Bitcoin Forum

If Bitcoin becomes widespread enough that most people hold their savings in it, then it will greatly and permanently reduce liquidity in the financial system, lead to a decrease in consumer spending and cause major ructions in the global economy.

People part with their money easily these days because in the back of their heads they know that what they have in their hand right now, will be worth far less in the future due to inflation. So they spend their money on gratifying goodies now rather than save it for later when, due to a negative real return, it will be worth less. In a Bitcoin world this behavior is reversed. People will understand the resilient and long lasting value of their Bitcoin and not want to part with it unless they are getting something very favourable in return. The psychological hurdle to spending money will be raised in each individual's mind.

This change in the mass consumer psychology that is so important and relevant in the world today will lead to a liquidity crunch. Central banks usually solve the problem of a liquidity crunch by printing money and lending it out cheaply but they won't be able to do this as faith in fiat currencies will already have been so severely degraded by Bitcoin's ascendancy. There will be no answer to people becoming more prudent with how they spend their hard earned bitcoin. It will simply shrink the economy.

In my opinion this will be a good thing as so much of the economic "growth" we see in the world today is a vacuous re-packaging of frivolous fancies to meet imaginary needs fueled by an incentive to spend currency that is always losing value. Things that satisfy a genuine pressing need will continue to be invented, bought and sold and this is all that is necessary for a vibrant healthy economy.

I don't think any economy would shrink.

Not everyone is willing to hold their bitcoins for the long term. And even if they choose to there will be a point in time when they chose to sell off some portion because they have reach their maturity date or need some money. However, there are people who are into trading of Bitcoin than people who are willing to hold it. So the money still circulates around because a lot of people are still willing to sell. As long's there is needs, wants, merriments, vacations and emergencies then people will tap into their Bitcoin.

what you dont realise is the M0 and M1 money that circulates in peoples daily spending is only a few percent of all "money" locked up in different m3 schemes already.. so it wont lock up peoples m0 and m1 money any differently than current schemes

however people will move from investing in stocks and shares to ALSO invest part of their long term m3 money into bitcoin.. so will reduce the amount locked up in traditional m3 financial investment schemes(but how much % is still unknown)

also to note..
when people buy bitcoin. there is no lock up of that cash.. the market cap is not a reserve/vault of money.. its instead just math of taking the current market price and multiplying it.. its just a empty number of math not an allotment of cash locked up.. when someone buys bitcoin, someone else equally sells bitcoin and so the money still circulates by the bitcoin seller receiving cash and then him using that cash in traditional spending ways circulating it normally(m0 m1 circulation for starters)

when money is truly "locked up" its usually in insurance policies or where pension deposits buy shares and then those shares of companies invest in other things and the circulation of M3 is just bouncing around in the tradfi stock/share/insurance/credit markets
(EG invest in a pharma company which then invests in blackrock which then invests in other companies which keep the m3 money bouncing around in m3 markets)

only some of that will come out of the m3 and move into bitcoin and then the sellers either move it into m0 m1 or.. or.. m3 again

..
remember and emphasis this
when buying bitcoin you are not locking your money up into a vault or reserve, the money does not sit around waiting for you. you are instead buying a currency from a seller and that seller is selling bitcoin to get your money to then have them use your money on their personal choices of how they want to spend their money

that money can just circulate in m0 m1 circulation or end up back in m3 investments of tradfi

Bitcoin about challenging the accepted wisdom on money and you're scared about less spending? Good. Perhaps we will start investing in things that truly matter instead of wasting money on garbage we don't need. Regarding this whole liquidity issue, sure, it causes worry. But you have to understand, Bitcoin is evolving faster than most people can even comprehend. Like the early years of the internet. Think back on how slow and awkward it was. Now take another look at it. Likewise for Bitcoin

Embracing Bitcoin is not about shrinking the economy. It's about growing the proper way with actual value, not only figures on a screen. It's about turning our attention from consumption without thought to deliberate investment. It's about realizing that things that last, not the newest trends, define actual riches. Thus, friends, let yourself unwind. Bitcoin will save the economy - it will not bring it down

Nice write up OP this should really should bring mixed reactions from the community for a healthy debate/discussion.

And I want to agree with you on the possibility of a liquidity reduction should a widespread Bitcoin adoption happen...but then again one of the qualities of money is scarcity, for as long as the central banks aren't printing money to cause inflation then in some way this actually gives fiat value and not liquidity reduction.
Btw, think of it as Bitcoin being a savings account that the banks will benefit from such that the fiat equivalent of holding BTC can easily  be pumped back into the economy to address other business which makes this a win wins scenario, so no need for alarm I guess.

As of consumer spending, it really depends on several factors tbh such as inflation, buying power of fiat or crypto, otherwise Bitcoin doesn't really have this influence over people's spending as its pretty much a parallel economy.

