Why Gresham's Law Doesn't Apply To Bitcoin And Fiat \ stacker news ~econ

Why Gresham's Law Doesn't Apply To Bitcoin And Fiat wikifreedia.xyz/a/naddr1qvzqqqrcvgpzphtxf40yq9jr82xdd8cqtts5szqyx5tcndvaukhsvfmduetr85ceqy88wumn8ghj7mn0wvhxcmmv9uqq6emjv4eksctdyaej6mrpwu6jnd3z

720 sats \ 24 comments \ @siggy47 16 Jun econ

I'm not sure I agree with this. I have thought of Gresham's Law in the past to explain lack of adoption, but maybe I'm wrong.

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117 sats \ 1 reply \ @grayruby 16 Jun

The hope is eventually bitcoin will prove to reverse Gresham's Law where good money will drive out bad.

92 sats \ 0 replies \ @Undisciplined 16 Jun

I agree that it doesn't apply, but that doesn't mean the principle can't be elucidating.

Sats and fiat don't have a fixed exchange rate, which is the premise of Gresham's Law. Dollars won't necessarily drive out Bitcoin for the same reason Argentine Pesos didn't drive out the dollar.

186 sats \ 0 replies \ @Coinsreporter 16 Jun

There's so much variety in fiat these days that Gresham, if living, would have to add a new dimension to his law. The law of a fiat replacing the other. But, that would interpret like 'A bad money replaces another bad money.'

75 sats \ 0 replies \ @TheBTCManual 17 Jun

I'm torn on this, like in some regard yes there people who apply greshams law, they hodl and spend their fiat first, which I think is still a smaller cohort, who see bitcoin as money

But theres a larger cohort that see bitcoin as just another asset, a stock, a way to get more fiat so their incentive is always to spend the Bitcoin at some point first to acquire that higher fiat number

96 sats \ 5 replies \ @DiedOnTitan 16 Jun

You buy a piece of candy for $0.10. Which dime do you spend, which dime do you keep? It's important to remember that Gresham's Law means that bad money "drives out" good money from circulation.

78 sats \ 4 replies \ @TNStacker 16 Jun

I'll take the Merc, please.

75 sats \ 3 replies \ @DiedOnTitan 16 Jun

No question. With 90% silver content, the melt weight alone is at least 10x the face value.

71 sats \ 2 replies \ @siggy47 OP 16 Jun

Of course. Just like you would get rid of shitty fiat and save bitcoin. Under this theory people will spend their shitty fiat first and save the good money. That's a strong tendency to fight against.

75 sats \ 1 reply \ @DiedOnTitan 16 Jun

Exactly. That's Gresham's Law. The interesting aspect of it for Bitcoin is that the world is still very much discovering what the "price" is. There is an increasingly real chance that 1 sat will become the global base unit of account effectively replacing USD and gold. When this happens, we flip to the Bitcoin Standard where everything gets priced in sats.

Having grown up in the fiat standard, we can wrap our heads around notions like the global economy is worth $100 trillion USD. We all know that there is nothing close to $100 trillion USD in circulation, but it's a unit of account we kind of understand (it's a large number).

If we flip this unit of account and internalize the value of the global economy to be worth 2.1 quadrillion sats (the total fixed supply), then 1 sat equals ~$0.04. Which makes 1 bitcoin worth $4,760,000. So...stay humble and stack.

24 sats \ 0 replies \ @TNStacker 17 Jun

96 sats \ 1 reply \ @0xbitcoiner 16 Jun

Cool find! I liked that it was a wikifrredia link 🤠

👀 stacker news wikifreedia

74 sats \ 0 replies \ @siggy47 OP 16 Jun

I know. It was the first one I have seen.

Nice job on the SN entry. Are you a frequent contributor?

96 sats \ 7 replies \ @SatsMate 16 Jun

I may be unpopular saying this, but I think It does apply to fiat and bitcoin.

If I understand my currency/monies, and I have $100 fiat and $100 bitcoin, and the restaurant gives me a tab for $125, I am going to spend all of my fiat ($100) and part of my bitcoin ($25). I wouldn't ever get rid of my bitcoin first as it is deflationary in nature.

The USD is the worse of the two, and any rational actor will tend to get rid of that first.

63 sats \ 6 replies \ @siggy47 OP 16 Jun

That's my perception also. It seems obvious, in fact. I have literally had people say to me at PubKey "why would I spend my precious bitcoin here when they accept dollars? "

86 sats \ 5 replies \ @03365d6a53 16 Jun

actually it's not obvious..

it's much more convenient to pay with btc than it is to purchase the local cash variant and pay with that

plus you're not supporting banksters

plus you're supporting a circular btc economy and helping to bootstrap the payment network

ALWAYS pay with btc. Spend and replace.

73 sats \ 0 replies \ @siggy47 OP 16 Jun

The fact that Gresham's Law is in play is obvious. Bitcoin is better money than fiat, and people want to hang on to it. This is especially true as fiat sheds value through inflation. Personally I spend bitcoin as often as I can, but I get a lot of pushback from hodlers who think I'm crazy.

21 sats \ 3 replies \ @joda 17 Jun

I've never seen a situation where Bitcoin is the most convenient way to pay. Even if a store takes Lightning, it's still easier to tap a credit card.

21 sats \ 0 replies \ @03365d6a53 17 Jun

pay with credit card?

how embarrassing.. to rely on a bank, to make a purchase.

0 sats \ 1 reply \ @SatsMate 17 Jun

Right or take the phone like a Harry Potter wand over the payment terminal. We need this level of ease of buying - the apple pay ease of hovering the phone.

21 sats \ 0 replies \ @03365d6a53 17 Jun

bitcoin nfc cards already exist, they've been out for ages

75 sats \ 0 replies \ @joda 17 Jun

I think the tendency is to save Bitcoin and spend fiat UNTIL you are all-in on Bitcoin, it's almost all of your money, and you are trying to go out and change the world.

Until then, Gresham wins.

54 sats \ 0 replies \ @TNStacker 16 Jun

The United States debased its coinage in 1838 out of necessity when it was found there was too much gold and silver in our coins. This made the coins worth more than their face value and encouraged their melting or export.

Necessity?!! Too much gold and silver in the coins?!! You couldn't make this shit up.

21 sats \ 0 replies \ @DiracDelta 16 Jun

Correct, it literally cannot apply.

"The choice to prefer to spend Bitcoin or fiat during some particular transaction is not primarily dependent upon which has the higher market value to the listed face-value as they are two completely different currencies and not two competing versions of the same currency."

If you like using words based on your "feelings" rather than accepting that words have meanings, fiat and leftism might be more your cup of tea than bitcoin.

0 sats \ 0 replies \ @Bell_curve 17 Jun

If we look at Argentina, the peso is so weak and unstable that people want dollars, the stronger currency. If a weak currency becomes worthless then people stop using it?