user15: Some people believe that hoarding hurts the Bitcoin economy.
But are they really right?
As long as corresponding goods vendors and services will be here to stay and reinforce people's faith in Bitcoin, hoarded bitcoins simply do not take part in daily business and do not hurt anyone.
Quite the contrary, they will decrease the supply of bitcoins in active circulation, thus increase the demand for bitcoins, and thus raise their over-all value, right?
Update: This question also comes with a premise or insight that Bitcoin "power users" have savings and spendings wallets or similar setups, and that those two forms of wallets will not tend to "compete" with each other so much. The bitcoins in the spendings wallets will rather compete with the fiat money that respective users will use to buy for goods and services. The bitcoins in the savings wallets will rather compete with more traditional forms of assets and investments.

user446: Yes. Hoarding does hurt the currency, but not because somebody's getting rich off of it. The problem is that due to the fixed quantity of coins, it's obvious that the value is going to go up if bitcoin achieves widespread adoption.
And what's keeping bitcoin from widespread adoption?
"Currency risk" is one of the primary reasons, and it's easy to see why. If the price is at risk of wild swings in value, then how is a merchant going to feel confident in pricing his goods? Imagine an internet merchant who prices his goods at 8pm, goes to bed at 9pm, the price of bitcoins doubles at 10pm, and all night long nobody will buy from him because his goods are now way too expensive.
This is a serious disincentive to the adoption of bitcoin. And it exists whenever the possibility of bitcoin going way up in value exists. It's a catch-22. Bitcoin can't achieve widespread adoption (and therefore make hoarders rich) without having value stability, but value stability implies by definition that you can't get rich off of it.
The good news is, we can modify bitcoin, or create a competitor, which has value stability as a goal. The funny thing is that this currency, while being less "valuable" by design, would actually have more value to the community because of its stable value.
Whew, is your mind bent yet?
If not, here's the paper that explains it more thoroughly.

user11513: Why would anyone holding bitcoins want to put an end to hoarding? Let's say I own a mining rig. I invested x dollars of my money into securing the bitcoin network, and earned a reward of y bitcoins. Now, instead of spending my btc, I hoard them. What I've actually done is worked for the good of the bitcoin network, and demanded nothing in return! Its a pretty good deal for everyone else, since by hoarding instead of spending my btc, their bitcoin value is unaffected, due to my preventing y btc from increaseing the supply, with the resultant price inflation. Had I spent those btc, the value of everyone else's btc would have dropped by (y/MarketCap) * YourBitcoins.
Now if I buy up additional btc with dollars, the story gets even better. Lets say I take a portion of my weekly salary and buy up Z bitcoins. Now, in addition to the fact that I am working now and deferring my demand into  future, I increased your btc purchasing power to (Z/MarketCap) * YourBitcoins! 
If you're now thinking this deflation will suck the btc economy down a black hole, are you more likely to blow $10,000 at a strip club if you (a) have a billion dollars worth of btc in your wallet or (b) exactly $10,000 worth of btc in your wallet? Hopefully the answer is obvious, which makes one man's hoarding your night out. So next time you meet a hoarder, give them a pat on the back for making you richer by working for free!