This is bullshit Keynesian Economics. It's like saying that people spend only because they're aware of the inevitability of inflation. With no inflation they'd have no reason to spend. How dumb you have to be to believe that? Are you trying to make us believe that people would never buy a new car if they weren't inclined to do so by inflation, or that they would never buy food if they had vehicles that permanently increase their purchasing power?

As much as I might want to agree that all that you have said does make a lot of sense, it's still important you understand that the acceptance of bitcoin into the mainstream financial market won't in any way shrink the economy of any country, expect for countries who's economy has or had been previously bad.

Bitcoin is another form of money, and there is no way (not even in the next 30 or 40 years) that Bitcoin will completely wipe out fiat, both will co-exist in harmony, and this is because, people are still going to be needing fiat to invest in bitcoin, which is a means through which bitcoin will become more valuable, and those that live in rural areas where internet is a big problem; are always going to need fiat for their day to day buying and selling transactions.

Every economy will go on as normally, the only thing I see is that alot alot of people are definitely going to be pumping alot of fiat into bitcoin, which may cause the central banks to print even more.

If bitcoin could have pose a danger to the economy by the way of its increasing in adoption rate to what we are having today, then we would have sensed this right from time as it continues to advance, but to the greatest surprise, there is nothing to fear or risk on with bitcoin adoption in the world economy system than to create several opportunity and our most desired privacy and security in which we wanted with the profitability in it.

Every time my sister makes a dumb purchase she defends it by saying her money won't be worth anything in the future so she may as well spend it now. I do not believe she is an isolated case, and her reasoning isn't wrong either. People, even those who don't know what QE is, intuitively have come to understand that their money will be FAR less valuable in the future. The only way to combat that is to invest but most people think of investing as difficult and risky, so their bias is to spend all of their available income. Bitcoin provides an incentive for people to save their money, the incentive being that their bitcoin won't lose value systematically. This incentive does not exist for fiat due to negative real interest rates and future pending QE. A world in which Bitcoin achieves mass adoption will clearly impact people decisions on what to buy, how much to buy, and at what price.

People will of course still buy the necessities such as food and a car but the psychological hurdle to clear before buying frivolous items will be raised. And of course, economic growth depends exclusively on the sale of increasingly frivolous items.

I don't know where you are living but it's wrong to say that people spend their money easily because they know the money they have currently will be worth far less in the future. Not all currencies lose value actually, not all countries undergo inflation. Some currencies and economies are very strong and the inflation doesn't severely impact them up to now. More importantly, if some goods tend to become rarer, no matter in which currency you will pay them their price will appreciate, even in BTC. Bitcoin doesn't prevent inflation from shortage.

I definitely think that there is huge potential for Bitcoin to shake the fiat debt based system. It already has and it is currently making history right now with certain current events. The only thing we know for certain right now is to HODL! Don’t pull a Germany lol.

I don't think there's a real chance of most people in the world keeping their savings in Bitcoin. Bitcoin requires having devices and digital literacy that most people don't have, and it also requires a certain level of patience and responsibility. It is also not under any authority's control, which can disturb many people who see the state and other institutions as necessary to gain trust in finances.
In any case, fiat can remain in active use for daily lives and purchases, so its liquidity would be just fine. In fact, it's bad for fiat to be hoarded and de facto out of circulating supply, so if people used BTC for savings and fiat was solely for frequent transactions, it could be good for fiat.

When was Bitcoin the MOST IMPORTANT thing in the world lol, Bitcoin almost give no impact to the global economy.

Worldwide net private wealth stood at $454.4 trillion in 2022 (https://www.visualcapitalist.com/global-wealth-distribution/), while current Bitcoin's market cap is $1.3 trillion (https://coinmarketcap.com/), it's not even reach the 1% of worldwide net private wealth.

I would say corruption is the biggest thing that shrink the economy because the only few people can access to that dirty money, if they have business and they spend it to their business, the money only flow in himself.

I totally agree with you. The current concept governments have on how an economy should work is totally despicable. They profit from the ignorance and compulsivity of individuals who are likely to live an entire life without making any significant financial progress, because they spend more than they earn in worthless stuff, endorsed by celebrities and influencers they put on an altar. And there are very few people with enough reach to try teaching something different to the masses, as the most influential ones just want to maintain the gears of the system working smoothly.

It's not possible to say if the scenario you mentioned would be the solution for the current problems we face. But someone must try, and to get rid of being a slave of fiat inflationary system seems to be the first step.

I don't get what you mean by when a consumer's psychology will be changed from buying less. I mean they will prefer to buy BTC for long-term investments but they still have to spend money on their daily needs which means they don't have to spend all of their money in BTC but have to keep some money in liquid form that they could use to meet daily expenses. And how the change in the psychology of consumers is going to crunch liquidity and which liquidity are you talking about, I mean if you are talking about fiat then you also mentioned such a problem can be faced in fiat via lending and printing more money, etc.

