Why are people calling Bitcoin a religion? (and more importantly, what's “a religion”?)

"...a long series of wars began between Catholics and Protestants. These became known as 'wars of religion,' and religion became a way of talking about differences between Christians. At the same time, Europeans were encountering other cultures.... Some of the traditions they encountered shared certain similarities to Christianity and were also deemed religions." - The Conversation

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Aaron Blumer's picture

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There's so much hype, it's hard to tell what's real there.

On cryptocurrency in general, I'm guided by a couple of convictions: that the economic concept of value comes from human desires, not anything objective, and that currency is nothing more than a more convenient way to engage in trade.   That said, currencies themselves gain and lose 'value' based on how humans regard them and the economies behind them, relative to other economies. A global currency is a pretty weird animal. A digital global currency even weirder. Likely: there's a lot of very temporary value in some of these currencies due to the hype and trendiness. At some point, the bubble will burst and some of the crypto's will survive while others fade into history. Some investors will lose vast amounts of money. Others, depending on when they get out, will do really well.

Views expressed are always my own and not my employer's, my church's, my family's, my neighbors', or my pets'. The house plants have authorized me to speak for them, however, and they always agree with me.

dgszweda's picture

Aaron Blumer wrote:

There's so much hype, it's hard to tell what's real there.

On cryptocurrency in general, I'm guided by a couple of convictions: that the economic concept of value comes from human desires, not anything objective, and that currency is nothing more than a more convenient way to engage in trade.   That said, currencies themselves gain and lose 'value' based on how humans regard them and the economies behind them, relative to other economies. A global currency is a pretty weird animal. A digital global currency even weirder. Likely: there's a lot of very temporary value in some of these currencies due to the hype and trendiness. At some point, the bubble will burst and some of the crypto's will survive while others fade into history. Some investors will lose vast amounts of money. Others, depending on when they get out, will do really well.

A currency needs a couple of key things:

  • It needs to be liquid - crypto can be moved around, but for the most part it is pretty much impossible to buy anything with it as practically all businesses do not have the capacity to accept crypto.  In addition, due to its volatility it is hard to value how much crypto is required to purchase a goods or service.
  • It needs to be stable - crypto is all over the place in terms of value and therefore nearly impossible to price goods or services against the digital currency.
  • It needs to have a strong central authority - It needs to be backed by something.  Crypto currently has no inherent value and it has no strong central authority to deliver on the value.  You can argue that the USD is just a piece of paper, but it actually has the full strength and faith of the US government and the strongest economy behind it.  The strong central bank in the US controls monetary policy, further putting strength and confidence in the buying power of the USD.

The forces behind crypto are speculative and ideological and have, for the most part, no clue around what makes money.  Crypto has no protection around it (if it is stolen it can't be recovered), has no substantial way to use it, is extremely volatile, and has no inherent value behind it.  In fact, at the end of the day its value is tied to the USD.  Bitcoin's value is determined solely on supply and demand.  So while it contains some attributes that allows it to behave like a currency, it is not a currency.

josh p's picture

I'm more in line with Aaron on this one as I don't think a currency necessarily has to have a strong central authority. I have a couple days wages invested into Bitcoin just out of curiosity. I don't trust it a whole lot although I'm generally in favor of the idea. Here is an interesting article by Taleb about the value of Bitcoin. In particular, he addresses the degree of inherent value that the blockchain actually offers. 
file:///var/mobile/Library/SMS/Attachments/ce/14/07070575-CC8F-45B1-AC06-91F03281FD4A/Bitcoin_Currencies_and_Bubbles.pdf

dgszweda's picture

josh p wrote:

I'm more in line with Aaron on this one as I don't think a currency necessarily has to have a strong central authority. 

You don't have to believe that, but it is a key bedrook of monetary policy.  It prevents what is termed as fragility in currency.  Central Authority provides stability.  Stability is key to a strong currency.  It is one of the key reasons why the USD is the strongest currency in the world and why in many ways the USD is the basis for global pricing (such as oil).

If you were being paid $10,000 in bitcoin today, and you went out to buy a car, that car may costs you $10,000 or $12,000 depending on the time of day that you were going to purchase the car.  That continues to become a bigger issue if the entire car manufacturing process is than reliant on bitcoin.  This is a classic example of countries that have a weak central authority, high corruption and they have run away hyperinflation where a loaf of bread is $1 in the morning and $50 by the evening and the bank is printing out notes that are of extremely high volume to prevent stacks and stacks of dollars.

josh p's picture

dgszweda wrote:

 

josh p wrote:

 

I'm more in line with Aaron on this one as I don't think a currency necessarily has to have a strong central authority. 

 

 

You don't have to believe that, but it is a key bedrook of monetary policy.  It prevents what is termed as fragility in currency.  Central Authority provides stability.  Stability is key to a strong currency.  It is one of the key reasons why the USD is the strongest currency in the world and why in many ways the USD is the basis for global pricing (such as oil).

If you were being paid $10,000 in bitcoin today, and you went out to buy a car, that car may costs you $10,000 or $12,000 depending on the time of day that you were going to purchase the car.  That continues to become a bigger issue if the entire car manufacturing process is than reliant on bitcoin.  This is a classic example of countries that have a weak central authority, high corruption and they have run away hyperinflation where a loaf of bread is $1 in the morning and $50 by the evening and the bank is printing out notes that are of extremely high volume to prevent stacks and stacks of dollars.

Yes I understand the basics of currency but Bitcoin is basically a hedge (or designed to be, not really convinced it will work) against governments weakening their own currency. It has been used to some success in places where there is runaway inflation. You are failing to account for the extreme (far beyond Bitcoin) volatility of some currencies. But yes, overall I don't have hopes it will be successful. 

dgszweda's picture

josh p wrote:

Bitcoin is basically a hedge (or designed to be, not really convinced it will work) against governments weakening their own currency. 

Theoretically, with no other variables it could be a hedge.  Real practice shows that it is not a hedge and given other variables, it is doubtful it could ever be a hedge.  The proponents that are pushing it as a hedge are bullish on Bitcoin and not really looking at it correctly.  The real good example is today.  As inflation is rising, Bitcoin continues to drop, add on the other variables and it is just a dropping volatile mess right now.  Nothing but demand is keeping it afloat today, as there is no real value assigned to it.

Barry L.'s picture

...but it hasn't been behaving as such either.  A store of value has to be valued by the public.  Bitcoin can be that, gold used to be that, not anymore.  The real hedge is things that are tangible like real estate, commodities in demand, and high end artwork.  I invest a small percentage of my portfolio in bitcoin because I do think it is a store of value to the public...someday, but it's not a currency and I wouldn't invest my retirement in it. 

Charlie Munger is 90+, an S&P index fund did better than Berkshire Hathaway in the last 10 years.  Even though Jamie Dimon doesn't endorse it, JP Morgan owns some as well. 

Since I do follow the Bitcoin promoters out there, there is a religiosity fervor to many of these guys. You hear alot of "it's a way of life, not an investment" and "I'll invest everything I own" and "I'll hold it to zero". Many people borrow on their houses to buy it. If you follow Michael Saylor at Microstrategy on Twitter, he's like that and he has followers that no matter what, they won't sell.  That's stupid and wrong and a Christian shouldn't get caught up with that philosophy.  Look at it like any other investment, weigh the risks to see if it matches your needs, etc.