Stay friendly please lads, some good stuff posted here be a shame to lock the thread !
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Some posts have now been soft deleted.
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Any currency is based entirely on trust and confidence. The paper money we use today is worthless. It's an IOU, always has been, the notes even say "I promise to pay the bearer...." This has been how financial systems have always worked, traders put some intrinsic value on something, then that becomes currency or similar. We used to use the barter system, but then it changed to precious metals, or silks, or spices, or rocks, before eventually becoming coins, and then paper money (I know the majority of currencies are not longer made from paper).So what exactly is this money "invested" in its market cap? Do you mean the money investors spent to buy bitcoin? If so, then that money is gone, because it has all been converted to bitcoin, so cannot provide any backing.
Bitcoin's value is illusory, based entirely on trust and confidence. If that collapses, Bitcoin will be worthless, as no-one will want to buy it or accept it in payment.
I don't think that anyone would suggest that a British government would behave as recklessly as Germany's Weimar government or Zimbabwe's Mugabe government, which is what it would take for the value of sterling to collapse. Barring that, the IMF/World Bank would not allow a major world currency to collapse and would step in to support it, inevitably with the requirement for austerity measures until the currency stabilised.
When the pound was the dominant world currency (over 100 years ago) we were on the gold standard, so it wasn't a fiat currency.
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Support the currency with what?Not quite true. Although there is no gold or other assets to back fiat, there is the guarantee of the government which issued it, who can step in to support the currency in a crisis.
I will add that the Dollar is the most widely used fiat currencies and before that it was the Pound. I think in the future it will be a crypto currency and it will have other crypto currency competitors.
We are still in the early adoption phaseSee post #50.
Falling confidence in a currency will usually be the result of poor economic performance and/or bad management of public finances, so the government can do various things to reverse that trend, including the following:Support the currency with what?
So manipulation of the markets you mean... This is exactly why we need decentralised finance.Falling confidence in a currency will usually be the result of poor economic performance and/or bad management of public finances, so the government can do various things to reverse that trend, including the following:
1. Raising interest rates to make investing in the currency more attractive.
2. Introducing exchange controls to prevent money being transferred abroad.
3. Imposing import tariffs to protect domestic industries and reduce imports and the trade deficit.
4. Raising taxes and/or reducing public spending to cut the budget deficit, particularly if that had been financed by printing money (so-called quantitative easing).
You just have to ask someone that runs a business that trades in Continental Europe how difficult it is using the current Financial system.So manipulation of the markets you mean... This is exactly why we need decentralised finance.
I don't think it's a very good argument to replace government "manipulation" with no control at all, leaving currency markets vulnerable to speculators able to exploit any weaknesses.So manipulation of the markets you mean... This is exactly why we need decentralised finance.
I do speak to businesses who trade with Europe and all they ever complain about is the amount of paperwork post-Brexit, not the financial side of importing/exporting, which is easier than it's ever been with electronic banking.You just have to ask someone that runs a business that trades in Continental Europe how difficult it is using the current Financial system.
A very interesting excursion into history, thank you. I didn't think it was such a deep process.Before World War 1, gold coins were in circulation in the UK. Bank notes were also in circulation for convenience, but they were real promissory notes at that time, as they could be exchanged for gold coins. Those coins could be melted down into ingots and would still have had value, as gold has always been desirable and in demand. That value may fluctuate, but would never be zero. The money therefore had an intrinsic value, in the underlying value of the metal it was made from, which a purely digital currency can never have. It was not, therefore, a fiat currency.
I do know what market capitalisation is in the normal sense. For a company on the stock exchange, it is the share price multiplied by the number of shares in issue, and it reflects an opinion of the value of the underlying assets owned by that company and its ability to make profits and pay dividends. Bitcoin, on the other hand, has no underlying assets or income-earning potential to support its market capitalisation; it is based purely on speculation.
The dotcom bubble of 20 years ago should be a warning. Companies with digital business ideas were floated on the stock exchange and investors enthusiastically subscribed to their shares on a wave of optimism. Demand was higher than supply and the share value rose well above the issue price. After a while, the companies had frittered away all of the money they had raised without establishing much of a business. Investors then realised that the companies had little in the way of assets or earning potential to support their market capitalisation, so the share price collapsed. That shows how market capitalisation is not, in itself, an indicator of any real, underlying value.
Unlike a trading company, there has never been a "Bitcoin plc" taking investors' money and using it to make more money. All purchases of Bitcoin are from previous investors or miners. Of course now it works much better thanks to VPN services, I have read more about them here and I advise you.
I said that the IMF would step in because they have done it before, in the 1970s, when they granted a loan to get the Labour government out of a financial crisis.
This is why it collapsed
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