# Good article by Rory Gillen on Bitcoin



## Brendan Burgess

*Bitcoin - Currency, Asset or Mirage *


Extract: 
So, have bitcoins any value? When you own them can you earn a return on them? Our current understanding is no. Do you have counterparty risk? Yes. Can the amount of bitcoins be increased at will? Not at present, but new cryptocurrencies are cropping up regularly so does it really matter if each separate one is limited if there's no control of the supply in general? It would not appear so. Unless you know the answers to these 'Sound Money' questions, you should avoid bitcoin as an investment proposition. Fans of bitcoin seem to be placing all their faith in the fact that bitcoins are strictly limited in supply. So what? A limited supply means very little if an item has no intrinsic value. The Dutch learnt the lesson of intrinsic value in the late 1600s when Tulip-mania took over. The only intrinsic value tulips had then (and now) was the cost of production, but the Dutch forgot that for a few years, and lives were ruined in the too often human pursuit of riches without effort.


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## ant dee

The article isn't good..
How is there counterpart risk on Bitcoin ?

Other cryptocurrencies dont mean increased supply simply because no one is forced to use them, unlike increasing supply on government backed fiat currencies.

The faith in bitcoin is not based on tulip - style limited supply. It's things like  decentralisation, permission-less innovation, transparency , privacy that make it  attractive.

And the list could go on and on , there are nice articles and presentations about these things from people that are smarter and have better communication skills than me.

Like we say that we can't afford to not own a house and can't afford to stay out of the stock market , with the same logic we can't afford to stay unexposed to cryptocurrencies.


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## TheBigShort

I first heard of Bitcoin when it was about €80 a coin and I dismissed it as I hadn't a clue. Kept on hearing about it, kept on dismissing it.
Finally tried to learn about it. The jury is still out for me but I have heard enough to consider buying some. My purchases of bitcoin to date are very modest and I haven't actually used it to buy anything or trade with someone else.
But what convinced me to get involved is the reporting around the blockchain technology. I don't fully understand it nor could I explain it but I think I understand the concept. It is that understanding that makes bitcoin very interesting.
 I would be of the mind that global government backed fiat currencies are devaluing at a faster and faster rate. Cash will certainly become, if not a thing of the past, a nostalgic item like vinyl. 
All transactions are going digital, so what is the point of having multiple international currencies? These are useful within the borders of countries, but in a globalised digital world, a binary code is the same in Alaska as it is in Zambia.
So who will control a globalised digital currency? Well, if it's decentralized, then no-one but the users themselves. Sovereignty will rest with the individual, not the State. 

There are still more questions than answers, but ones relating to multiple crypto currencies can be answered by pointing to multiple national currencies.
What about claims that it is being used for money laundering? Perhaps so, but so what? Cash and the banking system is also used for money laundering, still we use it today.
It has no intrinsic value? Neither has anything really, unless there is a demand for it. That demand being generated by a confidence. Certainly, the confidence in blockchain technology is growing.

Anyway, that's my tuppence worth (or 0.0000012 of bitcoin). Gradually becoming a believer, just wished I did so at €80!


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## Jim2007

ant dee said:


> The faith in bitcoin is not based on tulip - style limited supply. It's things like  decentralisation, permission-less innovation, transparency , privacy that make it  attractive.



It is exactly the same, in both cases their worth depends on confidence, nothing else.


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## ant dee

All money is based on faith and confidence.


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## TheBigShort

Jim2007 said:


> It is exactly the same, in both cases their worth depends on confidence, nothing else.



But what inspires confidence in bitcoin?


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## seamless

I think its worthwhile to separate Bitcoin and the underlying blockchain technology. I have no idea where any of the cryptocurrencies will end up but I am reasonably sure that blockchain technology will be successful - take a look at the marketing spend IBM are putting behind their own Hyperledger blockchain initiative.

BTW there's a server up in the Digital Hub somewhere with several Bitcoin, I started mining in 2009 and gave it up as a lost cause.... :-(


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## TheBigShort

seamless said:


> I think its worthwhile to separate Bitcoin and the underlying blockchain technology. I have no idea where any of the cryptocurrencies will end up but I am reasonably sure that blockchain technology will be successful



I agree, that is why I bought some. Mostly out of curiosity in trying to understand it.
But as I have begun to understand it more, at least to my understanding, I have also bought some other crypto's. It is becoming more of a collection of fine crypto currencies, which in itself is bizarre. 
It will all go bust when it is realised that these things are not backed with any intrinsic value. 
But as you have pointed out, the blockchain technology appears to have real value. Therefore, increasing the value of bitcoin and others.
It reminds me somewhat of when Facebook emerged. Most people initially dismissed it as a fad. Now it's huge and part of everyday living. By no means the first social media, it is however joined by a plethora of other social media platforms. 
Crypto currencies are to fiat cash currencies what social media is to print media.


