The falling value of crypto currency from Bitcoin’s peak of purchasing power alarms a vast swath of crypto currency enthusiasts.
But do all crypto currency enthusiasts matter? Do people who simply buy and sell bitcoins on exchanges matter?
Currency Is A Network Of Goods And Services
Currencies represent networks of goods and services that can be directly acquired using said currency. As we build new currencies and new markets of goods and services available in exchange for Bitcoin let us remember the forces that give rise to the value of currency.
Currency’s value derives not from exchanging it for other currency, rather in exchanging it for actual consumable products. In that sense the people who willingly trade their own labor and products for crypto currency matter most.
The degree to which a business owner keeps the bitcoins they receive is directly proportional to the value they contribute to the currency network. Business owners take profits by hoarding some of the currency they receive in exchange for their services, and when these profits are denominated in Bitcoin they contribute greater value to the currency network than if they dumped their Bitcoin to profit by some other form.
As investor-owners of the crypto currency systems we want the greatest share of our collective asset to go to the people who provide the most value, that is businesses who denominate their profits in Bitcoin.
You might object: “Collapsing prices means collapsing profits for Bitcoin-denominated businesspeople”.
But falling prices actually mean increasing profits for those businesspeople who bear the risk of bringing us forward into the new sound money economy. A lower “price” for Bitcoin simply means a Bitcoin-profiting venture now snags a larger share of the twenty one million coins in supply.
Bitcoiners Should Prefer More Coins Flow To Stronger Hands
Any amateur statistician observing the two-year moving average price of Bitcoin relative to the economy as a whole will quickly realize the stable (dare one say predictable) increase in purchasing power for your Bitcoins. While small businesses with low margins provide nice services to us all, truly high-value businesses crank out high profit margins. Which type of business organization do we want owning the most Bitcoins?
Profits indicate you clearly understand how to enhance the lives of others. Companies and individuals with cashflow sufficient to allow them to save away Bitcoin profits by economic law provide greater value to the crypto currency economy than those with low profits.
My Colleagues Thought I Was Crazy
During my tenure at Ripple Labs my salary was paid exclusively 100% in the digital asset XRP, the price of which for those few years was monotonically decreasing. That is to say the purchasing power of every XRP I saved at the end of every pay period went down, and down, and down.
And everyone told me I was insane!
“Why allow your savings to decrease in value every month?” they would plead.
Failing to understand the fundamental difference between fiat assets of unlimited supply and crypto assets of known or fixed quantity, they missed the real reason why the price of XRP was continually falling.
Most people understand the value of a currency to fall due to an increase in supply, an irreversible debasement of the currency. In such a paradigm one must continually acquire more and more units of currency to maintain ownership of the same proportion of the supply.
Crypto assets of finite supply however decrease in price due to cycles in demand for the currency, rather than from debasement. One must only maintain steadily their holdings in order to keep the same share of total supply.
Now when purchasing power of a currency in a fixed-supply paradigm, the total share you as a business or labourer receives actually increases.
I earned more XRP every single month than I did the previous month. My salary actually increased each pay check!
And the rest is history. XRP value and Bitcoin in general regressed to the mean and everyone who had taken profits in crypto came out ahead with a larger share of the total economy.
Be that guy with the big slice of pie. Take profits in Bitcoin.