By Keith Weiner
The Instability Problem
Bitcoin is often promoted as the antidote to the madness of fiat irredeemable currencies. It is also promoted as their replacement. Bitcoin is promoted not only as money, but the future money, and our monetary future.
In fact, it is not.
A tragedy… get the hankies out! 
[PT]
Why not? To answer, let us start with a look at the incentives offered by bitcoin. We saw a comment this week, which is apropos:
“Crypto is so exciting and stimulating that is actually very hard for me to be interested in/do things unrelated to it lately.”
This sentiment is chilling. It illustrates another way that bitcoin speculation is affecting the real world. Some people are actually producing less. Speculators like him get free money (i.e., the accumulated savings of others, provided as income). Why should they do mundane work for wages? The net result is that someone at the margin will have to consume less.
We could dub this the “tragedy of the speculations.”
Bitcoin, hourly (at the Bitstamp exchange). There was a very large correction in recent days, but as we write this, a quite hefty bounce has begun. We want to interpose here that we actually do not agree with every point Keith makes about bitcoin (although there are obviously wide areas of agreement) and we hope to soon have our own analysis ready for posting in order to initiate further debate. A few things are clear: no matter where one stands, bitcoin is here to stay. Understanding it is important, and everybody should keep an open mind (don’t just wave it off as some kind of fad). Moreover – and that is the most important aspect from our perspective – bitcoin is a creature of the market. No government had a hand in its creation, although some governments are presumably salivating at the opportunities the technology seems to offer with respect to eliminating cash currency. As an aside, the recent news regarding the steps taken by China’s regulators mainly indicate that they apparently don’t fully understand how bitcoin actually works (considering that the EU once appointed Mr. Oettinger as its digital commissar – a man barely capable of operating the remote control of his TV set – one shouldn’t be too surprised). Clearly though government bureaucrats are very bothered about the fact that there apparently exists a largely unregulated market somewhere. The horror! Their chief concern is to exercise control over everything and if possible, regulate it to death, or at least condemn it to some kind of zombie existence. It is their raison d’etre after all – and of course it is all for our own good (more on this in our coming update). [PT] – click to enlarge.
We don’t prefer to focus on the real or alleged intentions of bitcoin creator Satoshi. We do not call this “unintended consequences” (though we doubt that Satoshi could have foreseen this). Instead, we say that the skyrocketing price creates a perverse incentive. A …read more
Source:: Acting Man
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