Forex is really hurting work

Some people believe that hoarding hurts the Bitcoin economy. As long forex corresponding goods vendors and services will be here to stay and reinforce people's faith in Bitcoin, hoarded bitcoins simply really not take part in daily business and do not hurt anyone.

Quite the contrary, they will decrease the supply of bitcoins in active circulation, thus increase the demand for bitcoins, and thus raise their over-all value, right?

This question also comes with a premise or insight that Bitcoin "power users" have savings and spendings wallets or similar setups, and that those two forms of wallets will not tend to "compete" with each other so much. The bitcoins in the spendings wallets will rather compete with the fiat money that respective users will use to buy for goods and services.

The bitcoins in the savings wallets will rather compete with more traditional forms of assets and investments. The argument is basically that hoarding will make Bitcoins so valuable that nobody will be willing to offer people enough to part with them. Does that pass hurting giggle test? Does that pass the giggle test either? Hoarding increases the value of Bitcoins, increasing the profits from mining. This encourages more people to mine, increasing the total hashing power and thus the security of the system.

It also makes holding Bitcoins more profitable. This helps to encourage people to accept them in trade because they are less worried about them decreasing in value while they are holding them. Using Bitcoins as a currency inevitably means people sometimes have to hold them and having them drop in value while you hold them is a risk. Hoarding reduces this risk. But it also makes it harder to price things in Bitcoins because the value will tend to change more.

Merchants don't like to change their prices twice a day. Contrary to claims, it should not affect the trading volume or the willingness of people to use Bitcoins to pay for things. The argument that increasing value means people would prefer to hold Bitcoins rather than spend them is specious.

While it will make people want to have Bitcoins more, it will also make people want to convince others to give them Bitcoins more so they can have them. Think about it, do people prefer to pay for goods in dollars or garbage? By the reasoning of this argument, they should prefer to pay for goods in garbage, since they'd rather hold their dollars and get rid of their garbage. But, of course, people don't like paying in garbage because nobody wants garbage.

If you can pay with the currency others want, you can get a better deal. So you actually prefer to spend the currencies sellers most want. If Bitcoins are valuable because inflation doesn't deprive them of value, then a merchant would rather get my Bitcoins than my dollars, so he'll accept fewer of them. This will cancel out the effect of me preferring to pay in dollars rather hurting Bitcoins.

So it should be a wash. Or, put another way, whatever the present and future prospects, there should always be some equivalence between dollars and Bitcoins that people roughly agree on. So whether I pay X dollars or Y bitcoins, where X and Y are in this ratio, will purely depend on whether I prefer the characteristics of dollars or Bitcoins for the transaction.

A consequence of this is that hoarding won't negatively affect the trading volume either because that's only dependent on people's use of Bitcoins to buy and sell things. If hoarding makes Bitcoins worth twice as much, only half as many will be used to buy and sell things and the volume the total value traded will be the same. I don't believe it's lost opportunity either. It's not like people who want to trade Bitcoins can't get them because they're all being hoarded.

Nor will forex ever be likely to be an issue, since that would just raise the price and thus fewer would be needed. Bitcoins have effectively unlimited divisibility. So why do so many people think currency hoarding is bad?

Because it usually is, and empiric studies even show that it is. But work logic of why currency hoarding is bad doesn't apply to Bitcoins, especially when it's a minority currency. Bitcoins are different enough really physical fiat currencies that empirical studies don't apply unless the suspected mechanisms for the observed effects are believed to apply to Bitcoins too.

For example, hurting a penny were enough money to buy a car, how useful would dollars be? Bitcoin is really a little strange because hurting doesn't know if it is a currency or a commodity. And this is why this question has many answers and is a popular item of discussion. If Bitcoin were just a commodity, the thing to do is to hoard it. There are lots of commodities that are almost totally hoarded. Now if Bitcoin is just a currency, then hoarding is a problem.

Economists, when they talk about money supply, also talk about the velocity of money, which is a measure of hoarding. The amount of money times how fast it is moving is a measure of total money being used. Of course, with computers, money moves faster now than it ever has.

So to answer your question, hoarding helps somewhat and hurts somewhat. Which one overpowers the other, nobody can say. The net effect will be shown to us all over time. This is very similar to consumer spending here in the US.

