“One big reason is its utility. There are no middlemen, no large transaction fees, and no limits on amounts sent to anywhere in the world. Transactions are fast, and secure for the most part.”
Transactions aren’t *that* fast. One can easily spend 20 minutes or more waiting for one’s transaction to be incorporated into a block and signed into the chain — and this is especially true for small transactions. This makes it cumbersome to use BTC for the single most common kind of transaction: small POS cash purchases.
Using physical BTC coins has been one proposed solution, but it’s a non-starter because it implies the existence of a single consolidated mint entrusted with producing said coins.
Using a brokerage house similar to VISA is a viable option, but introduces serious capacity concerns. Not to mention that such a brokerage house would indeed charge transaction fees (after all, transaction fees are *built into* the Bitcoin algorithm, to incentivize miners to include your transaction in their next block).
Anyway, these are perhaps minor nit-picks. What concerns me is when they’re coupled with this:
“This high utility value is a big reason to use Bitcoin and not leave it under a mattress speculating it’ll increase in value and make you rich.”
So, the high utility of BTC is tied to its convenience. That utility has to be greater than the opportunity cost of holding onto your BTC. If it’s not, then it’s irrational to spend your BTC; you lose more in the process of spending them (i.e. their potential future value) than you gain from the convenience of the transaction.
There is a positive feedback loop at play here. The more people choose to hoard, the less BTC infrastructure is developed. The less infrastructure is developed, the less convenient it is to use BTC. The less convenient it is to use BTC, the lower the utility of engaging in BTC commerce. The lower the utility of BTC commerce, the more people are likely to hoard.
I agree, but then a long period of stable prices and competition from other crypto-currencies is also at play. Bitcoins actually have amazing stable prices, albeit rising, if you look at the long term chart.
No doubt Gresham's law is at work as with PMs when it comes to fiat.