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Author Topic: Does hoarding hurt Bitcoin ?  (Read 3549 times)
Boussac
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August 01, 2012, 12:44:38 PM
 #1

This questions has been debated in other threads but as it comes up frequently with people recently introduced to bitcoin, I find it useful to gather answers here.

The value of bitcoin stems from scarcity and usefulness. Scarcity is set form the word go (21 million) and hoarding just increases the perceived scarcity.
Now does hoarding hurt the usefulness of bitcoin ?

Bitcoins are useful to transfer value from A to B over the internet.
To transfer value requires a certain amount of bitcoins, corresponding to a price denominated in central money.

Let's say a buyer wants to purchase a 10-dollar item using the bitcoin network. He/she buys 10 dollar worth of bitcoin, say 1 bitcoin for simplicity, from a bitcoin payment processor that will send it to the seller. The seller in turn may want to cash out the bitcoin for 10 dollars after x number of confirmations i.e x times 10 minutes.
The processing of the transaction has created a demand for 1 bitcoin for x times ten minutes.
The more transactions are processed using bitcoins, the higher the demand for bitcoins.

Therefore hoarding has no effect on the ability of the bitcoin network to process transactions: volatility does. If the exchange rate varies wildly in a 10-minute interval, then the payment processor cost of hedging the exchange rate risk goes up. The payment processor passes the cost of hedging in fees applied to the sellers: the cost of accepting payments through the bitcoin network goes up.

In the end, if the hedging fees become higher than the bank card fees, then the seller may end up refusing payments through the bitcoin network. However the likelihood of the bitcoin volatility becoming so high is rather thin: even with the small volume and active speculation that we experience today, the volatility is perfectly manageable over a period of 1-hour (6 confirmations) with fees far more attractive than the bank card fees.

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JoelKatz
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August 01, 2012, 12:53:04 PM
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Hoarding only hurts Bitcoin by increasing volatility. When new people start hoarding, they push the price up. When hoarders panic and sell, they push the price down. A large number of consistent hoarders, buying a consistent amount of Bitcoins on a regular basis, however, help by stabilizing the demand for Bitcoins. A more stable value for Bitcoins will help to make Bitcoins more useful as a medium of exchange which is vital for long-term success.

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August 01, 2012, 01:00:35 PM
 #3

If it weren't for hording BTC would still be at sub dollar prices.

But it's the same thing for Gold.
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August 01, 2012, 01:13:37 PM
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If it weren't for hording BTC would still be at sub dollar prices.
True, and at sub-$1 prices, every $.10 change in the price would be 10% or more.

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But it's the same thing for Gold.
I don't think that's true because of gold's ornamental and industrial uses. But certainly the price would be much less.

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August 01, 2012, 01:36:03 PM
 #5

at the moment ,there is so little places accepting BTC ,what else can you do with them ?

almost every place i spend money everyday still only accepts money ........


going to take a while before btc is usable for daily stuff
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August 01, 2012, 02:10:29 PM
 #6

I've always been skeptical of the theory that a currency that increases in value causes hoarding and a currency that reduces in value causes spending. I'd imagine a currency that increases in value would encourage folks to buy higher priced goods while a reducing value would drive the prices of goods down. Everyone knows that in many cases you get what you pay for but (for example) tailors making clothes to last a lifetime have almost disappeared while everything in the clothes shops is made in countries with cheaper labor.


you can still wear an indestructable pair of jeans for many years before they fall apart

but the fashion industry works hard to make people think they need to be stylish and new  stylish clothes

are released every season every year ,and famous people wear them so everyone else wants to wear the latest fashionable item


very clever ......
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August 01, 2012, 02:43:43 PM
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at the moment ,there is so little places accepting BTC ,what else can you do with them ?

almost every place i spend money everyday still only accepts money ........


going to take a while before btc is usable for daily stuff

What you can do with them pretty soon is use them to process internet transactions.
My point is bitcoin development will unfold in three phases:

1/ store of value (hoarding today)
2/ meta-currency (using the bitcoin network to process transactions denominated in fiat currency)
3/ full fledged currency (using the bitcoin network to process transactions denominated in bitcoin).

Step 2 is made more difficult by volatility but this is not a show-stopper. I don't believe we can go from 1 to 3 without going through step 2.

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August 01, 2012, 02:50:41 PM
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Now does hoarding hurt the usefulness of bitcoin ?

I'm not sure how saving money hurts an economy.  Whether bitcoins are increasing or decreasing in value, I still have to purchase food, water, etc.  Even for luxury items, I'm not sure if it makes much of a difference.  If prices are rising, I may believe they have plateaued & choose to buy my boat now.  If prices are falling, I may believe they will continue to plummet so I want to buy my boat now.  Assuming bitcoins increase in value forever because they are deflationary, there are other factors that will make me want to purchase the boat.  Summer may be coming, the family would really enjoy it, or I'm about to retire/quit my job, etc.

There are also huge benefits to hoarding/saving.  The inflationary nature of dollars force people to make risky investments to fight inflation or risk their savings becoming worth nothing.  So people either lose their money in risky investments or decide to spend their savings now before it buys even less.  Now none of these people have any savings for retirement or hard times.  Maybe a deflationary currency is exactly what we need to spur savings & eliminate the need of so many welfare programs.

at the moment ,there is so little places accepting BTC ,what else can you do with them ?

