11 Comments
Feb 28, 2021Liked by Ranjan Roy

One minor clarification - Square making half its revenue from BTC Cash App is misleading; BTC transaction revenue is measured as gross value while currency-denominated transactions are measured as net. The proper comparison would be $4.6B gross/$97mm net revenue for BTC transactions measured against $103.7B gross/$3.3B net for other transactions.

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This is already explained well, but to put it explicitly: an increase in the real value of a currency is deflation. As long as the price of Bitcoin goes up faster than dollar inflation, i.e. as long as it's an appealing investment, it's unappealing as a means of exchange (deflationary spiral etc).

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I’m two years late to the punch, but I can’t help but wonder what Bitcoin would have looked like in a non-ZIRP world. It was created in response to the 2008 bailouts, but if we didn’t have a ZIRP world for as long as we did, perhaps some of the speculatory aspects of it wouldn’t have been nearly as prominent.

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Currency values do fluctuate - in relation to each other, no? It's supply and demand so BTC is just finding its value relative to other currencies. I really do not see a difference, except that BTC is new and (currently) under high demand. There are also attributes of these particular "currencies" that are currently being fleshed out and can hopefully be improved over time - like gas rates and execution times.

Remember that satoshis are going to be the "useful" unit of BTC - which is 1/100M th of a bitcoin. This is about .00055 cents (check my math) at the current price, so fluctuations at this level are much, much smaller - relatively speaking. When satoshis reach a level that is "useable" - say US$.01 - that is where the transactions, and therefore the focus in the media, will shift and it will become much more useable as a result.

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Totally agree that price volatility in either direction is super distracting. Many of the current DeFi projects are piggybacking off of real innovation from late 2018-2019 (e.g. Uniswap) when the market was totally sideways.

Also, token distribution is generally a hard problem but it is getting better. An issue with the old ICOs was "everyone just pumps my token and dumps it after their price target" (which doesn't even raise capital for the project effectively - https://medium.com/@jillcarlson/short-convexity-8793f18629bb), but newer projects have tried to instead use it to bootstrap e.g. incentivizing people to use your project by rewarding tokens instead of selling them.

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Basically adoption of something new like this which has multiple aspects to it will have stages. The more BTC becomes exchanged as a currency, i.e. the more circulation that occurs the less people will fear losing their satoshis which at the moment feels like a precious jewel to keep hold of. The circulation phase will emerge if enough companies and platforms integrate it in this way. Miami is an example.

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I think its an emerging situation. The utility will come with time as this phase of speculation moves on and with more people being paid in crypto. I spend crypto if I need something and if I can wait until Dash (for eg.) is relatively high then I do. It just makes spending money more interesting IMO.

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I guess innovations like Diem could fill the void in payments? https://netinterest.substack.com/p/facebooks-big-diem

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Fascinating article! Thanks for sharing your thoughts.

I tend to agree with you about the theory. If BTC is used as an investment vehicle and/or reserve of value, it will never be able to become a utility asset (currency).

I have no answer, but maybe after a period of rising prices, it'll slow down and get closer to something like gold? I'd be curious about the evolution of gold price in its early days. Maybe worth exploring?

So many questions, few answers.

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An insightful, contrarian take. Keep up the good work! :)

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