Overall, people can't just survive by holding BTC in their wallets, they need food, a roof, have to pay bills, etc. So to meet all the expenses they can't just rely on there funds in the form of BTC because in the long run BTC does give profit but in the short term BTC can also make you loss. And a person with mindset of keeping no funds for emergency cases, is consider idiotic because investing in one coin is extremely risky especially when you are spending it all. Even the emergency funds.

I think the reverse would be the case in my opinion. First of all, when Bitcoin is "widespread" I don't think it would be as volatile as it is today so I also don't think people would make the kind of profit they make today from holding Bitcoin, but that's by the way because we're talking hypothetically.

Millionaires and billionaires today hold the most in long-term investments, but still, it's millionaires who spend the most money. This is to tell you that holding Bitcoin won't affect the way people spend negatively. People who hold Bitcoin also spend money. They have bills to pay too, they go on vacations and throw parties, and they have kids to take care of. The world is not good to abandon all these things simply because they want to hold Bitcoin, it'll be simply business as usual, most likely better because this time, people have more money to spend because they have gotten more from their profits on Bitcoin.
No economy will collapse.

Bitcoin has nothing to do with global economy or any national economy.

It is only one more option, one more spice in an economy of a nation, a national treasury, a local community economy, and a family, an individual finance. A world, nations, locals, families, individuals can choose Bitcoin for their treasuries to improve their financial status.

It is more easily achievable at individual and family scales or small local scales but when it is up to a national scale or bigger as global scale, it is responsibility of government, their many agencies, and many combined regulations, actions to achieve better treasury for the nation or the world. It is not responsibility of Bitcoin and Bitcoin does not have any power to change anything from governments and their bank systems.

Bitcoin has huge potential, growth potential is certain but how will it shake up the fiat system? We should not exaggerate bitcoin unnecessarily. After all, bitcoin is only used as an investment asset like gold and it is inflation resistant but that doesn't mean everyone will save with bitcoin. If people wanted to do it and could do it, they would have done it with gold before, not waiting for bitcoin. Bitcoin is not the only inflation-resistant asset in this world.

Do you think the government is stupid enough to legalize bitcoin to shake up the fiat currency system they have built for hundreds of years?

It's a bullshit argument based on false premises.


Looking on the internet I see that in the USA, 22% of the population has no savings  (https://www.bankrate.com/banking/savings/emergency-savings-report/)and 44% could not pay an unexpected 1K. (https://www.cnbc.com/2024/01/24/many-americans-cannot-pay-for-an-unexpected-1000-expense-heres-why.html)

So I don't even go into the rest. There are countries that are more thrifty than the USA, of course, but they are the exception rather than the norm.

You could have applied it to gold, which is much more widespread in the population, and has not led to shrink the economy (if gold becomes widespread enough that most people hold their savings in it, then it will greatly and permanently reduce liquidity in the financial system).

If Bitcoin was to work independent of the fiat, then it's possible to assume that with lots of people holding Bitcoin, it might lead to the reduction of the amount of money in circulation but this is actually not the case. Majority of the peope that are holding Bitcoin only keep a small fraction of thier money which might be as low as 10% to 20% in Bitcoin while the rest is used in daily transactions which still allows money to continue flowing on a regular bases. Even before Bitcoin got this level of adoption it has witnessed, individuals and private firms still HODl money in banks and don't allow it to circulate all that much but it never stopped the free flow of money because in a more ideal sense, it's always a small fraction of your wealth that gets stored or saved up for the future.

The effect of an aggressive level of Bitcoin adoption that are majorly HODLers would be that it will make people to become more responsible with the way they spend whatever comes into their hands because it's way easier to spend money that's in fiat form as opposed to spending your Bitcoin holding.

gold is not as easy to hold as bitcoin

I don't think BTC will shrink the economy of the world, because a lot of things has happened to the world economy that will take some governments years before they will be able to fix it little, and I don't think BTC can solve such problem in the world.

Don't forget that, BTC is different from fiat money which government cannot direct to one particular area to solve the problem because is a decentralized currency that has some period to pump in the market for those that hodl to sell to accumulate profit or there is a dump period also which people and governments use to buy BTC to hodl long as they wish because it will surely going to be bull run that will make them to free the BTC from their wallets. There is something you need to understand today op, that all the government of the world will not going to adopt BTC, if it continues to remain in decentralized currency because they prefer something that they can control by their power which such thing will not going to happen to BTC in the future.

