| > deflationary ... there's an incentive to hoard it rather than spend it. By that logic, everyone would put their dollars into investments that beat inflation (this is a form of saving). Yet they do not. You can hold (hoard?) securities (VBLTX, HTS, JNJ) that beat inflation, yet people spend dollars on depreciating assets (cars, computers). There are other less-risky financial instruments [1] that beat nominal CPI, yet people spend dollars. > Doesn't that mean that it's expected to rise in price? Sure, relative to an inflationary currency. But bitcoin fluctuates quite a bit. By they way, currency is just a good, like anything else. One trades currency for some other good that one values more than the currency [2]. [1] http://www.mint.com/blog/investing/beat-inflation-with-i-bon... [2] http://en.wikipedia.org/wiki/Time_preference |
No-one buys a dozen computers and puts them in their basement as savings for retirement. People buy cars and computers to use, not as investments. People with nontrivial quantities of "spare" dollars generally do put them into inflation-beating investments.