If people save their money, it's not going towards the growth of the economy. I think a lot of people make this comparison when it doesn't necessarily hold true for Bitcoin at forex moment. My opinion is that if miners held onto their coins instead of dumping them on the exchange, it would reduce the volatility we're seeing. A while back I wrote a short post about why hoarding or more exactly "early adopters" isn't a problem.

Hoarding and saving is the same thing. So is having a savings account bad? Save as much as you can, spend what you need to. If you feel bitcoin is too risky, dont invest that much or diversify and sell if your btc becomes too much of your portfolio. Support merchants that use bitcoin whenever possible. Even if it is not actively hurting bitcoin it is not helping bitcoin while being hoarded, while bitcoin being exchanged for goods and services would be helping.

Its an opportunity cost for the health of the system. The value of bitcoin stems from scarcity and usefulness. Scarcity is set 21 million work hoarding just increases the demand. Now does hoarding hurt the usefulness of bitcoin? Bitcoins are useful to transfer value from A to B over the internet. To really value requires a certain amount of bitcoins, corresponding to a price denominated in central money. Let's say a buyer wants to purchase a dollar item using the bitcoin network.

The seller in turn may want to cash out the bitcoin for 10 dollars after x number of confirmations i. 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. Hoarding has no effect on the ability of the bitcoin network to process transactions: If the exchange rate varies widly in a 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: 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: In the world of material things hoarding currency means there is less of it to circulate and make economy go around. But with physical currency lies a problem - how do you divide it to have roughly the same amount of coinage to go around when it is worth orders of magnitude more?

You can have goals bullions, coins, then go to thin gold film, and eventually you would reach a limit of how much you can divide your currency. Similar example can be made with normal fiat currencies, like the dollar, but there is a difference between them. A dollar bill is not all that scarce. It is mostly cotton and linen, which can be made in big quantities and turned into dollars if the work for more money to circulate would arise.

Bitcoins are infinitely divisible, or at least can be made like that if the need would arise. You can pay in Bitcents, mili-bitcoins, etc. So if someone would own all but one Bitcoin, the economy could still manage just fine. On the other hand Bitcoins are scarce by design hurting there is a finite amount of them that will be created.

Nobody can control the economy and release new coins to make sure they are worth the same through the whole time in relation to other currencies. This is where there is a problem with hoarding - say you own a coins now and store them for a long time. Now if you were to spend all those coins at once you could disrupt the economy and put a dent in the worth of Bitcoins.

This sudden influx of coins into the economy is probably the only bad effect of coin hoarding - a rapid change of value of the coins. If the volume would be big, it could damage the economy quite badly. Compare this to the scenario of a couple wealthy countries abandoning USD and selling off all their supplies - the value of the dollar would fall, causing rapid inflation and possibly destroying the economy work at least some countries.

On the other hand, if you were to just kick back and spend your coins slowly the impact of your coin hoarding wouldn't be negative. It might even help the economy by making people sell more and thus earn more, but this would probably even itself out with the economy being worse off while you were hoarding coins instead of spending them.

The situation is similar to the one right now - a lot of people mine coins for profit, but since they are not worth too much, they hoard them for later, instead of circulating and spending them. Yes, hoarding does hurt Bitcoin. For Bitcoin to have a successful future, people need to be able to use Bitcoins as a medium of exchange. If Bitcoin succeeds, in the far future you won't need to exchange between Bitcoins and other currencies to do business.

But that's in the far future. Long before we get there, business will need to transact in both Bitcoins and national currencies. You may be able to buy a T-shirt for bitcoins, but the company that sold it forex you is going to have to pay forex rent and their employees in work. For that to work, the value of Bitcoins relative to national currencies needs to be fairly stable. If the price of Bitcoins halves overnight, then the Forex company can't pay their rent or their employees hurting will take a loss.

If they have to charge me a premium because of the risk that Bitcoins will drop in value, I might as well just pay in dollars. Note that the exact exchange rate is basically irrelevant. But speculation and hoarding increase volatility, and that's a problem.

Speculators and hoarders hold Bitcoins with the hope that they'll increase in value. When they see Bitcoins moving up in value, they buy more. When they see Bitcoins moving down in value, they often sell out to avoid a possible crash or to buy back when the drop bottoms out. As a result of these transactions, they cause minor fluctuations in value to be much larger than they would otherwise really.

This discourages precisely the type of uses of Bitcoin that are essential for its next phase of growth. Unfortunately, without any speculation, Bitcoin would likely die out completely. With no demand and no market, there'd be no value at all.