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## Pugmister

TheBigShort said:


> I agree, that is why I bought some. Mostly out of curiosity in trying to understand it.
> But as I have begun to understand it more, at least to my understanding, I have also bought some other crypto's. It is becoming more of a collection of fine crypto currencies, which in itself is bizarre.



Not to derail the topic but was just wondering what exchange and wallet you used to buy other cryptos ? I currently hold positions in Bitcoin, Etherium and Lite coins (roughly a 50% gain in all three at this point in time). I used Coinbase on IOS to buy all three and also hold them on the Coinbase wallet. I would like to purchase some lesser known Cryptos such as Dash or OMG but finding exchanges to do so is proving difficult. I am also considering moving to an offline type wallet for increased security.


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## TheBigShort

Pugmister said:


> Not to derail the topic but was just wondering what exchange and wallet you used to buy other cryptos ?



Coinbase. The others are Etherium and Lite. I'm looking at Ripple now. Like you, it's proving difficult.


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## Firefly

TheBigShort said:


> I first heard of Bitcoin when it was about €80 a coin and I dismissed it as I hadn't a clue. Kept on hearing about it, kept on dismissing it.
> Finally tried to learn about it. The jury is still out for me but I have heard enough to consider buying some. My purchases of bitcoin to date are very modest and I haven't actually used it to buy anything or trade with someone else.
> But what convinced me to get involved is the reporting around the blockchain technology. I don't fully understand it nor could I explain it but I think I understand the concept. It is that understanding that makes bitcoin very interesting.
> I would be of the mind that global government backed fiat currencies are devaluing at a faster and faster rate. Cash will certainly become, if not a thing of the past, a nostalgic item like vinyl.
> All transactions are going digital, so what is the point of having multiple international currencies? These are useful within the borders of countries, but in a globalised digital world, a binary code is the same in Alaska as it is in Zambia.
> So who will control a globalised digital currency? Well, if it's decentralized, then no-one but the users themselves. Sovereignty will rest with the individual, not the State.
> 
> There are still more questions than answers, but ones relating to multiple crypto currencies can be answered by pointing to multiple national currencies.
> What about claims that it is being used for money laundering? Perhaps so, but so what? Cash and the banking system is also used for money laundering, still we use it today.
> It has no intrinsic value? Neither has anything really, unless there is a demand for it. That demand being generated by a confidence. Certainly, the confidence in blockchain technology is growing.
> 
> Anyway, that's my tuppence worth (or 0.0000012 of bitcoin). Gradually becoming a believer, just wished I did so at €80!



Excellent post and I fully agree. Like you I wish I had jumped in at €80. Current levels look bubbly to me but I've never looked at it in enough detail so I could be wrong.


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## cremeegg

Still a Rory Gillen fan I see Brendan, even though he has turned his back on AAM.

https://www.askaboutmoney.com/threa...ccounts-or-a-general-15-yr-plan.202538/page-4



Brendan Burgess said:


> A limited supply means very little if an item has no intrinsic value. The Dutch learnt the lesson of intrinsic value in the late 1600s when Tulip-mania took over. The only intrinsic value tulips had then (and now) was the cost of production, but the Dutch forgot that for a few years, and lives were ruined in the too often human pursuit of riches without effort.



Tulips illustrate the problem *which can arise *where an item with no intrinsic value is used as a store of value.

Certain other items with no intrinsic value, which have been used as a store of value, could be called upon to illustrate the durability of such things. Gold, US Dollar bills, the €10 note I have in my pocket.


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## Brendan Burgess

cremeegg said:


> Still a Rory Gillen fan I see Brendan, even though he has turned his back on AAM.



???? If I think an article might be of interest to users of Askaboutmoney, I link to it.  It is completely irrelevant whether they are a poster on Askaboutmoney or not.  Anyone has a right to stop posting if they get fed up with it. Lots of active users stop posting. Some come back, some don't. 

Brendan


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## TheBigShort

Firefly said:


> Current levels look bubbly to me but I've never looked at it in enough detail so I could be wrong.