1.Bitcoin will never become a dominant global currency, which means that your prediction will never happen in reality.
There were 1000 forum threads about the same subject. "What would happen if Bitcoin becomes the one and only global currency?"
I think that this question has already been answered multiple times. You don't add anything new to the discussion, by asking it again.
2.The consumer psychology would NEVER change. The people always want more and more. That's human nature. You can't turn them into monks, who are totally indifferent towards materialistic things. The consumerist imperative is as strong as the biological imperative.

If you spend simply because time isn't on your side, you're more likely spending on something that doesn't really need spending. That's the kind of consumerism we have right now. And this is largely brought about by a currency whose value slowly dies over time. Whereas, if you have a kind of money that doesn't rot, then you can think properly, plan, prioritizes, and so on. Spending isn't hollow, impulsive, wasteful.

Bitcoin affords us to think of bigger plans, future ideas. Fiat urges us to spend on anything here and now because you can't anymore buy tomorrow what you can buy today with the same amount.

Bitcoin will have no impact on the economy, it's too small.

People will lose their life savings and that's it.

Did the collapse of Bitconnect had any impact on the economy ? no.

I won't deny this, currently bitcoin is not really popular and not big enough to have a significant impact on any world economy. Bitcoin's current capitalization is not even 2 trillion and it is even a small capitalization of a company. So, it is not wrong to say that it has not had any impact on the economy yet but this will definitely change in the future as it becomes more popular around the world. Even Bitcoin will have a more significant impact than any other asset if it can maintain its current growth rate.



With this statement, it shows your ignorance or that you don't even have any knowledge about bitcoin when comparing it to a ponzi project that has been dead for almost 10 years.

Bitcoin has no other use case aside from "number goes up", it's a legal pyramid scheme of a greater fool.
Back in the days when it was actually used it had more value than today, now it's only a speculation tool and traded mainly by trading bots.

HODL - people who don't know that true value comes from usage, this bubble will pop like every other bubble.

If you ask me, spending will be as the people want to do. Needs might be different but junk good being produced today will be produced in future too and people will buy them if they are colorful, make cute noises or appear nice looking.

But we are far from a bitcoin-only economy so it is too early to comment but we can always speculate.

Because the savings attitude although prevalent in this community does not hold true outside this forum and the biggest bitcoin userbase is beyond the reaches of this forum.

The economy has a different capable to make a trade and increase their revenue, so I guess its an opportunity to those community are the trend of the bitcoin and not as a threat, imagine being convenient with the use of the bitcoin as a mode of payment and before we know people will just bitcoin to make a trade, and even now there's a lot of bitcoin pairs so you don't need to worry about those people who holding their asset they are getting ride with the long term but for the recent traders they keep exchanging their asset into other coins. Also its a good opportunity people now seeing bitcoin into different way and opportunity to use and gain profit.

Question time:

What makes you think that if people hoarding money is bad?
I agree that money is meant to be spent, but it should be spent wisely, without someone (the government) incentivizing us to spend. Scaring us with war and inflation or whatever else they can think of.
Ultimately money is your own. If I worked for it, I should be able to do whatever I want with it. You may not be aware of the fact that in many countries destroying money is a crime because it belongs to the government, not to you. You are only a user, borrowing it from the government to be able to transact, pretty much like you're not the owner of games you buy on Steam. 

Pitching bitcoin as a replacement for Fiat and usable for daily transactions doesn't seem reasonable right now. Unless of course we accept that most of these transactions will occur via custodial lightning network.

If that happens what's worse? A bunch of tech startups acting as banks or our current system?

what journal did you read that you can say like this? the financial system will not be affected by bitcoin, even if more people come into contact with bitcoin, at most only a few percent of the population, because again the government will not allow bitcoin to grow further and disrupt how citizens use their fiat. so your statement that bitcoin can shrink the economy doesn't make sense, and it's just your personal opinion.

hmmmm.... but while people might be less inclined to spend Bitcoin, they might still engage in economic activity using other assets or fiat currencies, especially if those assets are used for everyday transactions while Bitcoin is held as a store of value. This dual-asset economy could balance the deflationary pressures.

I think this would not happen because no matter how many bitcoins are lost and how much are being saved by the whales, the value of each Satoshi will increase and there will be no dent in the consumer spending. Think of a society that have no fiat money and only Satoshi's / bitcoins/ do you think that people will stop spending the bitcoins and not meet their needs ?

I think as more and more adoption of Bitcoin grows, it will only help strengthen Bitcoin and reduce inflation. Also due to transparent blockchain, there will be no chances of corruption and no more easy money for the governments (who enjoy printing fiat currencies).

Exactly, you can spend or save as you want. If someone needs to save they can use fiat or bitcoin, the latter would obviously be better but situations are not same in every country to allow the latter.

We are still far from a bitcoin-only economy and even if we see a fait-bitcoin hybrid economy, people will continue spending that they usually do. Because these habits of buying useless things or buying less necessary items has stemmed since an ancient time.

