Post
Topic
Board Economics
Re: Does bitcoin suffer from Gresham's law?
by
wasserman99
on 06/09/2014, 21:34:19 UTC
Gresham's law implys that when given a choice between two currencies to spend, people will choose the less valuable one.
bitcoin, being the ultimate form of money suffers from this effect (much the same as gold).
if i can buy something using fiat or using bitcoin ill choose fiat, because fiat depreciates rapidly and bitcoin is valuable and rare.

if I'll pay with bitcoin I'll have to go through the hassle of converting fiat to bitcoin to compensate myself for the loss of bitcoin.

this could limit bitcoin's ability to function as a common currency and instead just serve as a store of value.

More valuable when compared to what? If you have a currency exchange then you could simply exchange one currency for another. If this was true then why are people not paying for things in pennies and one dollar bills instead of twenty dollar bills? A one dollar bill is 1/20 of the value of a 20 dollar bill and a penny is 1/100th the value of a dollar bill.