> Bitcoin was built to be a currency, to be used to trade for goods and services. However, a significant portion of BTC is being hoarded and not traded
This could easily be an instance of http://en.wikipedia.org/wiki/Gresham%27s_law in action, whereby BTC is considered "good money" by its holders and USD (etc.) considered "bad". i.e. When you take your sack of coins to the market, you spend the shaved and nicked coins first, reserving the finest coins for some more important transaction.
> thus leading some (like Nobel Prize laureate Paul Krugman) to argue that it's not a currency at all, and any value is purely speculative
This doesn't necessarily follow, if you understand Gresham's law. i.e. it's not a question of what is or isn't currency, but rather which form of currency is held more dear. This is, of course, a form of "speculation", in the broadest sense of the term.
Yes, I agree that the strict interpretation of Gresham's law is not exactly applicable here, since there is no enforced BTC-USD rate. But the broader sense can still inform, along the lines of Rolnick and Weber:
> They also focused mainly on the interaction between different metallic monies, comparing the relative "goodness" of silver to that of gold, which is not what Gresham was speaking of.
Comments
> Bitcoin was built to be a currency, to be used to trade for goods and services. However, a significant portion of BTC is being hoarded and not traded
This could easily be an instance of http://en.wikipedia.org/wiki/Gresham%27s_law in action, whereby BTC is considered "good money" by its holders and USD (etc.) considered "bad". i.e. When you take your sack of coins to the market, you spend the shaved and nicked coins first, reserving the finest coins for some more important transaction.
> thus leading some (like Nobel Prize laureate Paul Krugman) to argue that it's not a currency at all, and any value is purely speculative
This doesn't necessarily follow, if you understand Gresham's law. i.e. it's not a question of what is or isn't currency, but rather which form of currency is held more dear. This is, of course, a form of "speculation", in the broadest sense of the term.
Gresham law works only when the exchange between the good/bad money is fixed. Usually by a government/sovereign decree.
Otherwise quite the opposite is observed in real world. There's even a word for it. Dollarization.
Yes, I agree that the strict interpretation of Gresham's law is not exactly applicable here, since there is no enforced BTC-USD rate. But the broader sense can still inform, along the lines of Rolnick and Weber:
> They also focused mainly on the interaction between different metallic monies, comparing the relative "goodness" of silver to that of gold, which is not what Gresham was speaking of.
(from the wikipedia article)