As bitcoin usage increases, merchants will adapt themselves to use it and then it will be worth watching.

So we're going to mint all the BTC and then what? Use LN?

Well, we all know that before Bitcoin people tend to hold their savings, invest in stocks and real estate and bonds.  With Bitcoin being available, it will just be another investment or saving diversion.  I do not think that Bitcoin being widespread will cause problem in the global economy.


There are psychology of purchases, you forget the fact that Bitcoin being adopted in globally can enable consumer to have a borderless transactions, which can promote purchases.  People will always buy what they wanted and desires.  Even if it in Bitcoin or in Fiat currency, it makes no difference.  The thing is that Bitcoin enables financial inclusion which can possibly bring more positive input than negative one since people who can't participate in global purchases can now be able to.
It is also believe that with digital transaction, the easiness and convenience of transfers, can boost spending.

Everyone will try to come up with his own theory when it comes to the impact of bitcoin on the economy, but i won't say much concerning this because bitcoin will always remain, in serving it purpose of creation since it's on a decentralized digital network, another thing to put in consideration is the bitcoin network, which also experiences liquidation whenever the market falls below expectation, this is not because of the nature of bitcoin, but the way people engage on making their investments or trades in it.

Bitcoin blockchain provides borderless transactions since its create in January 2009.

It's only matter of people that they accept this blockchain and bitcoin for their trades or not. If they (two sides of a trade as trade partners) accept bitcoin, they can do it smoothly because Bitcoin miners simply confirm transactions from tip of mempool to maximize their transaction fee and income from mining. Miners don't care where these trades are made and between what trade partners and entities.

This is mostly the old debate in economics: should we head for inflation or deflation?

I'd want to throw Japan on the table. Japan has swung between deflation and low inflation since the 90s. The interesting thing is that their GDP still grew in almost all years (https://tradingeconomics.com/japan/gdp-growth), even during deflation phases. So it's not at all clear that deflation "shrinks" an economy.

I would not rule out however a change in consumer habits, with consequences for the economic structure. Consumption that fulfills basic needs would probably not change much: these goods have traditionally a low price elasticy value, i.e. if the price changes the consumed value does not change much. Industries which produce goods with a higher price elasticy however could lose importance in such a scenario. This would affect some categories of goods, for example durable goods like cars and luxury goods aimed at the middle class. In many cases you are in no hurry to purchase these goods so you can wait while it depreciates, until your necessity really becomes high. So it's indeed possible that sectors of the economy focusing on basic and urgent needs benefit from deflation.

I don't think Bitcoin will cause monetary contraction, as geopolitical pressures can affect Bitcoin currency. You will notice that in the country I live in, the basic needs around us can be met with currency, but never with Bitcoin, even though we can use Bitcoin holdings.

We purchase bitcoins with money and hold them, holdings we may have for a few years but not forever. We will eventually sell this Bitcoin holding and transfer it to our local currency.
But since we've held bitcoin for a while it's usually what I've used to grow my money. So I think there will be no economic contraction due to Bitcoin, only the process of using it.

I got your point, if Bitcoin is widely adopted, it could change how we think about and approach economic growth. It might lead to more thoughtful growth focused on saving and investing rather than just spending on unnecessary things. This could result in better investments in new ideas and infrastructure, and avoid wasting resources on things driven by inflation.
However, Bitcoin could also encourage smarter financial decisions and create a more balanced and efficient economy, focusing on essentials and long-term stability. The idea that Bitcoin would hurt the economy doesn’t consider how new financial tools and changes in central bank policies could adapt. Overall, Bitcoin’s impact could be positive by shaping a healthier, more resilient economy aimed at sustainable growth and long-term success.

It may surprised you that people aren't willing to sell their bitcoin no matter how hard things seems to be for them, they would hodl as long as they are still breathing because selling is like wasting one investment and of course people had seen the future of bitcoin and for that they are holding for decades or even till their last breath and could passed to the next offspring.

Bitcoin doesn't have any economic side effects because bitcoin is not a competitor of fiat neither is it created to threaten fiat and besides both fiat and bitcoin works collectively since you can't use bitcoin without having to convert to fiat or you can't have bitcoin without having to convert your fiat to bitcoin so both are working together and there no day one would think of overtaking the other.

I think it’s a bit of an overstatement to say “Bitcoin will shrink the economy.” In fact, the emergence of Bitcoin and other cryptocurrencies is not shrinking the size of the economy, but redefining the way wealth is stored and transferred.

I don't know about others but honestly I haven't sold my bitcoins yet because I haven't reached my goal. If bitcoins can reach my target, I will sell them immediately and I know my friends will do the same. No one intends to hold bitcoin forever or pass it on to the next generation while our current life is full of difficulties and problems to solve.

