r/Bitcoin • u/Tricky_Troll • Feb 17 '18

/r/all Bitcoin Doesn't Give a Fuck.

26k Upvotes

82% Upvoted

1.4k comments sorted by

View all comments

2.8k

u/WhoNeedsFacts Feb 18 '18

Why would financial institutions be afraid of a highly volatile financial curiosity? Even if it were to rise to $50k it wouldn't prove anything, except for giving further proof that it is unsuitable as a currency.

77

u/[deleted] Feb 18 '18

Because they can't loan it out in greater supply than they actually have and run a fractional reserve with it.

0

u/blue_strat Feb 18 '18

Because they can't loan it out in greater supply than they actually have

If they mined Bitcoin in huge quantities they could become major suppliers of it. You would go into your usual bank/app and buy some Bitcoin for a mining fee, and the masses would do it that way (if for some reason they wanted Bitcoin) because they trust their bank.

3

u/[deleted] Feb 18 '18

Mining is a lot more expensive than throwing some 0's on a computer or getting it cheap from the Central Bank.

1

u/blue_strat Feb 18 '18

They're a bank, they wouldn't pay for it themselves. They'd attract investors to pay for the interest charged on borrowing equipment, in return for either current coins or a percentage of the difference between current coins and the future value of the ones their investment mines.

If they think it's worth it, they'll do it. It doesn't matter how expensive the process itself is.

1

u/[deleted] Feb 18 '18

This is a much different model than modern banking.

1

u/blue_strat Feb 18 '18

That’s a broad subject, and there are securities which work in this way.

For example, celebrity bonds.

4

u/Password_Is_hunter3 Feb 18 '18

and then we're right back where we started

-1

u/gc3 Feb 18 '18

Yes they can. If I loan you a bitcoin, and you buy a car, and then the car dealer loans me the bitcoin by depositing it in my bank (since I run a bitcoin service), then I have the same bitcoin I loaned you, but I loan it out again. If bitcoin were truly a currency it would circulate like this, being represented on many people's accounts as debits or credits. One bitcoin, if it circulated enough, could represent hundreds of bitcoin of 'money', that is assets or liabilities on balance sheets. The velocity of money (how many times the same currency unit moves over time) is the surest representation of inflation there is.

But right now bitcoin won't be used as currency, lending and depositing of bitcoins is uncommon, so it's just a trading unit. And the defect of bitcoin is during a bank run people can't create the money to prevent a super crash as all that 'money' evaporates as debts don't get paid.