A big deal is made out of the fact that more than three quarters of Bitcoins are not in circulation. Only about 28% are used in transaction. Now, ignoring the fact for a moment that perhaps a large proportion of the 28% are being moved between addresses held by the same people, and are therefore not really being used (a bit like a multi-millionare moving his or her funds between bank accounts), is this "hoarding" really a problem?
Well, this Wikipedia page claims that the top 5% of Americans hold over 50% of the wealth. Presumably they're sitting on most of it - so over half of American wealth is being hoarded. And the top 20% hold 85%, which is remarkably close to the Bitcoin hoarding figures.And yet the US economy keeps ticking over nicely.
Suddenly Bitcoin hoarding doesn't seem like so much of a problem to me.
Hmmm… I don't think that particular measure of American wealth is the same as total-Bitcoins-in-existence. Most of the 'wealth' included in the above statistic is the value of stuff (debt, equity, property and so on). The number of Bitcoins in circulation is a measure of M0 in the US Money Supply sense (see Money Supply. I think, but I don't know, that the US Federal Reserve would consider it a problem if most of the dollar bills were hoarded. But then, they can just print some more ;-)
ReplyDeleteNo one has really gone beyond M0 for Bitcoin just yet. Will people be prepared to start fractional reserve banking with BTC? I can't see why not, it all started with gold smiths holding gold & silver, after all.
You can fairly easily introduce a version of fractional reserve banking by introducing a new alternate cryptocurrency with an unlimited upper bound and only allow government servers to "mine" them (Britcoin? Fincoin?). You could also back this alternate currency with a pool of traditional old Bitcoins. It might happen.
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