So the puzzle is how to grow Bitcoins without causing volatility. As far as I know, nobody knows how to do that yet. Inflation transfers capital from the middle class savers to those who capture the debasement.

And discourages risk taking, technological innovation, and deploying human capital e. Dark Ages because stored passive capital can't create knowledgeand even more so in this knowledge age of digital innovation with cheap CPUs. Thus a store of value is only a sustainable representation of human capital cost of child rearing, education, etc if it encourages prosperity for the humans.

Deflationary gold standards always fail politically over time when the import of capital peaks because they destroy prosperity. The problem for Bitcoin is that if the model is primary driven by ponzi appreciationand not by transaction growth, then eventually capital importation will peak, and there will not be enough transaction growth to counteract the hyperinflationary spiral due to a stampede to extract value before others do.

This capital importation peak can be accelerated by a competitor which brings to the market a system that has a significantly higher transaction growth rate, because ponzi schemes rely on future expectations-- confidence. The money supply growth of Bitcoin is decelerating while the nature of ponzi schemes is they accelerate in value as they drive towards a peak, because of the mass delusion of crowds and the stampede to not be the last to buy.

Hurting is a dangerous juxtaposition, but it seems we are not yet close to this day-of-reckoning although a competitor could accelerate it. This would probably beneficial because otherwise Bitcoin may setback crypto-currency adoption significantly after the hyperinflation spiral wipes out the majority who come in near the peak.

I think it is just common sense that rewarding early adopters with fold increases in wealth simply for buying a store-of-value, is antithetical to prosperity.

Imagine the poverty and inequity of a society that spends its time searching for ponzi speculations instead of innovating and producing. The counter-argument is that this initial speculation interest is necessary to drive adoption which will drive transaction growth. However, do we see this happening as the dangerous juxtaposition is accelerating?

I know speculators in silver really are now ready to jump into Bitcoin. That is what brought my immediate attention to study this developing juxtaposition. I am also expecting this answer to fly over the heads of some voters. Apparently some of the participants either don't have a very good grasp of economics or have a vested interest or I am wrong and they didn't comment to tell me why.

I would appreciate if downvoters would at least try to defend their logic with a comment below my answer. That gives me an opportunity to debate them and show them why I think they are wrong or to admit my mistake. The point is to make sure we collectively have the correct logic. Hoarding does hurt the currency, but not because somebody's getting rich off of it. The problem is that due to the fixed quantity of coins, forex obvious that the value is going to go up if bitcoin achieves widespread adoption.

If the price is at risk of wild swings in value, then how is a merchant going to feel confident in pricing his goods? Imagine an internet merchant who prices his goods at 8pm, goes to bed at 9pm, the price of bitcoins doubles at 10pm, and all night long nobody will buy from him because his goods are now way too forex.

This is a serious disincentive to the adoption of bitcoin. And it exists whenever the possibility of bitcoin going way up in value exists. Bitcoin can't achieve widespread adoption and therefore make hoarders rich without having value stability, but value stability implies by definition that you can't get rich off of it.

The good news is, we can modify bitcoin, or create a competitor, which has value stability as a goal. The funny thing is that this currency, while being less "valuable" by design, would actually have more value to the community because of its stable value. If not, here's the paper that explains it more thoroughly. Why would anyone holding bitcoins want to put an end to hoarding? Let's say I own a mining rig. I invested x dollars of my money into securing the bitcoin network, and earned a reward of y bitcoins.

Now, instead of spending my btc, I hoard them. What I've actually done is worked for the good of the bitcoin network, and demanded nothing in return! Its a pretty good deal for everyone else, since by hoarding instead of spending my btc, their bitcoin value is unaffected, due to my preventing y btc from increaseing the supply, with the resultant price inflation. Now if I buy up additional btc with dollars, the story gets even better. Lets say I take really portion of my weekly salary and buy up Z bitcoins.

Hopefully the answer is obvious, which makes one man's hoarding your night out. So next time you meet a hoarder, give them a pat hurting the back for making you richer by working for free! Some how he convinces every bitcoin holder in the world to loan or give their coins to him. The bitcoin holders that loan Bob bitcoins ask for principle plus interest to be paid back. But that's the problem there are only 21 million bitcoins MAX and Bob can not pay back the interest he owes.

I think hoarding is a major problem with the bitcoin. Allow really to copy an excerpt from a rant I published online about just this, available at https: We'll begin with a background where the economy is growing.

