A bear(ish) take on bitcoin as a currency.

- hodl as a symptom
- network effects
- why it'll never be a currency (feel free to msg me in 5, 10, 20+ years and we'll see how well this ages)

HODL'ING

So obviously bitcoin has gone up in value a lot in the past year or so.

At a micro level, it's also volatile. Swinging up and down by thousands of dollars.

In the face of this volatility and past success, the consensus has been:

DON'T SELL. Hold on for dear life!!

But... that begs the question. When *should* you sell?

If you think about it, you should at some point.

If you hold it all, and then die with a bunch of bitcoin then it was all a waste.

If you pass it to your kids, same question: when should they sell?

Point is, you should sell at some point. A knee jerk answer to "when?" is "at a high".

When will it be at a high? Who knows, hence volatility.

OK wait, so why is it so volatile?

Well, one answer is because it's relatively new.

There is arguably a more important answer..

The more important answer is that it's not inherently valuable.

Gold has use. Houses, regardless of the market, at the end of the day, can be used to live in.

Bitcoin is only valuable because a set of people believe it is.

Other than that, it's just a ledger.

Since bitcoin derives its value from what people believe it's worth, it's subject to

a) all the irrationality and volatility of human decision making, and
b) the cascade and network effects from everyone looking to everyone else to determine Bitcoin's worth.

MEANING that Bitcoin will always have some baseline level of volatility.

Caveat: I haven't researched this much and I'm only speaking for bitcoin specifically. I'm aware stable coins and other crypto coins exist, I know nothing about them or how they work.

Some of you might be thinking, "but Josh, it's decentralized! No one has any control over it. What cascade/network effects are you talking about?"

Yes, the currency is decentralized. But *we*, the deciders of how much it's worth, are not.

In fact, because of news outlets, social media, we are in fact very centralized.

And all it takes is a small (but influential) crowd saying some compelling sounding rhetoric for people to go crazy.

In those times, people will either sell off or buy aggressively. volatility

This is why it will never be a mainstream currency.

It's too risky. Too volatile.

I don't want to get a 1 btc paycheck when the price of milk is 0.1 btc, and then when I go to buy the milk the price changes to 0.2 btc.

Made up numbers, hopefully you get the point.

Again, the volatility comes from us (irrational, volatile humans) deciding its price and nothing else.

If we could decide its price in a decentralized fashion as well, I'd be more intrigued.

But that would require decentralization of communication as well.

MEANING: if we all stopped watching the news, getting on centralized social media platforms, etc... then I theorize that bitcoin would stabilize.

If news and social media decentralize, I'll be in on crypto as a currency.

I just don't think that will happen in my lifetime.

Despite all of this, I'm very excited for the blockchain space in general. I actually wouldn't be surprised if a crypto-coin became a currency.

It would just have to have some other feature to help with stability. Maybe something to do with smart contracts?

In any case, I'm actually pretty bullish that bitcoin will increase in value. I don't think the hysteria will slow down any time soon.

That being said, I don't like the philosophy behind it. Everyone's just buying it because FOMO/speculation.

I'd rather invest in something that objectively increases the wealth of society. Like... a business or start up.

Anyhow, that's just my take. We'll see how well this thread ages. Thanks for reading!