Gresham's Law Applied To Bitcoin

[BitProdigy]

Gresham's Law states that "Bad money drives out Good".

Basically it defines the principle which says that if a person has a whole bunch of crappy money like fiat paper, and also a whole bunch of good money like say gold or bitcoin, that person will spend his crappy money before he will spend his good money. He will buy his goods and services with his crappy fiat before he will spend his gold or bitcoin.

I feel this pressure myself when I decide whether I want to spend my bitcoin or my crappy fiat that my employer pays me in. I save my bitcoin, and a spend my fiat. What effect does this have?

[GaliX]

in the end it doesn't matter...

The Guy who bought the Bitcoin pizza for 10,000 btc said the pizza was good.
If you resupply your bitcoin at the end of the month it doesn't matter what you use...

The problem is bitcoin itself is more like investing into a company stocks then a currency currently.. There are some places you can actually spend them but in the end there is no reason to use Bitcoin atm...

[thezerg]

The law is often misunderstood.  It only applies when the exchange rate does not float like when you have gold coins of the same denomination but different purity.

[Foxpup]

Gresham's Law states that "Bad money drives out Good".

False. It states "bad money drives out good when the exchange rate is fixed by law". When the exchange rate floats, as is the case with Bitcoin, bad money simply drops in value relative to good money. With a floating exchange rate, there is absolutely no reason why a person shouldn't spend whatever currency they please and exchange it for other currencies as necessary.

[BitProdigy]

Gresham's Law states that "Bad money drives out Good".

False. It states "bad money drives out good when the exchange rate is fixed by law". When the exchange rate floats, as is the case with Bitcoin, bad money simply drops in value relative to good money. With a floating exchange rate, there is absolutely no reason why a person shouldn't spend whatever currency they please and exchange it for other currencies as necessary.

Thanks for clearing that up guys but I still feel like I would rather spend fiat than bitcoin, perhaps only because I know the inflationary nature of fiat makes it go down in value the longer I hold on to it opposed to the deflationary nature of bitcoin which makes it go up in value the longer I hold onto it.

Perhaps this is an alteration of the accepted definition Gresham's Law. "People will spend inflationary money before they will spend deflationary money."

[Amph]

Gresham's Law states that "Bad money drives out Good".

False. It states "bad money drives out good when the exchange rate is fixed by law". When the exchange rate floats, as is the case with Bitcoin, bad money simply drops in value relative to good money. With a floating exchange rate, there is absolutely no reason why a person shouldn't spend whatever currency they please and exchange it for other currencies as necessary.

Thanks for clearing that up guys but I still feel like I would rather spend fiat than bitcoin, perhaps only because I know the inflationary nature of fiat makes it go down in value the longer I hold on to it opposed to the deflationary nature of bitcoin which makes it go up in value the longer I hold onto it.

Perhaps this is an alteration of the accepted definition Gresham's Law. "People will spend inflationary money before they will spend deflationary money."

but this has nothing to do with that quote, you want to spend more fiat becuase, you believe in bitcoin and you know that its price will rise, so holding is more valuable or because you don't hold any bitcoin and think that it will die soon

or again simple because it is still more comfortable to use fiat in many places without being seen as a "out of the masses"

[johnyj]

Bad money drives out good but that does not mean good money becomes less valuable, they just get hoarded and will be used at a later time with much higher purchasing power