The more I understand about it the more I consider it's potential to rise in value. As stated above, digital transactions will be the norm. The need for multiple national currencies will be redundant. The euro (notwithstanding it's flaws) is a typical example of not needing multiple currencies. The US dollar operates in fifty states across the US and in various countries around the world. It acts as the global reserve currency. That is it's value is recognized everywhere (if not accepted). 
In a digitized world, all digital transactions are effectively computer code. Those codes will need to be valued against something. The US dollar? I don't think so, to do so would cede global sovereignty to the federal reserve.
Perhaps it can be valued against gold? But gold cannot be transferred digitally. So what's left?
A blockchain technology of limited supply, that has confidence of users (getting bigger all the time), that is - bitcoin.


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## Jim2007

TheBigShort said:


> But what inspires confidence in bitcoin?



The exact same thing as with the tulips - believe!  And just like the tulips, if that belief is shattered it will rapidly loose value.  You cannot invest in anything who's value is based on fear and greed.  You can speculate, but then you should recognize it, for what it is.


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## TheBigShort

Jim2007 said:


> The exact same thing as with the tulips - believe!  And just like the tulips, if that belief is shattered it will rapidly loose value.  You cannot invest in anything who's value is based on fear and greed.  You can speculate, but then you should recognize it, for what it is.



I disagree. I don't think you can compare the blockchain technology that is driving bitcoin to a pretty flower. But I accept the point. It is speculative. But just as tulips were speculative so was, at one point, Facebook, Apple, Microsoft etc.
I don't fully understand bitcoin or blockchain technology, but I do find it intriguing. 
The internet opened the door to all sorts of technological advances and innovations. Tulips didn't.


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## ant dee

Bitcoin has actual uses , it's not a flower , we are missing the point here!

It's hard for us privileged people to see that with our fancy cards , online banking and brokerage accounts. We have all the financial freedom one would need , easy and fast. For the short term future at least... Who knows what's gonna happen after a few elections and a severe market crash or something.

But go ahead to India , Venezuela , Argentina, Cyprus etc and tell them Bitcoin and cryptocurrencies are like tulips.
Sure, us folks will choose to jump in and invest  to speculate.
Billions of un banked people are seeing little choice but turn to cryptos to prosper, some even to survive.


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## joe sod

ant dee said:


> But go ahead to India , Venezuela , Argentina, Cyprus etc and tell them Bitcoin and cryptocurrencies are like tulips.



Venezuela, Argentina and Cyprus !!, hardly countries with the most stellar financial histories, it might be more to do having a history of defaulting on US dollar loans so wanting to start with a clean slate using cryptos.


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## Steven Barrett

If you had all the bitcoin in the world but weren't allowed to sell it, would you make a return? 

If you invest in equities, bonds, cash or property you would. Even with deposit interest rates as low as they are, you would still make your money back, it would just take a longer period of time. With bitcoin, gold and other commodities, it is only worth what someone is willing to pay for it and there's no regular return from it. 


Steven 
www.bluewaterfp.ie


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## Firefly

Watched an interesting Netflix documentary last night called Banking on Bitcoin for anyone that's interested.


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## TheBigShort

SBarrett said:


> If you had all the bitcoin in the world but weren't allowed to sell it, would you make a return?
> 
> If you invest in equities, bonds, cash or property you would.



Not if you weren't allowed sell them, as per the conditions imposed above on bitcoin.


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## ant dee

Is the average individual in those countries responsible for defaulted US loans ? Most likely they never took a loan and are getting raised taxes , capital controls , hyperinflation etc.

You can just as easily easily say no one will buy a failed company's stock or a bankrupt country's bond.

Andreas Antonopoulos has nice material online to get informed on Bitcoin for whoever is interested.


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## Pugmister

Wondering if anyone has any insight into CGT arising as a result of a cryptocurrency transactions. If I was to buy Bitcoin using my euro bank account and subsequently sell and make a gain I understand that CGT would be due.

Would the same be applicable if I was to purchase say Etherium using Bitcoins and subsequently make a gain. In essence if you remain in crypto world does it eliminate any CGT due ?


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## ant dee

Pugmister said:


> In essence if you remain in crypto world does it eliminate any CGT due ?



While im not able to give tax advice, many seem to agree to this gloabally. Meantime you don't convert to FIAT , no taxes are due.

What happens though if you buy goods with bitcoin? Could be groceries with a bitcoin card or it could be a car from a private seller.

Also, someone that's getting paid in Bitcoin for goods or services should be subject to tax, calculating the crypto income in fiat daily and keeping accounts that way.


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## Pugmister

So irrespective of how the coin upon which the gain was made was purchased, once you convert to FIAT a taxable event occurs which will trigger CGT ?

Its a bit of minefield trying to get your head around this at times. Im hoping to purchase some coins in the coming weeks which can only be purchased via Bitcoin so it got me thinking of such a scenario.


