People have used all sorts of things as money. Money is used to transfer wealth and claims on wealth. A dollar is a claim on wealth. Gold is wealth. Currency or gold can be held as a stable store of value.
People will buy gold and hold it in the belief the price will go up, Otherwise, they will sell it in the belief it will drop in price.
The supply of gold is relatively static. So, what drives price in dollars is demand and the supply of dollars.
Most dollars are digital now. There is much more money than printed currency. All of the credit/debit card transactions are digital currency transfers. Paying for things on line is all digital. Bitcoin is nothing new in that regard.
The advantage of bitcoin is banks charge to transfer money from one account to another and bitcoin transfers without the transaction fee.
Peter Schiff's argument is gold has an advantage of a track record of being accepted as a medium of exchange for thousands of years and is therefore low risk as a store of value that bitcoin does not.
The supply of bitcoin and that of gold are stable, so the question is demand with regard to bitcoin being a store of value. Will bitcoin survive competition from other currencies, some of which do not exist yet?
This is like asking what will happen to the Mexican Peso or Canadian dollar if Scotland becomes independent and issues a Scottish pound. Gold and silver and platinum and nickel and copper coexist. The use of one currency doesn't preclude the use of others.
Just like there will be an exchange rate between pesos and dollars and gold and silver, there will be one between bitcoin and all of the others.
So, why use bitcoin? One advantage is the avoidance of bank transaction fees in moving the money around.
Why not? As a store of value it is volatile and has a short track record. Taxes cannot be paid directly in bitcoin.
When the Zimbabwe dollar was inflated out of existence, the government forbid transactions in the country in anything but the local currency. The economy collapsed and people were forced to barter. When the government lifted the restrictions on what currency could be used in the country, the shelves were resupplied and the hourly raising of prices stopped. Anyone with savings in Zimbabwe dollars, however, was wiped out.
The advice to investors is always to diversify. Don't put all of your eggs in one basket. Dollars in banks and investment accounts are exposed to inflation and confiscation. Hard currency in your personal possession is less so. Since bitcoin is inflation proof it might be a hedge in the long term. In the short term, it is too volatile.
I think the difference between Stephan's and Peter's view is the former is looking at bitcoin's advantages as a medium of exchange and Peter is emphasizing bitcoin's risk as a store of value.
[F]orce can only settle questions of power, not of right. - Clyde N. Wilson
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