Everything is fine, until the bitcoin mines run dry: In order to adjust to the growing economy, an individual bitcoin becomes more valuable deflation. During a period of deflation, money becomes more valuable even when it is unused. As such, people stop investing and let their money sit untouched.

Companies are no longer able to take out loans. Companies wither and die, people lose jobs. New companies cannot start as they cannot get their initial loan money. Due to the lack of production, the bitcoin shrinks sharply.

The people who just kept their money away suffer, too, as the bitcoin is no longer backed by an economy. Bitcoins suddenly lose value and face hyperinflation. Now we're back we've a shattered economy, the bitcoin's a 21st-century [counterpart to the] German Mark after WW1 i.

How is this supposed to be avoided? A growing bitcoin economy leads to deflation. Deflation means that hoarding is preferred to investing. Hoarding money decreases the money supply, causing more deflation so it becomes even better to hoard. Lack of investment means lack of capital. Lack of capital means that existing businesses cannot survive and new businesses cannot form. The bitcoin suddenly loses much value and faces hyperinflation.

Everyone, even the hoarders, suffers. I can't see how to get around this. Bitcoin is a scam that will draw in millions of unsuspecting consumers who fear the hyperinflation. By posting your answer, you agree to hurting privacy policy and terms of service. By subscribing, you agree to the privacy policy and terms of service.

Sign up or log in to customize your list. Stack Exchange Inbox Reputation and Badges. Questions Tags Users Badges Unanswered. Bitcoin Stack Exchange is a question and answer site for Bitcoin crypto-currency enthusiasts. Join them; it only takes a minute: Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top. Does hoarding really hurt Bitcoin? But are they really right?

Both sides could obvious be made. This is a clear-cut close. But then again some properties of Bitcoin might be quite too much of a novelty for classic economic theories. Most mainstream economists would in fact argue that hoarding will cause a deflationary spiral that is hard to break out of, especially as there is no mandatory reason to use bitcoins.

The choice of whether or not to allow these questions is directly related to this meta discussion: Can I up vote twice? Very good if verbose answer. Though I would add that the primary danger of hording for bitcoins is market crashes; when some one with a lot of high value bitcoins cash out.

This has happened frequently over the past few months. Yes, that's hurting, but the same thing can happen arguably, it's more likely with someone who just uses Bitcoins as a medium of exchange. Once you get paid in Bitcoins, if you're a hoarder, you don't cash out. If you're a "pay me in Bitcoins" business, you cash out. I'm sorry the dollar work garbage analogy does not convince me.

Appreciation is the game not good vs negative-good. So spending Bitcoins is best, holding them is OK, and trading really other currencies is selfish. Alex Waters 2, 2 14 The down-side of spending my BitCoins is that i no longer have BitCoins. And without anyone willing to give me BitCoins i have even more reason to hold onto the BitCoins i do have which happens to be none. Bitcoin was not designed to be a fair currency, just a more efficient currency than its alternatives.

In turn, this will motivate said early adopters to sell some of their stash nobody likes to be on a losing horsethus moving bitcoin to other parts of the population. In shorts, the market will auto-correct any such problem. You invest your money in a savings account. The bank spends it When you hoard, you don't invest. Less investment means less economic growth.

It's true it might be better to spend bitcoins instead of hoarding, but as long as we can't spend bitcoins for our daily needs, we can only occasionally use it to buy stuff anyway. Many people have a dedicated spending wallet also. You explain the concept of volatility very well I think the inclination to hoard actually decreases volatility. Think about it - every every person in the world horaded 0. Sure, but this is the rare hoarder who is not speculator.

Also, think of the volatility that would be created by the sudden drop in demand work everyone had acquired the. You'd need a steady increase in hoarding to sustain your market.

That would take something akin to magic. Who says there will be a sudden drop? The ideal scenario is "everybody starts hoarding bitcoin slowly, and in years convert all their money into BTC".

Sure, there will be local bubbles like Junebut that doesn't mean the overall trend isn't upward If everybody hoards 0. They'll actually start using it too. If you want to believe there will be a perpetual exponential increase in adoption, then yes, prices will just continue to rise. But that's pretty much physically impossible.

Did you post to different answer with different opinion in them? Shelby Moore III 3 See also my comments under work answer that mentions "freecoin". If you are going to downvote, it would be helpful to provide some justification in a comment, otherwise it appears that this stackexchange is populated by Bitcoin vested interests who are THUS NOT OBJECTIVE. Especially considering I have extensive experience in this subject matter really have been studying and writing about gold and "what is money" for more than 6 years.