user3441: Inflation transfers capital from the middle class savers to those who capture the debasement. Typically the rich can position into investments and/or "political capture" which capture inflation, and the middle class may not individually have the economy-of-scale to do this as well.
Deflation transfers capital from the middle class to the rich, because they save a much higher % of their income. And discourages risk taking, technological innovation, and deploying human capital (e.g. Dark Ages because stored passive capital can't create knowledge, and even more so in this knowledge age of digital innovation with cheap CPUs).
Thus a store of value is only a sustainable representation of human capital (cost of child rearing, education, etc) if it encourages prosperity for the humans. Deflationary gold standards always fail politically over time (when the import of capital peaks) because they destroy prosperity.
The problem for Bitcoin is that if the model is primary driven by ponzi appreciation, and not by transaction growth, then eventually capital importation will peak, and there will not be enough transaction growth to counteract the hyperinflationary spiral due to a stampede to extract value before others do. This capital importation peak can be accelerated by a competitor which brings to the market a system that has a significantly higher transaction growth rate, because ponzi schemes rely on future expectations-- confidence.
The money supply growth of Bitcoin is decelerating while the nature of ponzi schemes is they accelerate in value as they drive towards a peak, because of the mass delusion of crowds and the stampede to not be the last to buy. This is a dangerous juxtaposition, but it seems we are not yet close to this day-of-reckoning although a competitor could accelerate it. This would probably beneficial because otherwise Bitcoin may setback crypto-currency adoption significantly after the hyperinflation spiral wipes out the majority who come in near the peak.
I think it is just common sense that rewarding early adopters with 1000-fold increases in wealth simply for buying a store-of-value, is antithetical to prosperity. Imagine the poverty and inequity of a society that spends its time searching for ponzi speculations instead of innovating and producing.
The counter-argument is that this initial speculation interest is necessary to drive adoption which will drive transaction growth. However, do we see this happening as the dangerous juxtaposition is accelerating?
I know speculators in silver who are now ready to jump into Bitcoin. That is what brought my immediate attention to study this developing juxtaposition.
I am also expecting this answer to fly over the heads of some voters. Apparently some of the participants either don't have a very good grasp of economics (or have a vested interest or I am wrong and they didn't comment to tell me why). I would appreciate if downvoters would at least try to defend their logic with a comment below my answer. That gives me an opportunity to debate them and show them why I think they are wrong (or to admit my mistake). The point is to make sure we collectively have the correct logic.

user59: Even if it is not actively hurting bitcoin it is not helping bitcoin while being hoarded, while bitcoin being exchanged for goods and services would be helping. Its an opportunity cost for the health of the system.

user323: I don`t think hoarding Bitcoins is bad for them in itself, but rather spending the hoarded coins.
In the world of material things hoarding currency means there is less of it to circulate and make economy go around. For example, if people were still trading in gold (scarce resource), 99% of it was hoarded and not used, and you wanted to have the same volume of trade, the remaining 1% of gold would have 100 times the buying power (if you could buy a loaf of bread for 100 gold coins in the past, now you would pay only 1 gold coin). But with physical currency lies a problem - how do you divide it to have roughly the same amount of coinage to go around when it is worth orders of magnitude more? You can have goals bullions, coins, then go to thin gold film, and eventually you would reach a limit of how much you can divide your currency.
Similar example can be made with normal (fiat) currencies, like the dollar, but there is a difference between them. A dollar bill is not all that scarce. It is mostly cotton and linen, which can be made in big quantities and turned into dollars if the need for more money to circulate would arise.
Bitcoins are infinitely divisible, or at least can be made like that if the need would arise. You can pay in Bitcents, mili-bitcoins, etc. and it wouldn't matter much. So if someone would own all but one Bitcoin, the economy could still manage just fine. On the other hand Bitcoins are scarce by design - there is a finite amount of them that will be created. Nobody can control the economy and release new coins to make sure they are worth the same through the whole time in relation to other currencies.
This is where there is a problem with hoarding - say you own a 100000 coins now and store them for a long time. If Bitcoin turns out to be successful and all the internet is fuelled by the coins, a value of a single coin could be pretty high, lets say equivalent to 10 000$. Then you would have 1B$ worth of coins in your wallet, a significant amount. Now if you were to spend all those coins at once you could disrupt the economy and put a dent in the worth of Bitcoins. This sudden influx of coins into the economy is probably the only bad effect of coin hoarding - a rapid change of value of the coins. If the volume would be big, it could damage the economy quite badly. Compare this to the scenario of a couple wealthy countries abandoning USD and selling off all their supplies - the value of the dollar would fall, causing rapid inflation and possibly destroying the economy of at least some countries.
On the other hand, if you were to just kick back and spend your coins slowly the impact of your coin hoarding wouldn't be negative. It might even help the economy by making people sell more and thus earn more, but this would probably even itself out with the economy being worse off while you were hoarding coins instead of spending them. The situation is similar to the one right now - a lot of people mine coins for profit, but since they are not worth too much, they hoard them for later, instead of circulating and spending them.

