Tuesday, 31 March 2020

Cryptocurrency is an INTERMEDIATE store of value, but ONLY when it is used for payment

The value of any cryptocurrency is a product of its utility, its network effect, minus its cost of carry. Taken to the logical conclusions:

  1. If you CAN'T use a coin, nobody wants it -> ZERO value
  2. If nobody uses a coin, nobody wants it -> ZERO value.
  3. If the cost of carry for a coin is too high, nobody wants it -> ZERO value.

Since cryptocurrency is not widely used and accepted (yet), when physical or virtual items are paid for with a cryptocurrency, the crypto acts as an intermediate store of value. The buyer puts in fiat to acquire the crypto, and the seller exits to fiat at some point after the transaction.

Simply holding or hoarding cryptocurrency adds no value and only stokes volatility/misery. Yes, you can reduce supply and play games with prices, but no additional value is created.

Discuss.

submitted by /u/wtfCraigwtf
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source https://www.reddit.com/r/btc/comments/fs7aui/cryptocurrency_is_an_intermediate_store_of_value/

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