Bitcoin Forum

This is a question for retailers and service providers within the bitcoin economy. Now that $3 has been relatively stable for a while now, are peers spending some of their coin or is holding for speculation still as strong as ever?

Rationally speaking, this is a false dichotomy.  If I am holding bitcoin for speculation, and at the same time I want to buy some stuff with bitcoin, nothing prevents me from buying more bitcoin just for spending. This will not affect my savings stash.

This dichotomy would only be true if I had almost all my liquid wealth in bitcoin, which isn't true for most people at the moment.

Emotionally speaking it's a different story... I think that there are a few people who are so consumed by greed that they forgo purchases paid in bitcoin.  But I don't think this effect is huge.

I don't think its huge....

its gargantuan.  :(

According to the merchants when the price of Bitcoin was increasing, meaning that prices were deflationary in bitcoins, the sales were increasing. When the price of bitcoins came down, therefore prices in bitcoins were inflationary sales were going down. So in past experience what we have seen is deflation = increase of sales, inflation = decrease of sales.

My guess is that people were taking advantage the increasing purchasing power of Bitcoin. Well see how it goes in the future.

Interesting comments all. I was just wondering if there was any correlation. I found myself spending a little more now that I can replace my spent coins for about the same cost. I guess it's just me. :P

But isn't this a deflationary spiral? I thought everyone was supposed to stop spending because the value of their money was going up?

Actually, it IS huge.

I do not treat BTC and money the same, and it's purely psychological.

I would rather spend $5 than 1 BTC on the same item, even if that 1 BTC is worth $3 USD.  I think it has something to do with the possibility that the price of the BTC that I would then re-buy may go down.  It's like a collectible.  And it's the dumbest logic in the world.

It's not that simple. There are many factors involved. The main reason people spend more bitcoins when the price is going up is that those times we are getting more new users. And new users spend Bitcoins because it's something they haven't tried before, it's a new technology to play with. Once you get used to them, your reasons for spending them change. This is why the rising value of bitcoins will never be an issue, the negative effects of deflation are countered by the interest new people have in trying out Bitcoin.

And even the people who have incentives to save bitcoins will spend them if they decide they actually need something. Also the value of their coins rising might allow them to purchase something they couldn't purchase in the past because they didn't have enough. Also it's important to remember that eventually bitcoins will have a fixed money supply and then the value will be close to fixed unless the amount of users change. More users mean the demand for bitcoins is higher and the price goes up, if it's losing users then the value goes down etc. If the userbase is fairly fixed, so is Bitcoin's price.

Of course this doesn't take into account currency speculation but that is a separate issue that affects all currencies equally. The effect speculation has on the price will decrease as well the bigger Bitcoin gets.