Is increased merchant adoption reducing bitcoin's purchasing power? \ stacker news ~econ

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Is increased merchant adoption reducing bitcoin's purchasing power?

3616 sats \ 49 comments \ @Undisciplined 28 Jun econ

I don't know if this is part of the story of why NGU has been underwhelming, but I haven't seen anyone else bring it up.

The campaign to get people to spend their bitcoin, to the extent it's successful, will reduce bitcoin's short term purchasing power, because it is a direct increase in the supply of bitcoin.

"INCREASED SUPPLY OF BITCOIN!?! THAT'S IMPOSSIBLE!!!" I hear you screeching at me.

That's not what "supply" means, though, when we're discussing "supply and demand" (although it is what's meant by "money supply". Thanks economists)

In the simplest terms, "supply" is how much is available at different prices, not the total amount in existence. Convincing someone to spend their bitcoin more readily moves it to merchants who are perhaps more willing to exchange it for their local fiat (for instance, all the Square terminals accepting bitcoin and automatically converting it into dollars). That makes more bitcoin available at current fiat prices; i.e. higher supply.

Now, most of us expect (I think) that the increased usability of bitcoin will increase demand for it, which will lead to greater purchasing power, eventually. Increased usability comes before general awareness of increased usability though, which means purchasing power will fall before it rises (ceteris paribus).

Anyway, just some random ~econ musings. Might have nothing to do with anything.

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157 sats \ 2 replies \ @grayruby 28 Jun

Very few people are using Bitcoin as a MoE even if it is growing.

Trading volume on Bitcoin in the last 24 hours was 25B USD.

What I think is going on is the Bitcoin rallied aggressively after Trump was elected but much of it was leverage. Then we pulled back to 75k with the tariffs and have been grinding up and consolidating above 100k since then.

Purchasing power will go up over time as it always does.

50 sats \ 1 reply \ @Undisciplined OP 28 Jun

I suspect that's right. It just occurred to me that people were probably wrong to expect merchant acceptance to correspond with prices going up.

82 sats \ 0 replies \ @Bell_curve 28 Jun

As a merchant I think I want price stability or at least it changes or goes up gradually

107 sats \ 1 reply \ @SimpleStacker 28 Jun

Interesting take. I doubt the volume of this is large enough to be a major price determinant but maybe it plays a small role

Also, "supply" is probably the most overloaded term in econ

15 sats \ 0 replies \ @Undisciplined OP 28 Jun

Yeah, probably not relevant at the moment. It might be worth keeping in mind though, as merchant "adoption" picks up.

107 sats \ 13 replies \ @Scoresby 28 Jun

Ah, the ugly beast of supply and demand raises again its hoary head...

That makes more bitcoin available at current fiat prices; i.e. higher supply.

The person who spent the bitcoin was already willing to exchange it at current fiat price. And the merchant presumably will not so exchange it to another person at a loss. So their demand for the bitcoin is equal to the previous holder's demand for fiat.

I see no increase in supply / change in demand.

112 sats \ 12 replies \ @Undisciplined OP 28 Jun

The person who spent the bitcoin was already willing to exchange it at current fiat price.

Ahh, you're omitting the other component to supply or demand: they were willing (in some sense) but they were not able because they didn't have any. The bitcoin moved from hodl'ers who were persuaded to start spending it to merchants with much lower reservation exchange rates.

The supply increase really happens at the willingness-to-spend-more step. It's not in terms of fiat prices yet, but the exchange rate of bitcoin for stuff increased at that step, which is when the amount of bitcoin available increased (just not necessarily for dollars).

I don't really like talking about money velocity, but if you want to think of increased willingness to spend as increased velocity, you can get to the same place.

62 sats \ 11 replies \ @Scoresby 28 Jun

The bitcoin moved from hodl'ers who were persuaded to start spending it to merchants with much lower reservation exchange rates.

This is what I don't understand: why is the hodler's willingness to spend less meaningful than the merchant's?

The merchant is not willing to sell the bitcoin they receive at a loss, are they? So if they accepted it in exchange for some perceived value, I would think they would only be willing to sell that bitcoin in exchange for a similar or greater value. I can't imagine why we would expect a merchant who accepts bitcoin at a certain level to have any greater willingness to spend than the holder who sold it at the exact same level.

27 sats \ 10 replies \ @Undisciplined OP 28 Jun

The merchant didn't have any bitcoin before they started accepting it in trade (or they had already sold their bitcoin at the current price). The transaction gives them more bitcoin to exchange for fiat, which the customer was not willing to do.