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## ant dee

Another example, someone from Greece was saying that if you cannot prove / verify how much you spent purchasing the asset (bitcoin, altcoin etc) the Greek tax office will count the whole amount it is sold for as capital gains.
Of course, this is general legislation, not crypto specific, just the closest thing they were finding.

No-one knows exactly what to do.


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## ant dee

A banker calling cryptocurrencies a fraud, sure, I would want to protect my business's future too if I were on his shoes.
Funny how JP is investing in blockchain technology on the side... not to mention other Wall Street interest in crypto.

Yes you can lose all your money in crypto, same as in all investments. It all comes down to don't invest what you cant afford to lose, risk - reward ratio etc.
For us Irish here, it is like stock picking. You might find a company you like, you are not going to put all your money on it, cause it might fail.

For holding crypto, DO NOT leave it on the exchanges or online wallets! Buy a hardware wallet ( trezor, ledger nano s , etc ) , read their instructions / blog, keep your backup safe.


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## goosebump

The primary driver behind Bitcoin's value is a growing realisation, triggered by the 2008 financial crisis, that fiat currencies are vulnerable in a way that Bitcoin is not.

1. Bitcoin is not controlled by any government requiring re-election
2. Bitcoin is finite

Every fiat currency in the world is now pegged to one of the 5 reserve currencies (US dollar, Euro, Yen, Swiss Franc, Sterling).

When the next financial crisis hits, where do these currencies go? 

Interest rates are already < 1%. Quantitive Easing has been all but exhausted. So what's left?

The only way to keep the rabble off the streets will be to starting sprinkling €500 notes from ECB helicopters.

When that happens, Bitcoin takes over.

Note: CGT is due on Bitcoin gains even if you never convert back to fiat. If you bought BTC at €100, and its now worth €1,000, and you use it to buy something, a CGT liability arises.


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## goosebump

SBarrett said:


> If you had all the bitcoin in the world but weren't allowed to sell it, would you make a return?



Bitcoin is a currency. You can buy things with it. You don't have to sell it. Do you have to sell dollars to realise practical value from them?



SBarrett said:


> If you invest in equities, bonds, cash or property you would. Even with deposit interest rates as low as they are, you would still make your money back, it would just take a longer period of time. With bitcoin, gold and other commodities, it is only worth what someone is willing to pay for it and there's no regular return from it.
> 
> 
> Steven
> www.bluewaterfp.ie



Equities, bonds, currency and property are only worth what people are willing to pay for them.


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## goosebump

Firefly said:


> Watched an interesting Netflix documentary last night called Banking on Bitcoin for anyone that's interested.



Its out of date by about 18 months, which is a millennium in Bitcoin years.


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## goosebump

Jim2007 said:


> The exact same thing as with the tulips - believe!  And just like the tulips, if that belief is shattered it will rapidly loose value.  You cannot invest in anything who's value is based on fear and greed.  You can speculate, but then you should recognize it, for what it is.



What is it you think will shatter belief in Bitcoin? Bitcoin has been around since 2009. In that time, we've had the Mt. Gox failure, Silk Road, the New York Bitcoin licensing debacle, the PBOC crackdown on exchanges, numerous hard and soft forks and an endless and fractious debate about scaling.

And still, Bitcoin's value continues to grow exponentially.

Conversely, your €10 note in your back pocket buys you about half of what it could buy you in 2009.


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## goosebump

Pugmister said:


> Wondering if anyone has any insight into CGT arising as a result of a cryptocurrency transactions. If I was to buy Bitcoin using my euro bank account and subsequently sell and make a gain I understand that CGT would be due.
> 
> Would the same be applicable if I was to purchase say Etherium using Bitcoins and subsequently make a gain. In essence if you remain in crypto world does it eliminate any CGT due ?



There is no way to avoid CGT when speculating on Bitcoin.

And here's the more important point: that isn't what Bitcoin is for.


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## Steven Barrett

goosebump said:


> The primary driver behind Bitcoin's value is a growing realisation, triggered by the 2008 financial crisis, *that fiat currencies are vulnerable in a way that Bitcoin is not.
> 
> 1. Bitcoin is not controlled by any government requiring re-election*
> 2. Bitcoin is finite
> 
> Every fiat currency in the world is now pegged to one of the 5 reserve currencies (US dollar, Euro, Yen, Swiss Franc, Sterling).
> 
> When the next financial crisis hits, where do these currencies go?
> 
> Interest rates are already < 1%. Quantitive Easing has been all but exhausted. So what's left?
> 
> The only way to keep the rabble off the streets will be to starting sprinkling €500 notes from ECB helicopters.
> 
> When that happens, Bitcoin takes over.
> 
> Note: CGT is due on Bitcoin gains even if you never convert back to fiat. If you bought BTC at €100, and its now worth €1,000, and you use it to buy something, a CGT liability arises.



