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Bitcoin is very different from any other currency, because its supply is limited. It's designed to deflate.
by rorrr 15y ago
Bitcoin is very different from any other currency, because its supply is limited. It's designed to deflate.
- brandall10 15y agoTrue, but this behavior prompts people to hoard rather than spend. It won't really be used as a currency at any scale until it stabilizes.
- iwwr 15y agoOne economist's 'hoarding' is another's 'capital accumulation'. Note that in order to accrue any form of money, some valuable things must be provided in return (assuming voluntary exchange). So while the hoarder may have pleasure from owning digital or physical bills of exchange, everyone else gets to benefit from real goods and services that have been rendered. Of course, those hoarders that really remove money from circulation are a very small exception.
- brandall10 15y agoIf there is belief a currency is going to deflate it puts the brakes on spending. Why buy widget x today when you can buy two widget x's next month? Most people will just wait. The hoarding effect is a natural phenomenon, not necessarily a black/white thing. I understand people use bitcoins for services rendered and a fairly limited number of products - but that is clearly to the benefit of the seller. It would be nice to see some statistics on bitcoin users actually using them as a currency. I'd wager it's less than 10%, esp. now they've become a media darling and a vast number of folks are looking at these like guaranteed lottery tokens.
- iwwr 15y agoThere are some expenses you can't live without like food, rent, clothes etc. Holding cash in a deflationary (and non fractional-reserve) currency may be the equivalent of a savings account in a bank. But hey, if people really did decide to lead frugal lives in order to save money, capital would expand faster in areas more essential to human existence. Consider it as a shift toward long-term goals rather than short-term gratification. Of course, the longer the timeframe, the harder it is to predict future demand, so there is a limit to how future-oriented people can get.
- aero142 15y agoYour comment made me realize that computers have long exhibited this property. It was always nerve racking buying a computer because you could get one twice as fast in 18 months so people were hesitant to buy. This always appears to be true of almost all new developing technologies. In fact, all of the fastest growing industries I can think of exhibit this property.
- rorrr 15y agoCurrency only has value when exchange happens. It will never get to everyone hoarding. If there are no buyers at high prices, the price will go down.
- snorkel 15y agoSure deflation is part of the Bitcoin design but the actual real-world value of a Bitcoin is determined by traders on Mt Gox, and as an exchange Mt Gox doesn't give the impression of being able to prevent common price manipulation schemes.
- fleitz 15y agoThis differs from fiat currency how? http://www.appapillai.com/blog/2010/06/13/the-pound-sterling-and-george-soros/ http://www.appapillai.com/blog/2010/06/13/the-pound-sterling... http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program