Quote from: hugolp on July 21, 2011, 09:35:50 AM

Quote from: nakowa on July 21, 2011, 09:15:04 AM

If Bitcoin is a currency with deflation property, that means BTC has to be appreciated (which in reality means BTC is a fancy collectible)

Therefore a rational BTC user will hold BTC rather than spend it.

but if no one spend BTC, then what's the point of such a currency?

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who can help me find out the fallacies in this reasoning? thank you!

1. The price of bitcoins depends on supply and demand just like anything else. Only the supply of bitcoins is known, the demand is unknown. So the price of bitcoins (that is the purchasing power of bitcoins) is unkown and can change. Because usually the productivity increases with time, its assumed that the purchasing power will go up, but in the short run nobody really knows.

2. Its false that people stop spending when money appreciates (I dont even want to go into defining what a rational person is, the fact of the matter is that people spend even when money goes up in value). Bitcoin merchants have reported that when the price of bitcoins were rising sales were higher, as people were lured by the lower prices. You also have numerous examples in history of price deflationary economies were people kept spending.

The idea that people dont spend because a currency appreciates is just a myth.

+1