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Question: Do you hoard bitcoin because it's difficult to get them instantly?  (Voting closed: June 24, 2013, 09:34:34 AM)
I would spend bitcoins more if I could get them faster and know the prices i could repurchase them for would be close to what I spent them at. - 26 (42.6%)
No matter how fast I could buy them again, I would not spend them. - 12 (19.7%)
I buy and spend them irregardless of this issue. - 23 (37.7%)
Total Voters: 61

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Author Topic: Why do you hoard bitcoin? Would you spend them if they were easier to obtain?  (Read 2576 times)
triforcelink
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July 26, 2011, 12:57:22 AM
 #21

It's called opportunity cost.  And yes, the threat of opportunity cost DOES cause people to not spend money.  This is why I do not believe an inherently deflationary currency will ever work.

People keep saying that a deflationary currency cannot work... I still don't get it.. WHY? what am I missing???

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netrin
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July 26, 2011, 02:11:56 AM
 #22

It's called opportunity cost.  And yes, the threat of opportunity cost DOES cause people to not spend money.  This is why I do not believe an inherently deflationary currency will ever work.

People keep saying that a deflationary currency cannot work... I still don't get it.. WHY? what am I missing???

I'm glad SgtSpike called BS on the claims that lost gains are not losses. I happen to disagree with the comments about deflationary currency.

Bitcoins are undeniably inflating monetarily (about 30% annually). The deflation is based on current demand. Despite rapid monetary inflation, demand is high and prices are relatively stable or declining. Bitcoin is strong. Too strong?

The majority of people who are currently buying bitcoins do so because they believe in a its future value, otherwise the prices would fall. (I admit its more complicated than this as miners do not nec. sell and exchange markets represent only a fraction of the total economy).

But within a few years, the inflation rate will be lower than any national central bank's current targets. Because the population of the Earth is finite, the popularity growth will necessarily slow down as well. So, I don't see any deflation at all, except that produced by real demand, which is not a bad thing and will slow down eventually.

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July 26, 2011, 02:23:25 AM
 #23

Saving, or "hoarding" as it's derogatorily labeled, also provides an additional benefit to the community which is rarely considered.

By buying and holding these assets, the price is driven up toward what the holders of the coins believe to be the "true value"... whatever that means. By driving the price up in the present, the price signals to all the various components of the Bitcoin economy that there is significant interest in this thing. When entrepreneurs see the $100m market value of all btc, it gets their attention. They start projects which they may otherwise not have started had the price been lower.

Speculating on coins' value brings pricing signals into the present from the future (whether buying long or selling short). Having these price signals in the present is a huge value to the market participants, and helps fosters the progression of the market.

Consider the counter-factual... if everyone was -only- using btc as a currency and not as an investment. The price per coin would be much lower because supply would be higher. Many people who are developing the infrastructure and businesses behind the scenes may never have been interested if a Bitcoin was still worth $1.

tl;dr - speculation in any direction serves an important role in any efficient market. Be careful about demonizing it.
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