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296 sats \ 4 replies \ @SimpleStacker 26 May \ on: Gresham's Law has nothing to do with Bitcoin bitcoin
I don't agree. Gresham's law is originally about the commodity value of the currencies, but I'd argue that limiting its application to currencies with commodity value is too narrow.
More generally, Gresham's Law says that the currency which is perceived to be undervalued by the market won't circulate because people would rather hold onto it. In this instance, most Bitcoin hodlers perceive Bitcoin to be undervalued by the market and thus prefer to spend fiat while holding bitcoin.
I think it's a proper application of Gresham's Law to explain why Bitcoin circulation is low, but I don't think it's the only explanation for why circulation is low.
perceived to be undervalued by the market
this is incorrect. It's not a subjective perception, but an arbitrage-style price ceiling/floor guaranteed by a mint or a government.
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Right, i agree, but all I'm saying is that whether by perception or by objective arbitrage, the strategic incentives are similar, resulting in similar dynamics.
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The important difference is that there's no fixed exchange rate with bitcoin.
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Well, if you want to take Wikipedia as a common definition...
Under Gresham's law, "good money" is money that shows little difference between its nominal value (the face value of the coin) and its commodity value (the value of the metal of which it is made, often precious metals, such as gold or silver),
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