Who does control Bitcoin? How secure is it?


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## Steven Barrett

goosebump said:


> Equities, bonds, currency and property are only worth what people are willing to pay for them.



You can get a return from them. If you owned a property and the value went to zero, you can still get your money back through rental income. The same can't happen with bitcoin/ gold. 

Bitcoin may be suitable if you _speculate_ but I believe there are better ways to_ invest_ money.


Steven
www.bluewaterfp.ie


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## Early Riser

_"For we walk by faith, not by sight."_ 2 Corinthians.

_"The faithful man will prosper with blessings, but whoever is in a hurry to get rich will not escape punishment."_ Proverbs.


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## ant dee

SBarrett said:


> If you owned a property and the value went to zero, you can still get your money back through rental income.


That doesn't make sense, who would pay rent to live in a property that's worth zero? They would buy it, for zero, and live in it for free.

Bitcoin is not a get-rich-quick scheme, although there are countless cryptocurrencies that are just that.


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## TheBigShort

I have bought some bitcoin, small amount, to try understand it more so than anything.
It reminds me of when I first heard about FB. I thought it was a fad, won't last. 
Then all these other social media platforms followed, and Twitter in particular etc.
There is a lot I don't understand about it, but the digital age is upon us, paper and coin currencies will be affected the same way as the print media is affected by the internet (unless nuclear war starts then who knows what will happen). Paper  and coin will be still be around for a while yet but no-one will use them.


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## Steven Barrett

ant dee said:


> That doesn't make sense, who would pay rent to live in a property that's worth zero? They would buy it, for zero, and live in it for free.
> 
> Bitcoin is not a get-rich-quick scheme, although there are countless cryptocurrencies that are just that.



Ok, you bought a 1 bed apt for €500,000 during the Celtic Tiger and the value went down to €200,000 and stayed there. You would make your money back through rental income over a period of time. It may be a long period of time but you will make your money back. Same applies to dividend income and interest. 

If you bought €500,000 worth of Bitcoin/ gold and it fell to €200,000 and stayed there, that's it, you have a €300,000 loss. 

Steven 
www.bluewaterfp.ie


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## TheBigShort

SBarrett said:


> Ok, you bought a 1 bed apt for €500,000 during the Celtic Tiger and the value went down to €200,000 and stayed there. You



You would have to analyze why the value collapsed so much? Too many 1 bed apts with no-one to rent it too?

If bitcoin or gold price collapses in similar fashion there will be a reason for it, perhaps not enough people willing to trade with it?

It's the same thing.

I understand the point you are making, but the point about bitcoin is no-one knows at this stage is it overvalued or undervalued. I could take a guess, but that would be pure speculation. The important factor, in my opinion is, the blockchain technology. While I hear about the apparent flaws of bitcoin, I never hear a negative thing about blockchain technology. Instead, blockchain technology to me, would appear to be on the cusp of becoming mainstream.
When it does, all products and services that adopt to this technology will steal a march on competitors that haven't adopted the technology.
Bitcoin has stolen the march on its competitors, so far. In turn, providing value.


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## roker

I know nothing about this, how do you buy bitcoins? And is there an exchange rate for purchasing from different currencies?


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## joe sod

Is there not a big contradiction at the heart of bitcoin. People seem to have a religous zeal for it like others do for gold and proclaim that it will replace fiat currencies. However they want to invest in it because they believe its value will rise in relation to all fiat currencies. With regular currencies you can gauge its value with regard to other currencies using interest rates and purchasing power parity. There is a stabilising effect therefore if one countries goods are getting too expensive in relation to other countries currencies, over time the expensive countrys currency will fall back in value to restore purchasing power parity. Over time all currencies should gradually inflate and lose value, therefore people should not wish to hold large amount of currency as cash but in productive assets. However with bitcoin with its massive increase in value in relation to everything else how can it be used as a medium of exchange, nobody wants to buy anything with it, they just want to buy bitcoin and hold onto it until it starts falling again, then a mad scramble to spend it.


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## landlord

roker said:


> I know nothing about this, how do you buy bitcoins? And is there an exchange rate for purchasing from different currencies?



Rocker. There are are many different exchanges, Coinbase is the largest US exchange. PM me if you want more details. I am a Bitcoin believer!!


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## Leo

Just be careful of the wallet you chose, so that some developer doesn't accidentally wipe out your holdings. You also need to be careful transferring.  So if you know nothing, you need to spend some time educating yourself to the potential risks/ rewards before jumping in.


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