> but it's a much more reasonable policy than holding and never spending
It seems to me that what you are doing is actually not "reasonable". If you are assuming that Bitcoin is going to increase in value over time (or at least not decrease), then you should be spending all your dollars first (which are known to decrease in value over time).
The issue of whether merchants can offer discounts based on lower transaction costs would make these crypto-currencies more attractive (if that is the case) but it is not relevant to the discussion of inflation vs. deflation.
Dollars and Bitcoin are easily interchangeable, so the concept of spending dollars first doesn't make sense to me.
The amount of Bitcoin someone holds is based on their belief in Bitcoin's future success, their wealth, their spending needs that can only be transacted in dollars, and their backup plan in the likely event that Bitcoin becomes worthless. Once you've reached the proper balance for your risk tolerance, whether you spend Bitcoin or dollars is irrelevant, other than the 1% fee to switch between the two. Even if you think Bitcoin will triple in price tomorrow, it still makes sense to spend Bitcoin today because you can easily replace it with Bitcoin purchased at the current price.
> Even if you think Bitcoin will triple in price tomorrow, it still makes sense to spend Bitcoin today because you can easily replace it with Bitcoin purchased at the current price.
No, it doesn't make any sense, because you'd have to pay 3x as much to replace that Bitcoin. That's the whole point.
That's also why you should spend your dollars first. Even if Bitcoin value doesn't change a bit the dollar becomes worth less every day, which means you can buy less and less and less Bitcoin with that dollar as time goes buy. Better to use the dollar while its value is still at a maximum.
With Bitcoin the value will likely keep going up, especially once the supply crunch happens. A Bitcoin you give up today will be harder to recover tomorrow, the day after that, etc.
Accordingly you are wasting money if you're spending Bitcoin now which will be more valuable in a year while you have dollars you could be spending for the same thing that would otherwise be worth less in a year.
You might make the decision to use Bitcoin regardless, but that's a decision based on your own policies and wants, not a decision based on maximizing the value of the currency you spend.
"No, it doesn't make any sense, because you'd have to pay 3x as much to replace that Bitcoin."
No I wouldn't.
I walk up to the merchant. "Oh, you'll accept my $20 payment in Bitcoin? Ok, I'll pay with that." As I walk away, I tap four times on my phone to convert $20 worth of USD to Bitcoin. My loss is the 1% charge to convert, plus the bid-ask spread, not the 200% gain from tomorrow. I still get that.
I consider 1% a reasonable price to pay to promote Bitcoin. I don't think it'll be necessary for much longer.
assuming there are lots of bitcoin retail options (only one in my town and that is me), there are definitely scenarios where using bitcoin is preferable to dollars even if btc is to rise rapidly. some are futuristic: 1. merchant discount (from, say, no chargebacks) 2. merchant slight discount where the cost of not using credit payment processor savings is passed onto consumer 3. ease of use (I would like to touch my smartphone screen to pay for something) 4. more bitcoin exchanges make procurement freeish and immediate (possibly through an app) 5. quasi anonymity (buying something no one else has to know about). 6. ?
> I consider 1% a reasonable price to pay to promote Bitcoin.
Yes, that's why I say you are following policies of your own choosing. ;)
In a way though you're both "right"... you're still spending your dollars after all, only via an intermediate form in pursuit of your desired currency goals.
It seems to me that what you are doing is actually not "reasonable". If you are assuming that Bitcoin is going to increase in value over time (or at least not decrease), then you should be spending all your dollars first (which are known to decrease in value over time).
The issue of whether merchants can offer discounts based on lower transaction costs would make these crypto-currencies more attractive (if that is the case) but it is not relevant to the discussion of inflation vs. deflation.