If You Believe In Bitcoin, Never Buy Anything In Bitcoin

BitcoinREUTERS/Stephen LamA chain of block erupters used for Bitcoin mining is pictured at the Plug and Play Tech Center in Sunnyvale, California, October 28, 2013.

Many Bitcoin believers think that the digital currency will one day become the pre-eminent currency of the internet. They basically see it becoming the internet’s version of gold in that it’s naturally scarce, independent, virtually impossible to manipulate, and crucially suited for a digital world when money ought to be able to be moved seamlessly and at no cost.

Well here’s a tip: If you think that this is true, then never use Bitcoin in a transaction.

As more people have gotten into Bitcoin, the price has gone way up.

Virtually everyone who has ever bought anything in Bitcoin has been a huge loser, who would have been better suited just holding onto the Bitcoins instead.

Remember the pizza that was purchased for $US25 in Bitcoins years back? Had the person not bought that pizza, it would be worth nearly $US3 million. That purchase was a catastrophic decision, as that was probably the most expensive pizza of all time.

Of course this presents a Catch-22. How can Bitcoin become a real currency if it’s not used in transactions? And why would anyone use it in transactions if becoming a real currency offers so much more price appreciation? This contradiction is a core problem, and it’s a reason why it’s probably doomed to fail (real currencies don’t have this issue, since central banks prevent rapid price appreciation, and they mandate that the currency be used).

But really, if you’re thinking that Bitcoin is going to be huge, it’d be insane and irresponsible to buy anything with it.

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