Bitcoin will shrink the economy

[BunnyWunny]

It's a bullshit argument based on false premises.

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.

Looking on the internet I see that in the USA, 22% of the population has no savings and 44% could not pay an unexpected 1K.

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).

gold is not as easy to hold as bitcoin

[Zanab247]

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.

[davis196]

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.

[Darker45]

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.

[anarkiboy]

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.

[CryptoBuds]

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

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.

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

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

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.

[anarkiboy]

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.

[TheUltraElite]

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.

[Peanutswar]

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.

[coolcoinz]

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. 

[mpoletiek]

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?

[moneystery]

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.

[LandDAO]

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.

[virasog]

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.

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).

[TheUltraElite]

Ultimately money is your own. If I worked for it, I should be able to do whatever I want with it.

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.

[mpoletiek]

Ultimately money is your own. If I worked for it, I should be able to do whatever I want with it.

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?

[serjent05]

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.

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.

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.

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.

[348Judah]

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.

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.

[OcTradism]

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. 

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.

[d5000]

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, 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.