Can you buy a cup of coffee with Bitcoin? If you can, should you? If you own Bitcoin and choose to sit on it and not spend it, are you hurting the economy at large? Are you hurting or slowing Bitcoin’s growth? According to the Foundation for Economic Education (FEE) Director and author of thousands of scholarly articles, no, you are not.
To HODL, or Not to HODL?
In an article titled, “In Defense of Bitcoin Hoarding,” author Jeffrey A. Tucker details some of the logical fallacies and counter-intuitive logic that many have levied against Bitcoin. More specifically, he targets those who speak ill of ‘HODLers.’
Tucker compares the current economic situation of Bitcoin to traditional Keynesian economic theory. According to Keynesian economics, “economic growth is driven by consumer spending, not saving.” By this logic, holding and not spending Bitcoin is damaging the economy and inhibiting growth. But is this true? Moreso, does it apply to Bitcoin and other cryptocurrencies?
“Bitcoiners are HODLers. They save. They hoard. They have turned against consumption in favor of saving.” – Jeffrey A. Tucker, FEE Director
Diving deeper into this concept, Tucker outlines why it makes more sense for holders of bitcoin to continue holding their assets and not spend them. Bitcoin prices have seen a constant upward trend. If one were to use bitcoin for their daily expenses, they would surely lose out in the long run. This same logic would apply to any asset. For instance, if gold prices were surging, and had been on a huge upward trend for a long time, selling it would be foolish.
Tucker writes that there is “nothing selfish, strange, or weird about holding an asset that is rising in value. It would be irrational to do otherwise.” Indeed with bitcoin’s meteoric rise during 2017, any satoshis spent in January would be met with utter regret by the individual in December. Conversely, spending an inflationary asset or currency – one that drops in value – makes perfect sense. The sooner you spend it, the more bang you get for your buck.
Fiat currencies which are designed to be inflationary, are the perfect example of this. One US dollar in 1980 had the same purchasing power as $2.99 in 2017. Simply put, the value or purchasing power of a single US dollar has dropped by a considerable margin. To the logical investor, it would only make sense to use bitcoin as a currency once its value is established and rapid price swings become a thing of the past.
“In some ways, Bitcoin was invented to be the ultimate anti-Keynesian monetary praxis.” – Jeffrey A. Tucker, FEE Director
Tucker’s article concludes with several comments about his experience observing bitcoin holders. He notes that they “turn down luxury consumption. They don’t own cars. They bike and walk. They don’t spend big on dinners.” and “They know that everything they consume today eats into their capacity for consumption, investment, and building wealth for the future.”
Tucker ends the article with a single, completely apt statement. When it comes to the opinions of financial pundits, “Technology doesn’t care.”
by: Robert DeVoe
SOURCE: https://btcmanager.com/hodl-says-foundation-economic-education-director/