What to Know:
- Hodling Bitcoin could be counterproductive to its widespread adoption and utility as a transactional currency.
- Spending Bitcoin could strengthen its utility, foster broader adoption, and fulfill its original purpose as a peer-to-peer electronic cash system.
- Regulatory perspectives and financial systems need to evolve to accommodate Bitcoin as a currency.
Ripple’s XRP isn’t the only digital asset poised to revolutionize the global economy. Bitcoin, too, faces a crucial crossroads between being a store of value and a medium of exchange. However, this dual-nature is often misunderstood, leading to a lack of broad adoption and use.
“Hodl” has become the mantra of numerous Bitcoin enthusiasts who see the crypto as “good money” to be accumulated while spending “bad money” (fiat). This mentality, however, contradicts Bitcoin’s original intent as outlined in Satoshi Nakamoto’s whitepaper, “Bitcoin: A Peer-to-Peer Electronic Cash System.” It also contributes to Bitcoin’s lack of widespread adoption, as it is often viewed as a long-term investment rather than a transactional currency.
Hodling serves a purpose – saving for sizable purchases or early retirement. Still, the reality remains that this “good money” often needs to be converted into fiat to pay for these life milestones. On the other hand, spending Bitcoin creates a market demand for merchants to accept it, bolstering Bitcoin’s utility and adoption. It also demystifies Bitcoin for regulators, highlighting its practicality as a currency.
Bitcoin’s adoption problem gets complicated when merchants, pushed to accept Bitcoin, stop doing so due to a lack of spending by the ‘orange-pilled’ community. If Bitcoin isn’t spent today, it will struggle to become a universally accepted form of money tomorrow. It risks being relegated to just an investment vehicle, with regulators continuing to restrict its use as a currency.
A healthy balance between saving and spending can pave the way for a brighter Bitcoin future. This approach encourages more merchants to accept Bitcoin as a payment option, thus expanding its market penetration. Wallet providers could introduce incentive programs, offering customers discounts for spending Bitcoin. Companies like Binance are already providing cashback offers for Bitcoin usage in South Africa.
One significant drawback of spending Bitcoin is the complex tax implications. However, a rational approach from tax authorities, similar to the Australian Taxation Office’s stance, could change this. Until then, using automated tax calculation software to monitor Bitcoin transactions simplifies tax calculations and satisfies regulatory requirements.
Bitcoin’s original purpose was to be a global, censorship-resistant, and permissionless form of money. Its potential extends far beyond merely making people rich. Spending Bitcoin at a grocery store or coffee shop exhibits its speed, ease, and empowerment compared to fiat currencies.
Regulations, however, have yet to catch up with this reality. For example, the South African government classified Bitcoin as a “financial instrument,” not as money, which is how most people view it. Such classifications hamper Bitcoin’s real-world usage, leading to regulatory hurdles for crypto payment service companies.
For Bitcoin to fully realize its potential, it needs to shift from being a purely financial tool to a symbol of monetary freedom. The key is to spend Bitcoin, not just hoard it. After all, having a high-value asset that is never used is like owning a sports car that never leaves the garage.
Ultimately, Bitcoin adoption doesn’t happen by hoarding. It happens by spending. It’s time for Bitcoin holders to take the wheel and drive the revolution forward.
