Someone explain this to me…happy to admit if I'm missing something.

Assumption 1: Bitcoin has value because of its use of a currency, given that it avoids middlemen and traditional barriers of exchange.

Assumption 2: Since supply is limited, Bitcoin will increase in value over time, with Demand continually increasing with adoption, population growth and economic prosperity.

  • So Bitcoin essentially gains value when people use it as a currency, HOWEVER, Bitcoin also incentivizes people not to use it as a currency, since it is increasing in value over time (if you spend it, you lose the return you would gain by holding it).
  • This means that people who hold Bitcoin want other people to spend the currency, but have no incentive to do so themselves. This creates an unsustainable system given that people either spend their currency and miss out on return or hold their currency and hope others miss out on the return.
  • Therefore, the above assumptions CANNOT BOTH HOLD. At least one of them must be violated.
  • Bitcoin either doesn't have value as a currency, in which case the value is either inflated or from some other source (though given its infrastructure for its use with transactions, this seems unlikely) OR Bitcoin will NOT increase in value over time, in which case…why are we hodling?

submitted by /u/ABagelThatIsPlain
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Source and link to Reddit topic: The Bitcoin Paradox