Bitcoin Companies Are Compounding the Bitcoin Hoarding Problem

By Bitcoinist.net Aug 6, 2015 7:00 PM EST

Bitcoin hoarding has been dubbed as one of the “major problems” hampering the adoption growth of this disruptive digital currency. While there are over 14 million bitcoins in circulation at the time of publication, only a fraction of that amount is changing hands on a regular basis. As a result, there are a lot of coins not moving to different owners, leading to various addresses “hoarding” bitcoins.

Also read: New Economy Movement Focuses on Equal Opportunities

Consumers not Incentivized to Spend Bitcoin

Bitcoinist_Bitcoin_Hoarding incentiveOne of the more common reasons for the Bitcoin hoarding problems can be blamed on lack of incentives for consumers to spend Bitcoin. While merchants are reaping the benefits from paying lower transactions fees on Bitcoin transactions, the everyday consumer is still paying the same amount for goods and services, rather than receiving a discount.

On top of that, the number of merchants accepting Bitcoin payments is still fairly low, despite that number increasing over time. Despite there being lower transactions fees for merchants, as well as the option to has Bitcoin transactions converted to fiat currency and receiving the money in their bank account the next business day, most people are still wary of Bitcoin.

At this time, the Bitcoin ecosystem is in a make-or-break phase. Either the number of transactions will continue to increase, regardless of incentives to spend BTC for goods and services, or the number of transactions will start to decrease very soon. Luckily for Bitcoin enthusiasts, the latter does not seem to be as worrying as it sounds, as more and more Bitcoin transactions are recorded on a quarterly basis.

Merchant adoption is not the only factor influencing the Bitcoin hoarding issue, though. As long as the Bitcoin community can grow, there will always be enough reasons to send Bitcoin transactions to other people in the world. Loans, wages and even gifts in Bitcoin are a great way to support friends, family and loved ones.

Various companies around the world have been focusing their efforts on bringing Bitcoin — and blockchain technology — to all corners of planet Earth. Many people have limited to no access to a financial infrastructure, and Bitcoin could present a financial vehicle these people have been waiting for for a long time. But these companies are, in their own way, also a part of the Bitcoin hoarding problem.

Bitcoin Companies are Hoarding BTC as Well

Bitcoinist_Bitcoin_Hoarding companiesEvery Bitcoin company is earning their revenue in BTC directly, which is their main purpose of being active in the digital currency ecosystem. On top of that, most of these companies will pay their staff – either in full or partially – in Bitcoin as well, creating a list of transactions every month. As a result, Bitcoin companies are trying to fight the hoarding system in a way.

But here is the twist: there is always a portion of BTC left in the company’s wallets that are not being transferred. There is no reason to convert those Bitcoins to fiat currency when it’s not needed, but there are other expenses that can be paid with this BTC balance. One of those expenses is advertising and marketing, an area Bitcoin companies will have to work on if they want to help digital currency gain mainstream adoption.

It is no secret that Bitcoin has a serious PR problem, due to mainstream media associating the digital currency with fraud, scams and hacks all the time. Every Bitcoin company has the responsibility to help push Bitcoin awareness and adoption to new levels. Advertising and marketing efforts are the easiest way to do so, as these types of campaigns will attract new customers from all over the world.

There is an argument to be made on behalf of these companies as well, however. Various Bitcoin companies will not pay for advertising campaigns due to the low BTC price at this time. There is a certain merit to that statement, but the Bitcoin price will not increase as long as people keep hoarding coins either. “You have to spend money to make money” seems to be an appropriate saying in that regard.

What are your thoughts on Bitcoin companies affecting the hoarding problem? Let us know in the comments below!


Images courtesy of Shutterstock

The opinions expressed in this article do not necessarily reflect those of Bitcoinist.net.

Originally posted on: Bitcoin Companies Are Compounding the Bitcoin Hoarding Problem

Facebook Comments


  • Would you take out a loan to pay your current expenses in the hope that your hoard of bitcoins will increase in value in time for you to sell fewer of them to pay off the loan than you would need to sell now to pay those expenses? I can’t see anyone ever doing that except maybe for very short-term loans taken out in a perceived bubble. So over time more and more bitcoin whales will need to begin selling their stash for routine expenses — in other words, they will just need the money. Thus, hoarding must inevitably diminish. You can’t eat the future.

  • Hoarding is the right thing to do.
    People will spend the worst type of money first (fiat) and the better (Bitcoin, gold) later, unless there is a good reason to do differently.

    For example, if the same vendor sell the same good at the same price in $ and Bitcoin, I will pay in $.
    If the same vendor sell the same good at a 10% discount if I pay him with bitcoin, I will consider to pay him in bitcoin. I surely pay him in bitcoin if I get 15% in discount.

  • Marco Maltese

    Tell whales to spend and spread the currency, not people that only earn their everyday life.

Read previous post:
Macintosh’s First Firmware Worm Developed, Bitcoin Implications Dire?

For many years, two major computer operating systems have been considered to be more secure than Microsoft’s Windows. Both Mac...

Close