Bitcoin is just money, and it will be useless if we fall into trouble and cannot use it or if it does not help us. Investing in bitcoin is to help us have a better life, it serves us, we do not worship or serve it, so holding it until the last breath is a bad idea.

Bitcoin is a currency that is meant for investment and the if a country or any nation accepted to invest in Bitcoin that will help to increase their economy but some country does not understand such because then think about bitcoin is meant for scam people, so that is why some people in their country dislike to invest in Bitcoin not knowing that gold is a digital currency like a Bitcoin but then invest in gold and the gold have been helping them to increase their economy so you have to be the same part bitcoin will play when you invest in Bitcoin especially a country that have money to invest in Bitcoin for long time

Bitcoin going mainstream doesn’t mean fiat currencies would be going out of existence. That assumption most individuals seem to have is actually out of place. You wouldn’t imagine any nation loosing that part to its authority and identity to Bitcoin ever.

Again, people do invest in real estates, have it seat there in years for it to appreciate in value and the economy still runs fine. Why should Bitcoin be any different?
Is it because @OP tends to view it for just a currency? What happens to Bitcoin serving as an asset…?

Bitcoin isn’t going to shrink the economy and people will always find means to use Bitcoin in the most beneficial at way.

I might end up passing it to the other generation if I have enough. I am not saying I am nowhere near that of course, I would require like at least 200k in cash (fiat) so that I could live with that forever, and whatever is left could go towards my kids.

But I agree, problems are everywhere in our life and because of that I do not think that we are going to do just fine, and that will result with us selling, I have sold my coins many times over the years just to pay for stuff, not only that but I ended up taking many loans as well so it is not really something that I care at all. I believe that the most important thing in my life right now is to manage how to survive, and if it means not holding bitcoin then I won't hold it at all, but if I can, then I am not against it.

Wait, what? Since when did gold become a digital coin like Bitcoin? There might be digital currencies created that are backed by gold, but gold is a physical substance and the physical existence of gold makes it a more secure and trusted investment asset for most people in the world, especially those who are not too much into technology and stuff.

If you ask a person with traditional values about what they would choose for an investment between Bitcoin and gold, they would probably go with gold by telling you that it's more secure since it has physical existence and it cannot just vanish without anyone knowing where it went.

So, even though there is no doubt that Bitcoin is one of the most profitable investment assets of this era, gold has been around for centuries and it is still one of the most trusted forms out there.

In my humble opinion, saying that bitcoin will shrink the economy is like looking at the economy from a unidirectional point of view and delimiting the potentials or the scope of the economic sector of the world. What I mean is that the economy is wide and big enough to accept emerging technological innovations and solutions and still maintaining the old models and systems.

I don't see the fiat currency facing out at least not now and not in the near future. The massive adoption of the bitcoin and crypto technology won't stop people from using the fiat because they both have their own benefits and limitations.

Bitcoin can have positive and negative effects on the economy. The economy of a country will shrink if people evade taxes through buying and keeping Bitcoin hiding there yerly gaine to avoid taxes.  Another thing is Bitcoin can also affect the economy negatively if all the resources like investment is pointed to Bitcoin and the rest is neglected.

There might also be the time when Bitcoin is globally accepted and dominates the financial system, government and bank may loss control over the financial system and may lead to financial instability.


True, like supply and demand, a shortage of fundings to support ventures due to Bitcoin-focused investment can also cause economic and financial instability.

I also think that Bitcoin has not shrunk the economy and instead can make many people understand how to see the value of money and also the economic growth of a country when they start to adopt Bitcoin. This means that Bitcoin has provided more good opportunities for everyone who believes in it so that the presence of Bitcoin has helped more people who are economically difficult and also people who have difficulty finding money through their certain jobs, although it will not be easy for many people to earn money by relying only on Bitcoin.

We just have to think that if the adoption of bitcoin and cryptocurrencies shrinks the economy or reduces the appeal of fiat, governments will seek to discourage or eliminate cryptocurrencies immediately. Because fiat is a representation of government power and is the perfect tool for them to control the world economy as well as us. They would not be foolish enough to sit idly by or let someone who threatens their power become popular, that would be like shooting themselves in the foot.

Honestly, I don't see bitcoin playing any significant role or impact on the economy, let alone threatening the world economy.

People mightn't accept Bitcoin instantly because they're used to using fiats all their lifes but as the adoption goes on, people will used Bitcoin. Bitcoin can't shrink the economy but it'll improve it. Everybody owning Bitcoin will make them to have a different thinking about money and will become more functional to the society, be financially informed and not just a liability. Having Bitcoin makes you an investors and that's how people will begin to reason and it affects other things in life. I don't see anyhow having the thinking of an investor is going to shrink the economy. I'll improve it as people begin to invest in businesses and start up theirs  making more job available for people to work, add value to the economy and everybody is happy. With more job creation, the economy will be the one benefiting the most of ias money keeps circulating in and out.

