The Difficulty of Bitcoin Denominated Debt

4/8/2013 Portland, Oregon – Pop in your mints…

The following is an excerpt of our brief, hastily compiled yet infinitely useful practical guide to the evolving world of Bitcoins.  It is an encouragement to dive into Bitcoin acceptance, a monetary analysis of the Bitcion, a high level how to guide, and a word of caution all with a lesson in character embedded within its pages.

With any luck, it will hit digital shelves before the Bitcoin hits $200 USD, which will be tomorrow.  Enjoy!

The Difficulty of Bitcoin Denominated Debt

Bitcoins:  What they are and how to use them
Bitcoins: What they are and how to use them

Another rare but often unrecognized barrier to Bitcoin acceptance is the inability for the widespread formation of debt markets denominated in terms of Bitcoins.  The reason that debt contracts will not be created in terms of Bitcoins has to do with the very thing that makes Bitcoins valuable in the first place:  The mathematical limit on their issuance.

As of this writing, slightly over half of the 21 million Bitcoins scheduled to be created are in circulation.  The rest will be emitted in decreasing increments over the next twenty years.  The trajectory of the Bitcoin logarithm against the national currencies is negative, which is causing the inverse relationship in their prices.

Again, in layman’s terms, it would be a fools bet to take promise to pay a debt in Bitcoins, as they will, by definition, become increasingly difficult to obtain.  If anything, one would need to factor in a Bitcoin appreciation to the debt instrument, meaning that it would have in implied negative interest rate.  While we can foresee the emergence of such instruments, we also foresee that they will be too complex to be understood by most.  As such, an important medium of currency acceptance, the existence of deep and liquid debt markets, will be lacking in the case of Bitcoin.  While this is not a bad thing, it must be recognized by anyone who deals in Bitcoins.

The book will hit digital shelves near you shortly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint


Key Indicators for April 8, 2013

Copper Price per Lb: $3.38
Oil Price per Barrel:  $93.40
Corn Price per Bushel:  $6.33
10 Yr US Treasury Bond:  1.73%
Mt Gox Bitcoin price in US:  $186.90
Gold Price Per Ounce:  $1,571 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.6%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,613
M1 Monetary Base:  $2,534,800,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,501,300,000,000