I agree with CoinCidental that it is easier to hoard bitcoins right now because there's not much to spend them on.  And if anything this is driving the price up which is giving bitcoin more attention.  But just like the bubble last summer, there will be a value where people will stop hoarding & start selling.  Is this creating a lot of volatility now?  Sure.  Will this get ironed out?  Absolutely.  The higher the price, the more attention, the more merchants start accepting bitcoin, the less volatility there will be.  This is all part of the chicken & egg situation new ideas face.

The only reason to limit the block size is to subsidize non-Bitcoin currencies
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August 01, 2012, 02:58:41 PM
 #9

you can still wear an indestructable pair of jeans for many years before they fall apart
but the fashion industry works hard to make people think they need be stylish and new  stylish clothes
are released every season every year ,and famous people wear them so everyone else wants to wear the latest
very clever ......

Ain't that the truth.  We did some spring cleaning and my wife donated almost 20 pairs of shoes which had never be used to Goodwill.  Indestructible or not there would still be demand for women's shoes.  Now an industructable (and remained forever comfortable) men's dress shoe.  Oh forget about it.  They likely would be passed down as heirlooms. Smiley
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August 01, 2012, 05:07:28 PM
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If it weren't for hording BTC would still be at sub dollar prices.
True, and at sub-$1 prices, every $.10 change in the price would be 10% or more.

Quote
But it's the same thing for Gold.
I don't think that's true because of gold's ornamental and industrial uses. But certainly the price would be much less.

Isn't ornamental use just a form of hording combined with occasional bragging (wearing it)?

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August 01, 2012, 05:42:10 PM
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If it weren't for hording BTC would still be at sub dollar prices.
True, and at sub-$1 prices, every $.10 change in the price would be 10% or more.

Quote
But it's the same thing for Gold.
I don't think that's true because of gold's ornamental and industrial uses. But certainly the price would be much less.

Isn't ornamental use just a form of hording combined with occasional bragging (wearing it)?

For some people to an extent, but gold-plated items, for example, are purely ornamental.  There's a market for shiny things that stay shiny independent from hoarding.
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August 01, 2012, 05:44:48 PM
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Is the SR escrow system considered hoarding?
cryptoanarchist
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August 01, 2012, 05:45:52 PM
 #13

Thread title should be changed to "Does SAVING hurt bitcoin"

"Hoarding" is a term used by commies to justify stealing from people. It implies that anyone who saves money is a greedy bastard.
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August 01, 2012, 05:56:14 PM
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almost every place i spend money everyday still only accepts money ........

Do the places you spend money at accept Zimbabwean dollars, INR or Yen?

Bitcoin is being used for exactly what it should be used for and has the right attributes for, direct person-to-person trades over long distances & transactions that require anonymity. I honestly don't see it replacing cash, but thats just my opinion.

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August 01, 2012, 06:21:26 PM
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almost every place i spend money everyday still only accepts money ........

Do the places you spend money at accept Zimbabwean dollars, INR or Yen?

Bitcoin is being used for exactly what it should be used for and has the right attributes for, direct person-to-person trades over long distances & transactions that require anonymity. I honestly don't see it replacing cash, but thats just my opinion.


Majority of them only accept cash tbh
but then again most of them give discounts for cash anyway
any place that does accept cards has a 3% surcharge  and the purchase must be over a certain size
cash is still king
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August 01, 2012, 06:29:28 PM
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Thread title should be changed to "Does SAVING hurt bitcoin"

"Hoarding" is a term used by commies to justify stealing from people. It implies that anyone who saves money is a greedy bastard.

Perhaps when used in a monetary context, but it can also be a disease frequently inflicting people who have suffered great losses:
http://en.wikipedia.org/wiki/Compulsive_hoarding

https://www.bitcoin.org/bitcoin.pdf
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August 01, 2012, 06:36:21 PM
 #17

Hoarding hurts the individual, not bitcoin in general.

Imagine an individual owns 99,999 bitcoins. He can acquire the 100,000th coin for $9.40 right now easily. However, at what price can he sell his 100,000th coin? -- About $7.50. The more coins he owns, the harder it is to receive equal value when converting into goods (USD in this case).



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August 01, 2012, 06:40:05 PM
 #18

Hoarding hurts the individual, not bitcoin in general.

Imagine an individual owns 99,999 bitcoins. He can acquire the 100,000th coin for $9.40 right now easily. However, at what price can he sell his 100,000th coin? -- About $7.50. The more coins he owns, the harder it is to receive equal value when converting into goods (USD in this case).





Ask him if he can afford to hoard them for 5-10 years THEN start selling

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August 01, 2012, 06:42:42 PM
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Hoarding hurts the individual, not bitcoin in general.

Imagine an individual owns 99,999 bitcoins. He can acquire the 100,000th coin for $9.40 right now easily. However, at what price can he sell his 100,000th coin? -- About $7.50. The more coins he owns, the harder it is to receive equal value when converting into goods (USD in this case).





Ask him if he can afford to hoard them for 5-10 years THEN start selling



That's not hording, that's investing Tongue.

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August 02, 2012, 02:18:03 AM
 #20

Isn't ornamental use just a form of hording combined with occasional bragging (wearing it)?
I guess it's a matter of definition. "Hoarding" is kind of a useless, loaded term anyway. It implies that deferring consumption somehow deprives other people of something when in fact it does precisely the opposite. It's based on the myth that consumption drives the economy when the truth is that production drive it. A hoarder still produces, otherwise they would have no way to acquire the thing they are hoarding. A hoarder simply doesn't consume, which just leaves more for everyone else.

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