No bitcoin won't shrink the economy because all the money just circulates since you are paying fiat to the seller and the seller received the money. What do you think the seller will receive after selling his bitcoin? Does seller received another bitcoin for that matter? I don't think so that's why bitcoin won't shrink the economy when fiat would still exists as there are people who still doesn't in technology stuff like ourselves.

You dont realize how big the entire world economy is. I don't think it will suck out any liquidity. Everyday people put money into their retirement and that money enters stocks and crypto and doesnt cause a dent in the reduction of world liquidity.

As much as I would want it to happen, I dont think the effect will be that large. Look today, we got good ETF flows, at least for BTC, but the price looks like it wants to head to the $45K area which is the area when the ETFs were first introduced. People are buying but price is not going up. Why? Because at the same time people who bought during the FTX crash at $15K are taking profit. Its why everything stays balanced.

Bitcoin will neither shrink the economy nor improve the world economy. As far as I know, global GDP is over 100 trillion while bitcoin capitalization is only 1 trillion, how could it significantly impact the economy?

Bitcoin is not the only investment or the only inflation hedge in the world. If people still don't have a basic understanding of finance, of how the world economy works...then even if bitcoin is adopted and becomes more popular, it can't change that.

To improve a country's economy, we need to create more jobs and help people earn high incomes. I want to ask, how can you use bitcoin to create more jobs when it is just a currency or an asset?

Even if Bitcoin become widespread and many people saves their money in Bitcoin, that doesn't reduce liquidity in the financial system, lead to a decrease in consumer spending and cause major ructions in the global economy. People have their minds and will do their money for their life and their family so they will spend their money to fills their needs. Perhaps they found Bitcoin as their investment but they make the economy wheel will still running and their government will also use their regulation to make sure they can control their country. If people face an inflation, they will figure out how they can survive in the hard situation and perhaps they will tighten their seat belt until the situation back to normal.Bitcoin will not not shrink the economy although perhaps the economy may be change different than the past.

Traditional money thinking (spend, save, and occasionally the stock market) has held people behind for too long. Bitcoin alters all that. It makes you think like an investor. Now you're holding a growing asset instead of cash. You focus on the market, news, and technology. You become part of something greater. This is potent.

Suppose everyone has a stake in the game. Where everyone values long-term planning and responsible investing. We're talking about constructing a stable, successful future for everyone, not simply becoming rich. Old system doesnt work. Inflation, debt, and poverty are problems. Bitcoin offers escape. Take charge of your finances and develop something for yourself and your family. Yes, I believe. Bitcoin might transform the world. It wont happen overnight. It will take time, education, and people like you and me spreading the word.

Cryptocurrency has nothing to do with the economy because the crypto market is mostly dominated by individuals are investing in the market to make.momwy because the market is always volatile. The government too is investing in crypto just like the El Salvador that make Bitcoin legal tender for citizens to trade without any restrictions. Bitcoin was created to ameliorate the bank stress that many of use undergo to make transactions with lot of interest. If we check the record, we can see that since the since the launch of Bitcoin, it has appreciated more than 500% and it's still counting. If we check, we can see that their are countries that own Bitcoin that are even more than most of the big whales holdings.

That's true for any type of saving: if people save more, they spend less and the economy is shrinking. I don't think the existence of Bitcoin will change the behaviours of masses. It's just those who are into saving, now have another option to do so.
If Bitcoin were to replace fiat currencies in their role of functional, everyday money, then yes, the current financial systems would have to be re-designed.

And I have to add that equating GDP with the health of a country or people's happiness is utter nonsense.

People will always have the need to sell. Whenever it is for covering their expenses, paying off debt, or just for profit, money will move out of the market as usual. How would this harm or shrink the global economy? It's all of the contrary. Trading Bitcoin or any other cryptocurrency brings huge taxation benefits to the government. Besides, the vast majority of businesses and merchants accept Fiat over Bitcoin. This is mainly because of the volatile nature of the cryptocurrency.

Of course, BTC has grown into a "force to reckon with". But there's a long road ahead before it becomes big enough to challenge the traditional financial system (if it ever does). Bitcoin is only 15 years old. Who knows how will it perform in the future?

Hmmmm... that is right people will always need to buy and sell things which helps economy. Selling Bitcoin or other cryptocurrencies can not hurt economy. Actually governments can benefit from taxes on these sales. Bitcoin has made progress but it is still new and unpredictable so it is not ready to replace traditional money yet. Most businesses do not accept Bitcoin because its value can change quickly. Instead of causing problems Bitcoin growth can work alongside traditional finance and make the economy stronger. We will have to wait and see how Bitcoin does in the future.