You're confused because these are what economists would probably call irrational preferences, but we know there are bitcoiners who are willing to use their bitcoin as money but are not willing to sell it for fiat.

42 sats \ 9 replies \ @Scoresby 28 Jun

The merchant didn't have any bitcoin before they started accepting it in trade (or they had already sold their bitcoin at the current price).

We assume this because in the example the merchant is auto-converting to fiat, right?

If so, would you say a hodler who sells to another hodler increases the supply of bitcoin?

102 sats \ 8 replies \ @Undisciplined OP 28 Jun

We assume this because in the example the merchant is auto-converting to fiat, right?

Right. You could also infer their different valuations from the fact that the merchant is auto-converting and the customer wasn't.

A hodler who becomes more willing to spend increases the supply of bitcoin. That's basically tautological. However, it might take several steps for that to work through to fiat prices if the spending is with another hodler.

We could contrive scenarios where there's no impact on btc/fiat exchange rates, though, and maybe even where they move the other direction,

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63 sats \ 4 replies \ @Bell_curve 28 Jun

Interesting theory but I think miner profits and ETF flows are the 2 biggest factors affecting NGU

most miners are still struggling to break even and have been forced to sell more bitcoin (hodl less) to stay alive... July and August should be interesting since a lot of miners turn off their machines because hot summer months means higher electric bills
ETF flow is a new important factor to monitor, https://jan3.com/monthly-etf-flows/

177 sats \ 3 replies \ @Undisciplined OP 28 Jun

On the first point, is that because price has stayed pretty flat while difficulty has continued rising?

52 sats \ 0 replies \ @BlokchainB 28 Jun

At $52 per PH/s/Day, hashprice is close to – or at – breakeven for many miners depending on operating cost and machine model type.

Source

52 sats \ 0 replies \ @BlokchainB 28 Jun

Correct!

42 sats \ 0 replies \ @Bell_curve 28 Jun

Yes

I would say the biggest factor is higher than expected difficulty

62 sats \ 1 reply \ @OriginalSize 28 Jun

One bitcoin buys $107,353 right now. That's not too shabby.

10 sats \ 0 replies \ @Undisciplined OP 28 Jun

It's not, but I started wondering about this when people expected the price to rise when Steak n Shake and Square started accepting bitcoin.

I think that was the wrong expectation, and not because there weren't enough people spending bitcoin.

63 sats \ 2 replies \ @Coinsreporter 28 Jun

Increased usability

The misinformation and most people still not knowing about Bitcoin is the reason for Bitcoin's slow progress.

30 sats \ 1 reply \ @Undisciplined OP 28 Jun

I'm in the camp that thinks bitcoin is making amazingly fast progress.

21 sats \ 0 replies \ @Coinsreporter 28 Jun

I'm also in the same camp but maybe not at the same place.

52 sats \ 2 replies \ @itsrealfake 28 Jun

so,

is the updated advice "spend bitcoin to new plebs, who understand that it's a savings mechanism"?

or is it still "just do what you want with your money and let the market figure it out"?

at 2Trilly... I'm not sure how much impact retail has

177 sats \ 1 reply \ @Undisciplined OP 28 Jun

My advice is still "just do what you want with your money and let the market figure it out".

This is more about informing our expectations of what the effects will be.

52 sats \ 0 replies \ @itsrealfake 28 Jun

I think there's something to the "plebs are on a team, and we can coordinate the message" thing too.

it's kinda why I would encourage people to sell to their friends, so their friends can get gains in the long term.

obviously, people will do what they want tho

52 sats \ 1 reply \ @OT 28 Jun

I guess it's possible, but I don't think there would be enough merchants to counter the massive buying by ETF's and now companies putting it on their balance sheets.

I think it's just that most people who have been in Bitcoin for some time don't think of it like we do. All the bitcoiners here, on Twitter and nostr are the minority. Most see it as a way to get more fiat and they are selling it.

It's unfortunate, but it is what it is.

52 sats \ 0 replies \ @Undisciplined OP 28 Jun

Fair enough.

I wanted to put this idea out there because I do think it's relevant to how we should think about the effects of increased adoption. We likely aren't in a place where it's a driving factor yet, though.

43 sats \ 6 replies \ @fiatbad 29 Jun

The dollar is clearly a piece of junk who's value has decreased by 99% since its genesis.

