Is an increase in the use of Bitcoin in transactions positive or negative for the price? – Mish Talk
Today’s question
I am a merchant. Finally I decide to accept Bitcoin for what I sell.
Does it have any bearing on the price of Bitcoin? When and how?
Two matters
- As a seller, I keep Bitcoin received for my goods or services.
- As a merchant, I trade Bitcoin for dollars, yen, euros or anything else.
Case number one is price neutrality for Bitcoin. Case number two is a 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 is no price pressure in any way.
- In case two, the Bitcoin seller would rather have goods or services than Bitcoin. But the merchant doesn’t want to hold Bitcoin either. This represents a net negative desire to hold Bitcoin.
The above applies to gold, dollars and every commodity. Money itself is a commodity, but commodities are usually 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 about money, so I’ll stop there.
Case number one
Let’s go back to issue number one above: The seller not only accepts Bitcoin, but also has it.
In isolation, it is price neutral, as mentioned above. However, if an increasing number of merchants not only accept, but accumulate Bitcoin over time, it will likely be positive for Bitcoin.
If that happened to any significant global extent, the price of Bitcoin probably wouldn’t behave as it is.
Bitcoin accepted here
What happens if increasing numbers of merchants accept bitcoin but keep it.
Undoubtedly nothing. Accepting Bitcoin does not create transactions. However, accepting Bitcoin allows Bitcoin holders to more easily sell Bitcoin for goods and services.
As mentioned above, unless the seller has Bitcoin, the action is net negative for Bitcoin.
A few Bitcoin holders make senseless transactions to prove that they can.
In practice, most sellers won’t care, and most bitcoin holders do it for price appreciation, not to buy a cup of coffee or pay rent, so “Bitcoin Accepted Here” does next to nothing.
Can Someone Leave Fiat for Bitcoin?
No. People have written that they have, but looks are deceiving.
What happens in practice is essentially case two above. To pay a mortgage, rent, buy a car, insurance or anything else, unless the seller has bitcoin, there is a two-step process where bitcoin is exchanged for fiat and that fiat is used to buy goods and services.
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It doesn’t matter if this happens by the Bitcoin holder or the seller who receives the Bitcoin one second later. The result is the same.
It is only possible to escape fiat if every seller 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. So, 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 usage even as pseudo-monetary transactions.
Bitcoin is not suitable as money
Compared to the dollar, euro or yen, Bitcoin is very illiquid. Relatively small transactions can move the price quite a bit.
Bitcoin also works poorly as money if merchants don’t want to take it and hold it. Given that people have to pay capital gains on appreciation acts as a strong disincentive to transaction adoption.
Delusions continue
Cathie Wood says Bitcoin will be worth 1 million per coin by 2030.
But it’s nothing.
$10 million for Bitcoin is bearish
Supposedly, buying roughly $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 absurd claims. It tops them all.
Binance’s alleged crypto audit failed, not even the auditor would vouch for it
Meanwhile, back in the real world, Binance’s alleged crypto audit failed, not even the auditor would vouch for it
Also note that global arguments are breaking out around the world over the remaining crypto assets of FTX
Don’t worry, 1BTC = 1BTC is worth tens of millions of dollars soon. How Much Will Michael Saylor Be Worth? Someone do the math for me.
Oh, one more little thing. Governments cannot do anything about this. It is guaranteed.
Crypto Crash and Why It’s Impossible for “You!” to take out
In case you missed it, please understand that it will be impossible for “You!” to withdraw at $1,000,000.
This post originated on MishTalk.Com.
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