If You Believe in Bitcoin, You Should Never Buy Anything in Bitcoin

Business Insider
Analyzing the top news stories across the web
Nov. 11 2013 10:33 AM

If You Believe in Bitcoin, You Should Never Buy Anything in Bitcoin

166307154
This pub owner, for example, should not buy anything with Bitcoins.

Photo by Sean Gallup/Getty Images

This post originally appeared in Business Insider.

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.

Advertisement

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 $25 in Bitcoins years back? Had the person not bought that pizza, it would be worth nearly $3 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 if you're thinking that Bitcoin is going to be huge, it'd be insane and irresponsible to buy anything with it.

Joe Weisenthal is the executive editor of Business Insider. Follow him on Twitter.

  Slate Plus
Slate Picks
Dec. 19 2014 4:15 PM What Happened at Slate This Week? Staff writer Lily Hay Newman shares what stories intrigued her at the magazine this week.