Bitcoin will not shrink the economy at all, I'm even of the opinion that Bitcoin is the next big thing

Your post is very interesting and thought provoking about Bitcoin integrating into economy and financial system. There is one thing very clear that due to its deflationary nature it can reduce liquidity and spending that can ultimately have negative impact on growth, but it can provide more freedom to general public and reduce the role of central banks. However, it is important to remember that no government will take the risk of total adoption of Bitcoin, the most practical scenario  could be where Fiat and Bitcoin based financial might run in parallel.

Investing in Bitcoin does not mean that fiat currencies will disappear.  People save in bitcoins for a certain period of time. If there is no specific period, if bitcoins are held for the whole life, then this resource will not be useful for people's needs.  The purpose of holding Bitcoin for a certain period of time is for the investor to have the fiat money increase over a certain period of time. It does not cause inflation.  Inflation is seen when the money of one country moves to another country when the price of goods increases.

Bitcoin if like digital gold.

In my opinion, if Bitcoin spreads widely it certainly won't have any impact even though many people put their money in Bitcoin because as we know now there are also many people who put their money in Bitcoin but there is no change and the economy is running smoothly and in my opinion there will be no such thing as reducing financial liquidity because of course most people investing in BTC are looking for profit and what is certain is that at the end of the day they want a lot of money so I don't think there will be such a thing as a decline in financial liquidity, in essence it will run normally as it is now.

and in my opinion there will be no such thing as major economic chaos in the world because in my opinion the system of people in this world is of course looking for profit,  yeah, that's the point is there could be chaos but the chaos there is when someone experiences a loss because of investing in BTC and the cause of the loss is because of a lack of knowledge and don't use money that is ready to be lost, well maybe in my view people like that will create chaos because they are frustrated and don't accept the losses they suffer even though of course it's not BTC's fault but what's wrong is that those who invest don't have knowledge about BTC and don't know how to do it properly and don't ready for the risks posed by BTC.

but if, for example, all people in the world used BTC as a legal means of payment, it would certainly make fiat currency useless. but if, for example, bitcoin is only used as an investment asset and is not used as a legal means of payment in lots countries, of course fiat currency will not decrease even though the number of people holding BTC is large.

And there are also some investors who consider this to be the simplest and easiest way as their investment vehicle for the long term. Because of the current inflation, the government must adopt policies that are no longer confusing and should not make too many adjustments that will make economists have to constantly rearrange their investment plans. and regarding Bitcoin will shrink the economy in my opinion see I think BTC will always run on its own trajectory.

Bitcoin has only 15 years old but has an impressive growth in developments, adoption, value and price but it won't shrink the economy or expand the economy.

Because Bitcoin price increases because money flow into this market and the capital inflow comes from economy, not self-create by Bitcoin market. The shrink or expansion of an economy in national size or global economy depends on other components that interact with governments, banks and many companies and other things in a nation or the world. Bitcoin can not have a magic power to shrink or expand an economy.

If governments cared about it, they did not order massive printing commands to central banks to create new money supplies and caused inflation. They can tell you they want this, want that and they're doing this and that to fix inflation, but they lie.

Governments and central banks are the same and they will create inflation, halt it and inform you that inflation is fixed with their intensive efforts, then when you feel better they will print money again.

This chart (https://www.visualcapitalist.com/purchasing-power-of-the-u-s-dollar-over-time/) gives you idea of governments never fix inflation, they create it.
https://www.visualcapitalist.com/wp-content/uploads/2021/03/Purchasing-Power-of-the-U.S.-Dollar-Over-Time.jpg

You are  right that Bitcoin is primarily used as instrument of investment for the purpose of significant growth in the long term and investment in it it doesn't mean that Fiat currencies will disappear, instead both financial system are likely to co-exist in future. Bitcoin usage as method of payment has not gained much acceptance due to high level of its price volatility which is likely to continue in coming years unless its marketcap reaches to a substantial level, five Trillion dollars or more.

The government will get benefit from the tax especially if they make crypto become legal so they can watch their citizen who use crypto. If the government don't use too high fees for tax, I guess their citizen will obey the rule and will report their wealth in crypto so they will also pay the tax. When many people want to report their wealth to the governemnt and pay the tax, the income to the country will increase and people will have their own additional income from crypto. But that will not sink the economy but Bitcoin can help the grow of the economy both in citizen and the country.

Yes, the journey of Bitcoin still long and we don't know what will happen in the future. But if the government can learn and accept crypto, that will be a chance for the government to take more income from other side.

As of now people spend more than they save and not many people are even saving. When Bitcoin makes it to the mainstream, I'm sure many people will understand how good it is to safe Bitcoin because the value will always be going up unlike fiat that the value will be going down with time due to inflation. When people see how easy it will be to have their money double or increase in multiple folds through Bitcoin holding, they will use the opportunity well and the effect of this will be less money in circulation and shrinking of global economy.