Bitcoin has a lot of potential since it is a fascinating work around of traditional fiat currencies. Bitcoins are needed to be all over the world. They are a revolutionary way to increase personal freedom, economic freedom and prosperity for everyone. If Bitcoin use continues to spread, given the fixed supply there is a reasonable chance that someday the Bitcoin I own may be worth a respectable fortune. A lot of the people who bought Bitcoin early on are probably of the same opinion. But that attitude is putting a strangle hold on the adoption of Bitcoin.
The Bitcoin Millionaire Syndrome is where individuals are hoarding Bitcoin due to its potential value, therefore it is keeping Bitcoins out of the hands of people who need them as a medium of exchange. In economic terms the velocity of 50 to 70 percent of the Bitcoins in circulation is practically zero (http://eprint.iacr.org/2012). If Bitcoin were to be adopted by even a fraction of the world as medium of exchange then each of the 11 million Bitcoins in existence would be much more valuable than they are now. Therefore early adopters expect to be better off than the late adopters.
It is up for debate as to whether Bitcoins are backed by the value of the computing power and electricity used to create them. What is not up for debate is that Bitcoins represent a praxeological and real way to exchange and account for value. Those properties are needed universally by individuals for their day-to-day economic calculations. Those properties in fiat currencies today are all hugely distorted by inflation from government spending/printing and from monetary expansion as a result of fractional reserve banking.
I worry tho that my hoarding and lack of participation in the Bitcoin economy is accomplishing the opposite of what I like about Bitcoin’s potential. From now I will be looking for ways to participate in the economy. That may mean selling half of my Bitcoin or maybe loaning them to an individual so the Bitcoin circulates but eventually come back into my possession. Whatever action I take it will be better than just sitting back and waiting for Bitcoin’s widespread adoption.
Cha Ching and until next week (hopefully),
picture is from http://transhumanity.net/articles/entry/bitcoin-a-means-for-redistribution-of-wealth