Can't the deflation be a limit for BTC everyday usage?

[rb1205]

We all know that everyday money is affected by inflation. Now, the fact that your dollar/euro/??? will be more valued today than tomorrow is a good incentive to spend that euro for something you want rather than stockpiling them under your mattress for the days to come.

But we all know that bitcoins are supposed to deflate. This is a great aspect to attract users and investors in the bitcoin economy, but i'm not sure this will be good for promoting an economy based on it, as most people will try and hold every bitcoin he has as long as he can, using inflatable money for all his everyday business.

My question is: isn't bitcoin supposed to be used as currency and not be stockpiled? How do this cope with the fact that its value will hopefully increase over time?

[FreeMoney]

A money that encourages you to buy things under the threat of losing your wealth is not as good as a currency that pays you for waiting. It doesn't make you wait, it just pays you if you do.

Child has 2 apples. Tell him eat now I'm taking half tomorrow. OR. Eat what you like, I'll double your apples tomorrow. Which is nicer?

Also everyone coming in pretending this increase in value is guaranteed is a little silly. You should only worry about spending your deflationary money or not once you've run out of the crap money.

[goatpig]

Inflation supports rampant debt and malinvestement, it doesn't have much to do with consumerism, which is mainly a subjective factor derived from quality of life. In that case, you'll witness more consumerism under BTC than fiat.

[zef]

Yes saving/spending incentives are opposite during deflation/inflation.  If a deflationary currency was the norm, people would be screaming that inflationary currencies were a ripoff, a scam and unsustainable, noone would save, etc. What people are ultimately talking about is how inflation/deflation effects peoples time preference, low time preference means more savings, high time preference means more spending.

Personally I don't think anyone knows, or if there even exists an optimal time preference for money.  Someone may think they know, but when they start trying to tweak incentives to reach the goal, unanticipated things happen for better or for worse.

I dont think there is anything to fear about a deflationary currency, a lower time preference means more savings in general,  which means people have the ability to invest in longer term, and much larger projects that would otherwise not be possible.  This is opposed to the much shorter term, "hand to mouth" thinking of a high time preference crowd.

Of course there is the fear that no one will ever spend their money, and "horde" indefinitely. This to me is kind of ridiculous since there is no utility in bitcoin by itself. The more people horde, the more the value increases, increasing incentives for others to produce goods or services that the hoarders would spend on.  There is always some point at which someone would stop hoarding, because again, value comes from what you can trade for it. Perhaps someone will trade their coin in for a car or a house or a yacht, but the market will work this out.

[kwukduck]

Eventually deflation will calm down and not double value overnight

[tachi641]

The OP has a point. I know we all love our BTC and we would defend it but lets get real people. It is totally in the air when the actual BTC value will be determined. Who in the right mind would spend their BTC right now? One day it's 3 dollars next week it's 5 then 2 days later it's 8, and back down to 5 and back up to 8.

The way the system is going right now only leads to 1 thing. Traders, investors, horders. A money system this volatile cannot be used as a measure of trade, because people won't be spending. Now as far as fiat currency although it inflates it doesn't happen over night and it's relatively slick at inflating, or up until we hit "hyper-inflation" if we will ever hit it. As much as I believe in BTC, I know the US Government isn't going to step into the future without a plan already made on how to handle our debt, even if it means ripping off it's citizen and other countries. We are the world's strongest nation and will continue to be so... we have more supplies, oils, minerals, precious metals than anyone, we're just slow playing. Anyhow, back and to conclude, BTC at it's current rate cannot be used as a form of trade due to volatility.

[TradersEdgeDice]

Make it easy to profit from shorting and the price will stabilize.

I do not want naked shorts at all.  That would be a horrible practice to import from the fiat system.

However, the people holding tens of thousands of bitcoin could contribute to liquidity and make a nice profit with some kind of impartial system for shorting.

In order to short now, you need to have significant credibility.  Doesn't matter if you do this for a living, this kind of short is old school -borrow bitcoins, sell immediately, wait for price drop, return bitcoins to the owner with interest, pocket the profits.

Shorting should require credibility for the loan but not nearly as difficult as it is now.

I'm surprised we haven't seen any pump n dump (shorting conspiracies) yet.  It's not like there are any significant consequences to it at this point.

[silversurfer]

As much as I believe in BTC, I know the US Government isn't going to step into the future without a plan already made on how to handle our debt, even if it means ripping off it's citizen and other countries. We are the world's strongest nation and will continue to be so... we have more supplies, oils, minerals, precious metals than anyone, we're just slow playing. Anyhow, back and to conclude, BTC at it's current rate cannot be used as a form of trade due to volatility.

