Don’t spend Bitcoin Myth

Thought experiment…I often hear, “who would want to spend their bitcoin if the price is going up!”, but let me explain why I think that does not make logical sense. To be clear, I know there are other hurdles to bitcoin serving as a medium of exchange, but I am simply confronting this one specifically. For easy math I am assuming the USD value of 1 BTC is $70,000.

Scenario A) Bitcoin Standard: Let’s pretend you make $10k / month and you choose to immediately convert everything to BTC and use that as both your store of value and medium of exchange. You now have 0.143 BTC. Now suppose you want to buy an iPhone, priced in USD at $1500, but that also accepts BTC at the current exchange rate, so the current price would be 0.021 BTC. You now have 0.122 BTC. Let’s fast forward 12 months and assume the price of Bitcoin against USD doubles. That 0.021 you spent on the iPhone would now be worth $3000! Oh man, what a waste, I wish I still had that Bitcoin. But not really…The 0.122 BTC you still have is now worth $17,080!

Scenario B) Bitcoin as 20% Savings Account: Now let’s pretend you decide to keep 80% of your paycheck in USD ($8000) and convert the other 20% in BTC (0.028 BTC). This way you can spend your USD and not worry about losing your precious BTC! So now you decide to buy that $1500 iPhone in USD. You now have $6500 USD and .029 BTC. Let’s pretend again that the price of Bitcoin doubles against USD. You still have $6500 in USD and the .029 BTC is worth $4060 for a total of $10,560. Darn.

Scenario C) USD Just for Spending: Okay maybe this time I’ll put 85% in BTC (.121 BTC) and 20% in USD ($1500) so I have just enough USD to buy the iPhone and everything else in BTC! Perfect plan! So now you buy that $1500 iPhone in USD and still have your .121 BTC. Let’s pretend again that the price of Bitcoin doubles against USD. You have $0 in USD and the .121 BTC is worth $3900 for a total of $16,940.

In all 3 scenarios you exchanged the same amount of value in that moment. If you paid in BTC, then yes you will never get that BTC back, and it could have increased in value. If you paid in USD, then you never had that BTC in the first place and would never have reaped the benefits of the increased value anyway! If you think Bitcoin is going to increase in value there is no scenario where keeping USD simply for purchases instead of BTC makes sense. What am I missing?