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SVTPerformance's Chain of Restaurants
Road Side Pub
BITCOIN
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<blockquote data-quote="Klaus" data-source="post: 16624593" data-attributes="member: 190070"><p>This is a bit of a rabbit hole but you might find this interesting so I will proceed.... </p><p></p><p>The only "value" of a currency is what you can trade it for. Currency does not generate cash flow and has no intrinsic value beyond its use as a medium of exchange. Trading of currency occurs because of relative value. This means that it is undervalued or overvalued relative to another currency (interest rate parity) or relative to what you can purchase with it (purchasing power parity). </p><p></p><p>Interest rate parity: <a href="https://www.investopedia.com/terms/i/interestrateparity.asp" target="_blank">Interest Rate Parity (IRP) Definition</a></p><p>Purchasing power parity: <a href="https://www.investopedia.com/updates/purchasing-power-parity-ppp/" target="_blank">What Is Purchasing Power Parity (PPP)?</a></p><p></p><p>A fun way to determine valuation on a purchasing power basis is via the "big mac index." This converts the price of a big mac in any country back to USD. The point is that a big mac is a big mac so all else equal it should be priced the same in each country. This is not the case however. </p><p><a href="https://www.thebalance.com/what-is-the-big-mac-index-1978992" target="_blank">What Is the Big Mac Index?</a></p><p></p><p>Due to inflation currency has a negative expected value. This is different than relative value described above. Crypto bros think crypto has positive expected value which is why they hoard it rather than spend it. A hoarded currency is not a currency.</p></blockquote><p></p>
[QUOTE="Klaus, post: 16624593, member: 190070"] This is a bit of a rabbit hole but you might find this interesting so I will proceed.... The only "value" of a currency is what you can trade it for. Currency does not generate cash flow and has no intrinsic value beyond its use as a medium of exchange. Trading of currency occurs because of relative value. This means that it is undervalued or overvalued relative to another currency (interest rate parity) or relative to what you can purchase with it (purchasing power parity). Interest rate parity: [URL="https://www.investopedia.com/terms/i/interestrateparity.asp"]Interest Rate Parity (IRP) Definition[/URL] Purchasing power parity: [URL="https://www.investopedia.com/updates/purchasing-power-parity-ppp/"]What Is Purchasing Power Parity (PPP)?[/URL] A fun way to determine valuation on a purchasing power basis is via the "big mac index." This converts the price of a big mac in any country back to USD. The point is that a big mac is a big mac so all else equal it should be priced the same in each country. This is not the case however. [URL="https://www.thebalance.com/what-is-the-big-mac-index-1978992"]What Is the Big Mac Index?[/URL] Due to inflation currency has a negative expected value. This is different than relative value described above. Crypto bros think crypto has positive expected value which is why they hoard it rather than spend it. A hoarded currency is not a currency. [/QUOTE]
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