Spending vs. Hodling

Gresham's law

Wikipedia entry "Gresham's Law"

Gresham's law states that any circulating currency consisting of both "good" (Bitcoin) and "bad" (fiat, like USD, EUR,...) money [...] quickly becomes dominated by the "bad" (fiat) money. This is because people spending money will hand over the "bad" coins rather than the "good" (Bitcoin) ones, keeping the "good" ones for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one.
(emphasized comments added)

In short: Why would I spend the money, that's expected to rise in value, i.e. Bitcoin? I'd rather spend the money, which is expected to fall in value, i.e. fiat.

"The Yield from Money Held" Reconsidered

"Mises Daily" Article

If a person then adds to his cash balance (i.e. buys and hodls bitcoin), he does so because he is confronted with a situation of (subjectively perceived) increased uncertainty regarding his future (like future devaluation of fiat, capital controls, confiscation, etc.). The addition to his cash balance represents an investment in presently felt certainty vis-à-vis a future perceived as less certain. In order to add to his cash balance, a person must restrict his purchases or increase his sales of nonmoney goods (producer or consumer goods).
(emphasized comments added)

In short: Because individual financial sovereignty is the number one usecase for Bitcoin, naturally, holding it is the most desired action for most people. Yes, holding Bitcoin is using Bitcoin. Bitcoin is not here to be a better PayPal or Visa, which it never can be due to physical (like the laws of physics) restrictions on how well a blockchain scales compared to a centralized system. It's here to replace the Dollar, Euro, Gold.

Spend and replace

Furthermore, merely spending Bitcoin would of course weaken its price. The more supply there is on the market, the lower the price will go. It doesn't matter which thing is on the other side of the trade, if it's a USD note, or a donkey, or an apple.

Spending bitcoin is probably a good way to circulate bitcoin towards people who, for various reasons, don't buy bitcoin directly, using an exchange, or Bitcoin ATM. But you should always replace what you spent, ideally in the same moment and ideally a little more than you spent. For example, if you just spent 0.015 BTC, rebuy 0.018 BTC instantly.


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