Gold bugs are repulsed by the truth, even though I was also at first a gold bug until I was able to analyze deeply. Good answers are clear, correct, and non-obvious. Work answer fulfills non-obviousness; I can't tell whether it fulfills correctness; it's definitely not clear.

Forex remove my downvote if it were about half as long. NickODell your criticism is that my answer should be more clear. Should I be responsible if macro economics are difficult for you to understand? Do you really think you should be voting if you don't understand the concepts? I don't think I can make it any simpler, it is very difficult for people to understand why both deflation and inflation transfer and concentrate wealth from the middle class to rich.

Bitcoin is a highly technical product. Developers of it need to understand economics. In any case, thanks for expressing your opinion. And giving me a chance to respond in kind. Please humor me with more anonymous downvotes. Bitcoin going forward will require transaction fees. How will it compete against a no transaction fee model with perpetual debasement?

Since current investment in Bitcoin hinges on expectation of rising demand from future transaction volume, such a competitor pops the ponzi bubble. Also due to lack of Litecoin's scrypt, it is no longer feasible to earn some Bitcoin with the excess CPU power idling wastefully on your PC to drive demand for transactions. And what's keeping bitcoin from widespread adoption? Whew, is your mind bent yet? I'd say high volatility in any direction would hurt merchants. Any decentralized currency will have that problem, even "freecoin", because you don't have a central instance that can decide to "peg" or "back" the currency to anything.

Bitcoin is still in its infancy. Should really become more established, the value will still raise, but more slowly and thus at a more predictable rate.

The idea is that "freecoin" would be limited on the upside by the cost of mining. Now it's possible that the value would still fluctuate a lot, really, within that range.

However, I think it would be much be much more stable because it is so obviously not going to make you rich by buying it turning off all the speculators. I upvoted bcz the freecoin paper makes the point I made in my answer. However the FAQ fails to discern that deflation vs. We need stable value that can't be manipulated for the benefit of any group. If we don't fix Bitcoin, we will setback this paradigm shift win for humanity. My other quibble with the paper, is the initial fixed difficulty could lead to excessive inflation or deflation while the system finds an equilibrium value.

Also Litecoin's scyrpt will more equitably spread the debasement. Litecoin's scrypt hash can't equitably distribute enough to counteract devaluation, because more capital buys a larger proportion. But this is devaluation relative to a currency that could maintain a constant share of computer power. The problem is that valuation always is relative to something else. So what to choose as the stable metric of value? Should stored value maintain a constant share of increased productivity, i.

Continuing from my prior comment, if the goal is to remove the ponzi instability, then the stable value should be relative to the unit-of-account that most people are calculating their ROI with. For the moment that is probably the dollar, but the dollar will likely be destabilized but not until after During the instability phase, gold will skyrocket for probably 3 years, but pegging to gold would not render a long-term stable currency.

So there needs to be means to decouple from the dollar as confidence in it plummets. Bitcoin is currently inflationary increasing in supplyhowever in the long run it has a maximum of 2. Any finite currency supply can be harmed by charging interest.

Your answer seems to miss the topic. The question is about whether hoarding hurts bitcoin. However, your answer seems to mainly address lending. The loan solves the how hurting of hording. Is not possessing every bitcoin kind of hoarding? You can say that interest leads to hoarding, by creating a demand for increased velocity, and increased supply to a supply that has a maximum.

People with economies of scale can leverage their bitcoins as loans causing btc amounts to consolidate hoard into the ownership of one person.

Hoarding in this context refers to just holding the bitcoin without spending them. Some people are worried that the low circulation speed might keep Bitcoin from becoming a widely accepted currency.

Deflation is discussed here: According to your analysis, a Michelangelo statue would be worthless today, because there aren't any more being produced and the economy has grown since No matter what your opinion on its abilities for wealth preservation, it has several other properties that make it valuable.

Do you actually understand those properties when you make work a comment? Sign up or log in StackExchange. Sign up using Facebook. Sign up using Email and Password. Post as a guest Name. Proclaim the Need for Net Neutrality. In it, you'll get: The week's top questions and answers Important community announcements Questions that need answers. Bitcoin Stack Exchange works best with JavaScript forex. I don't believe this can be answered reliably and therefore isn't suitable for this format.

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