The US Government is 'slow playing' its economic strength?     Slow playing a debt collapse maybe.

[tachi641]

As much as I believe in BTC, I know the US Government isn't going to step into the future without a plan already made on how to handle our debt, even if it means ripping off it's citizen and other countries. We are the world's strongest nation and will continue to be so... we have more supplies, oils, minerals, precious metals than anyone, we're just slow playing. Anyhow, back and to conclude, BTC at it's current rate cannot be used as a form of trade due to volatility.

The US Government is 'slow playing' its economic strength?     Slow playing a debt collapse maybe.

They are going to abuse their power with the world still being on a dollar standard, they already know a collapse will happen. So they are going to make this last as long as they can. We own the most natural resources, more than any other country... They are crashing the dollar for a reason, and they already have the answer and backup plan when it does.

[hazek]

My question is: isn't bitcoin supposed to be used as currency and not be stockpiled? How do this cope with the fact that its value will hopefully increase over time?

Simple! People need to eat, drink, pay bills, pay for gas, wear clothes, live in a house...... ect. Not to mention all their wants..

As you can see, there will always be consumption.

What you don't want however is rampant consumption and zero savings like we have now, where everyone over consumes and lives beyond their means and is piling on a huge mountain of debt only because they'd be a fool if they saved under the current monetary policy.

And on top of that the scary monster deflation is only a problem when it's the monetary kind which is sudden and unexpected. What Bitcoin will have however is first monetary inflation and then neither monetary inflation nor monetary deflation. Constant price deflation which people can plan for on the other hand, will not be a problem at all.

It's so frustrating that nearly everyone has been brainwashed and indoctrinated in public schools and through mainstream media where they just don't understand that monetary deflation != price deflation.

[kiba]

It's so frustrating that nearly everyone has been brainwashed and indoctrinated in public schools and through mainstream media where they just don't understand that monetary deflation != price deflation.

Or it's simply that economic is non-intuitive and easy to get wrong.

[Alex Thornton]

Eventually deflation will calm down and not double value overnight

I agree that the deflation will eventually calm down. The real question is: will the appreciation simply level off, or will there be a massive correction first?

[hazek]

Or it's simply that economic is non-intuitive and easy to get wrong.

Obviously I disagree. My argument is that in fact the Austrian theory and either monetary inflation or deflation are very intuitive. It's just that everyone has been taught that inflation/delfation = rising/falling prices when in reality rising and falling prices are just the symptom of monetary inflation/deflation. This confusion has served the banksters very well.

[hazek]

Eventually deflation will calm down and not double value overnight

I agree that the deflation will eventually calm down. The real question is: will the appreciation simply level off, or will there be a massive correction first?

I disagree. The only way this could happen is if the Bitcoin economy stops growing. Instead what I suspect will happen is when the monetary inflation of issuing those 21mio BTC stops the Bitcoin economy wont stop growing and so we will have a constant and indefinite price deflation.

[rb1205]

Thanks for all your answers. By the way, my question was more pragmatical than ideological. Let me ask you again my question under a different point of view:
Let's say i have a given amount of $ and BTC, and my income is mainly in $ (BTC salary isn't an option). Now, assuming that i'm not interested in anonymous transactions and keeping in mind that a $ loses its value over time and a BTC gains (hopefully), why in the earth should I ever spend a single BTC rather than $ for my everyday business?

As i said, i'd like practical answers, keeping in mind that what i'm looking for here (like 99% of the people in the world or so) is to maximize the value of my money. Any answer that can be shortened to "Because the $ is bad" is not going to do it for me, sorry.

[caveden]

Let's say i have a given amount of $ and BTC, and my income is mainly in $ (BTC salary isn't an option). Now, assuming that i'm not interested in anonymous transactions and keeping in mind that a $ loses its value over time and a BTC gains (hopefully), why in the earth should I ever spend a single BTC rather than $ for my everyday business?

You have two options:

• Convert all or most of your salary right after receiving it, and then during the month spend the bought BTC. This allows you to lose less with dollar devaluation since you hold it for very short periods only. It would be particularly interesting when dollar inflation rates start to be measured monthly instead of yearly.
• Just use BTC as a savings account. You don't need to spend it often, just when you want to spend your savings. Pretty much like many people do with gold or other investment assets.