Gresham’s Law (Thiers’ Law)
TL;DR
“Bad money drives out good.” People hoard assets they believe will appreciate (Bitcoin) and spend those they believe will lose value (Fiat).
What Is It?
- Gresham’s Law: When a government overvalues “bad” money (debased currency) relative to “good” money (gold/bitcoin), people will spend the bad money and keep the good money in their pockets.
- Thiers’ Law: The inverse. When the bad money becomes so worthless that merchants refuse to accept it, the “good money” (hard money) drives out the bad and becomes the medium of exchange.
Why Does It Matter?
This explains why people primarily use Bitcoin as a Store of Value (SoV) today. If you have dollars (which lose value) and bitcoin (which gains value), you will logically spend the dollars first. Bitcoin only becomes a primary Medium of Exchange (MoE) once the fiat currency loses its utility.
Analogy
Imagine you have a basket of fresh apples (Bitcoin) and a basket of rotting apples (Fiat). Which one do you give away first? You spend the rotting ones to get rid of them and keep the fresh ones for later.