I’m Hoarding Bitcoins, and no you can’t have Any

One of the ways to help deal with the temptation to spend is to demand a Bitcoin discount at any store that accepts Bitcoin. But how can we convince businesses to accept bitcoins if no one will spend them? At a market cap of two or three billion dollars, Bitcoin can absorb many small businesses but it cannot be used for international oil trade. The business that bitcoins can absorb is limited by its market cap. Currencies are unusual in that the greater is its market cap, the more useful they are. This is in contrast to a more ordinary security, such as a stock, because a stock has a better value the cheaper it is in relation to the underlying assets of the company. The more greedy people are for Bitcoin, the better are its chances. The more bitcoin hoarding there is, the better it is as a medium of exchange. Furthermore, each subsequent step in Bitcoin’s advance must begin with more holders, not more spenders. It is true that Bitcoin’s price can occasionally and temporarily outpace the growth in its real prospects, but this is merely a byproduct of Bitcoin’s phenomenal success.

However, does it make really sense to prefer an alternative history for Bitcoin in which its price has increased slowly enough that it never developed any manias? A commodity which increases in price as quickly as bitcoins can be expected to experience shocks and manias on its way up because it would be difficult to tell the difference between a sustainable price increase and short-term speculation. This is perfectly reasonable because not only is the store lowering its own costs by using Bitcoin, but it is asking me to give up an inherently superior commodity. One of the most annoying things about Bitcoin is that it’s so convenient to make payments with it that sometimes it is extremely tempting to spend it and avoid the hassle of using dollars. But none of them wants to take payments in Bitcoin! If you really want him to start accepting bitcoins himself, ask him, “Do you take worthless paper money at this store?

Why would the merchant want something that you, apparently, don’t want? And then when the merchant later says “I’m not going to do that anymore. “I’ve been going to all the local stores and telling them how awesome Bitcoin is! Tell your local merchants that you want to be able to spend cash in their stores and get the change in bitcoins. We need to guilt those hoarders into spending their bitcoins to support the merchants! Who Needs Merchants Anyway? The initial price of bitcoin was caused by people who wanted to hold it, not people who wanted to spend it. It would have to be dozens of times more expensive for that, and it can only achieve that if the peoples’ desire to hold bitcoins continues to increase faster than their desire to spend them. Belief in Bitcoin improves the Bitcoin network, as long as people back-up that belief by the the action of acquiring and holding more. I conclude with one proviso: it can be very effective to give out small amounts of bitcoins just to help accustom people to having them. You should never want people to spend more-you should want everyone to be as greedy as possible.

I want you to pay me in bitcoins! There really is no compelling reason that anybody should spend bitcoins any time soon-if everybody is hoarding, that will just make the price go up until finally someone can’t help spending some. Thus, one who wants Bitcoin to become mainstream should never want its price to be lower. He should want an ever-increasing supply of hoarders. You are essentially telling the merchant, “Hey look at this totally awesome thing that I want to get rid of! Look at how gleeful he is as he buries it in his basement. Doesn’t he look terribly happy? Doesn’t he look so cute poring over his copy of Atlas Shrugged? Now let his avariciousness flow over you. Let your hands clutch! Let you teeth clench and your mouth contort into a covetous grimace. Let it seep under your skin. Let him out and come to terms with him. Let him roll in your bitcoins. There can be no spending of bitcoins without the buying of them, and thus all use of bitcoins as a medium of exchange depend on someone who wants to increase his holdings, i.e., a hoarder. They won’t use bitcoins because they think they’ll be worth so much more later.

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