Yet, it's still the most powerful fiat currency, capable of preserving purchasing power more than any other. This is due to the fact that it is the most USED currency for global transactions. The usage supports and perpetuates the value, even against the headwinds of Cantillionaires (and the US gov) siphoning much of the value away.

Usage clearly is an incredibly important input to the equation. Imagine if Bitcoin were USED for even a little bit of global trade.

I’m not certain we’ll ever witness that day, considering that here in 2025, even those among us who comprehend the significance of the stakes persist in prioritizing convenience over liberty.

12 sats \ 5 replies \ @Undisciplined OP 29 Jun

I agree that usability increases demand for a currency. This was about the short term effects of changing mindsets from hodling to spending.

I'm pretty sure we'll see bitcoin become a significant medium of exchange. There's so little downside for accepting it that I expect most merchants to accept it as payment within the next few years. At that point, orange pilling becomes much easier, since it's easy to answer the "What can I do with it?" question.

42 sats \ 4 replies \ @fiatbad 29 Jun

I had a conversation with a bartender in Nassau the other day....

I was asking how I could pay and mentioned I'd prefer using Bitcoin if possible. She chuckled and proceeded to tell the following story.

Recently, a group of people swept through the city onboarding merchants to "Bitcoin". It didn't sound like they helped upgrade their PoS systems to use Bitcoin.... it was more like they onboarded them to "invest". Of course, it was a scam, and the group just left with the money.

Obviously, this isn't how real Bitcoin works. But it did highlight for me how far regular merchants and regular people are from being able to properly accept and self-custody real Bitcoin. They have been scammed so many times by groups claiming to be using "Bitcoin". Similar to how most American retail feels after the FTX fallout of 2022.

Ultimately, it's an education issue. Those same merchants, at some point, had to educate themselves to use fiat rails without being easy prey to scammers. It's no different. It's not Bitcoin's fault, it's theirs for being so uneducated.

They will educate themselves when they see others successfully using Bitcoin in commerce without being scammed left and right. They will educate themselves when their suppliers and customers say they will only trade in Sats.

It's not the responsibility of Bitcoiners to educate the world. But it is our obligation to stop using fiat. To set the example. To show them what we think of fiat. To stop accepting fiat for our goods/services. This will create a ripple effect.... and eventually the Nassau merchants will learn.

But this will never happen if SoV is all we focus on. If we don't stand up against fiat, we will get incredibly rich while the rest of the world perpetually suffers under The Creature. Wealthy, but complacent (in aiding slavery) and empty of virtue.

12 sats \ 3 replies \ @Undisciplined OP 29 Jun

I'm guessing that most merchants will not accept bitcoin until their current PoS service offers bitcoin support.

42 sats \ 2 replies \ @fiatbad 29 Jun

That sucks, cuz it almost always leads to custodial options.

The merchants who learn to take self-custody will be rare. And the world may not change much, as we'd hoped.

Roger Ver would argue this is the fault of the protocol. But, I think it's the fault of the people. Humans are lazy. Nassau merchants are who layer 3 protocols such as Fedimint are for. Such protocols, while not much of an upgrade from fiat banking, ARE objectively still an upgrade from fiat banking, and should be praised by the Bitcoin community. (that's right @justin_shocknet , I'm still picking at this bone!)

0 sats \ 0 replies \ @justin_shocknet 29 Jun

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0 sats \ 0 replies \ @Undisciplined OP 29 Jun

I don't know. I think it's just a starting point. Some will begin trying to understand it further and get into self-custody.

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42 sats \ 1 reply \ @optimism 28 Jun

What % of volume do you think is consumer-to-merchant vs "investment"/speculation?

0 sats \ 0 replies \ @Undisciplined OP 28 Jun

Probably very little. This was more to get the idea out there for when MoE usage is a significant fraction.

42 sats \ 2 replies \ @Bell_curve 28 Jun

I think the biggest obstacle to merchant adoption is POS systems. How can we make it easy for retailers to accept bitcoin?

Slightly off topic

10 sats \ 1 reply \ @Undisciplined OP 28 Jun

What do you think of how the Square terminals rolled that out? I haven't tried one yet.

42 sats \ 0 replies \ @Bell_curve 28 Jun

I totally forgot about square so it was even on my radar

CoinOS has been doing a great job recruiting merchants in British Columbia and parts of Latin America by focusing on local small businesses and communities

I am not being paid by CoinOS to promote them

I have been impressed how a 2 person operation has grown especially in the area of merchant adoption

I suspect CoinOS is easier and cheaper to implement than square

21 sats \ 2 replies \ @Bell_curve 2 Jul