cell phone.

At the same time you might be able to turn your crowns into Ethereum with the same amount of trouble.

Quote: Evenbob

It took a wheelbarrow of paper money buy a loaf of bread.

The rate of inflation was so great that school teachers, who normally had an earlier lunch hour than factory workers or office workers, were often asked to do the shopping for neighbors. Nothing was indexed to inflation rates, so a life insurance policy might pay off with marks that were not sufficient to buy a postage stamp. In South America some countries attempt to index to inflation values. Currently it seems currency is worthless in Venezuela because there are simply no goods in stores and no one is being paid unless they are pro-government goons.

In situations like this 'value' of a currency becomes a matter of timing and happenstance. Publish an exchange rate and its a historical figure.

Argentina had entire industries fail when their currency was altered by an American court. Book publishers failed due to inability to buy paper. Book sellers failed due to a merchants inability to buy any merchandise on credit. Restaurants failed due to inability to have any reliable food supply. Tourists became a source of revenue.

Once a currency changes its value so rapidly it is so unstable that sustained value is unlikely.

Quote: Fleastiff

Once a currency changes its value so rapidly it is so unstable that sustained value is unlikely.

In the year 1992 the current Argentine peso (ISO 4217: ARS) replaced the austral at a rate of 1 peso = 10,000 australes (ten trillion pesos m$n). It was also referred to as peso convertible since the international exchange rate was fixed by the Central Bank at 1 peso to 1 U.S. dollar and for every peso convertible circulating, there was a US dollar in the Central Bank's foreign currency reserves. During the financial crisis of 2001, the country considered going to actual USD, but instead the fixed exchange rate system was abandoned.

The US dollar became legal tender in Ecuador March 13, 2000, and sucre notes ceased being legal tender on September 11. Sucre notes remained exchangeable at Banco Central until March 30, 2001, at 25,000 sucres per dollar with 50,000 sucres the largest note. Ecuador now only issues its own centavo coins.

The Belize dollar is pegged at 2 BZ$ = 1 US$ since 1978.
The Bahamian dollar is pegged at 1 BS$ = 1 US $ since 1966.
The East Caribbean Dollar is pegged at 2.7 XC$ = 1 US$ since 1976.
The Cuban pesos is pegged at 25 CUP = 1 US$.

The cost of importing banknotes to switch to the USD is very high, as they are paying face value for pieces of secure paper.

With crypto currencies it will be much easier for a nation to fix the value of it's currency to a major currency like the USD or the Japanese Yen or the Euro or the Canadian dollar. They will not have to incur the huge expense of procuring paper US banknotes. They do not need permission of the United States.

Some people foresee all of the smaller currencies in the Americas switching to crypto currency USD. Exception could be the major economies of Brazil, Mexico, and Canada.