Mind your business.

Wednesday, March 28, 2018

Don't Call It A Volatility Problem

"how can we turn whiplash into an asset class"

People speak of a "Bitcoin volatility problem," but no one thinks Wall Street's volatility is a problem.

Some smart ass even turned it into an asset class lol

oh the wanton perversity of it all roflmao

So what about all the volatility on Wall Street?

It's super volatile. It's also very sensitive to political events, which we all know can be rather unpredictable lol.

It might even be sensitive to weather. It's just a very volatile investment and it goes through periods of high volatility.

If you look at the headlines from a year ago many Wall Street investors were actually openly nervous about it then too.

i would like to buy a volatility

I hear you saying:

"Sure, but no one thinks of Wall Street stocks as money and it wouldn't be practical to use them as money for this reason among others. The same is true of bitcoin. Its volatility will prevent it from being used as money."

Well that isn't stopping many major online retailers from accepting bitcoin as a payment, including Overstock, Microsoft Windows and XBox stores, NewEgg, Intuit, and Shopify stores.

So it is money.

As a matter of fact.

Merchants are accepting it for payment.

But even if there were no businesses happily taking your bitcoin and shipping you fine jewelry or luxury watches...

Then you can still acknowledge the value of Bitcoin as a long-term store of appreciating wealth, as stock investments are.

That's exactly what Peter Thiel says Bitcoin is going to be.

In case you don't know who he is...

Peter Thiel co-founded PayPal with Elon Musk and sold it for a staggering sum to eBay some time after going public.

Peter Thiel is also a libertarian :)

He was also a very early investor in Facebook.

So you could say he's had some success at investing in disruptive Internet ventures, and might know something about online finance.

Well he says volatility is not an issue for bitcoin, because like a stock portfolio, bitcoin will be a long term investment.

He's putting his money where his mouth is.

It will be an appreciating store of wealth, the Internet's equivalent of a bar of gold in a vault or a diversified stock portfolio.

So even if Bitcoin isn't money (which it is), neither is Wall Street, but both are still highly valued as a long term store of wealth.

Why Bitcoin specifically and not another crypto?

Thiel says because it's already the biggest:

"I would be long bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions. There will be one online equivalent to gold, and the one you'd bet on would be the biggest."

There are likely to be a number of successful cryptos over the long term in a free market of competing currencies.

(a libertarian's friggin' wet dream come true)

But the safest bet for the solution of storing a lot of wealth long term in an appreciating asset would appear to be bitcoin.

That dominance over the crypto market is the result of the network effect (which is very powerful for currencies).

"A network effect (also called network externality or demand-side economies of scale) is the positive effect described in economics and business that an additional user of a good or service has on the value of that product to others. When a network effect is present, the value of a product or service increases according to the number of others using it." -Wikipedia

The use of bitcoin as a safe wealth reserve has already been established by convention, and that convention carries the inertia of over USD$130 billion (42% of all crypto) as of this writing.

If you want to read my next post about cryptocurrency:

"How Gold Became Money," like or follow me on one of my channels which I'll update with a link once it's up soon.