I’m really interested in the damage something like Monetas is going to do to the whole system. That really can host the counter economy and allow it to grow easily and with easy access by those most likely to use it. The impact of agorism (at least the examples it cites) and generally ignoring how it could be used or its plausibility as a historical factor is something that will probably negatively effect NRx. Funding is a major hurdle. Especially if you are trying to fund Invisible Colleges.

He says that the USG unseals some ruling that say, btc is illegal, because it is used for money laundering.

People panic and want to get their money out, but our hypothetical holder cannot because the market has panicked and there are no buyers.

I think the flaw in this, our hypotheical holder will just continue to hold at that point. Users located in russia ( and probably china ) will still continue to accept payment. The value of BTC will be re-normed against other currencies, so you will have an asset.

What will be hard though, is to actually get value to USD, since the USG will have made loud disapproving noises. What I would imagine people would do is find friends in foreign countries, have precious jewelry shipped to them, bought in BTC and go that old route.

Certainly makes things more expensive.

And at this stage, they would have to be willing to shut China and Russia out of the internet, who would, in a snowdenish response, agree to host stuff just to use it as a weapon. Note that they have both been talking about not using dollars for oil prices.

There is also the downside risk to consider. If USG were to try killing Bitcoin with drastic legal action, but was not successful, in all likelihood that would drastically accelerate the death of fiat.

Brendan.

It is late for me on Monday so please correct me gently if the following logic is unclear.

Typically we imagine that people think before they invest in the following or similar way:

Major premise: People invest in a good when they expect to take advantage of the market.
Minor premise: People expect to take advantage of the market either when the value of a thing will go up due to increased demand or the value cannot realistically decline much more.
Conclusion: People invest in a good when they expect the value to increase or not to decline much more.

In reality most people have the following process:

Step one: I have x extra dollars.
Step two: The shiny costs x+y dollars.
Step three: I buy shiny when y is a negative number or zero.

Is the second process a very rational investment process? No, but it can be described. The lower the cost of something attractive goes, the more people will buy it. One might wonder why this extra demand does not cause the price to go back up all the times. The answer is marginal sales. Right now BTC et al are being bought primarily by nerds and some speculators on the chance that they might make some money in the long term. This buyers only buy when BTC is cheap or declining so that any upward movement of the value causes them to stop buying. Also, many will immediately get out upon gains in order to generate small but needed revenue – most nerds are poor. Moreover, as BTC is used more and more for regular transactions and not hoarding, the more stable its value will be. Why? Again, marginal transactions, i.e. the people will only use the bitcoin when its value is within a narrow range.