user85: Yes, hoarding does hurt Bitcoin. For Bitcoin to have a successful future, people need to be able to use Bitcoins as a medium of exchange.
If Bitcoin succeeds, in the far future you won't need to exchange between Bitcoins and other currencies to do business. But that's in the far future. Long before we get there, business will need to transact in both Bitcoins and national currencies. You may be able to buy a T-shirt for bitcoins, but the company that sold it to you is going to have to pay their rent and their employees in dollars.
For that to work, the value of Bitcoins relative to national currencies needs to be fairly stable. If the price of Bitcoins halves overnight, then the T-shirt company can't pay their rent or their employees and will take a loss. If they have to charge me a premium because of the risk that Bitcoins will drop in value, I might as well just pay in dollars.
Note that the exact exchange rate is basically irrelevant. It doesn't matter if Bitcoins are $1 each or $1,000 each, we can trade them just the same. But speculation and hoarding increase volatility, and that's a problem. Speculators and hoarders hold Bitcoins with the hope that they'll increase in value. When they see Bitcoins moving up in value, they buy more. When they see Bitcoins moving down in value, they often sell out to avoid a possible crash or to buy back when the drop bottoms out.
As a result of these transactions, they cause minor fluctuations in value to be much larger than they would otherwise be. This discourages precisely the type of uses of Bitcoin that are essential for its next phase of growth.
Unfortunately, without any speculation, Bitcoin would likely die out completely. With no demand and no market, there'd be no value at all. So the puzzle is how to grow Bitcoins without causing volatility. As far as I know, nobody knows how to do that yet.

user1657: The value of bitcoin stems from scarcity and usefulness. Scarcity is set (21 million) and hoarding just increases the demand.
Now does hoarding hurt the usefulness of bitcoin ?
Bitcoins are useful to transfer value from A to B over the internet.
To transfer value requires a certain amount of bitcoins, corresponding to a price denominated in central money.Let's say a buyer wants to purchase a 10-dollar item using the bitcoin network.He/she buys 10 dollar worth of bitcoin, let's say 1 bitcoin for simplicity, from a bitcoin payment processor that will send it to the seller. The seller in turn may want to cash out the bitcoin for 10 dollars after x number of confirmations i.e x times 10 minutes. 
The processing of the transaction has created a demand for 1 bitcoin for x times ten minutes.
The more transactions are processed using bitcoins, the higher the demand for bitcoins. Hoarding has no effect on the ability of the bitcoin network to process transactions: volatility does. If the exchange rate varies widly in a 10-minute interval, then the payment processor cost of hedging the exchange rate risk goes up. The payment processor passes the cost of hedging in fees applied to the sellers: the cost of accepting payments through the bitcoin network goes up. In the end, if the hedging fees become higher than the bank card fees, then the seller may end up refusing payments through the bitcoin network. However the likelihood of the bitcoin volatility becoming so high is rather thin: even with the small volume and active speculation that we experience today, the volatility is perfectly manageable over a period of 1-hour (6 confirmations) with fees far more attractive than the bank card fees.

user145: Hoarding and saving is the same thing. So is having a savings account bad? Save as much as you can, spend what you need to. If you feel bitcoin is too risky, dont invest that much or diversify and sell if your btc becomes too much of your portfolio. Support merchants that use bitcoin whenever possible. 
https://en.bitcoin.it/wiki/Deflationary_spiral

user78: A while back I wrote a short post about why hoarding (or more exactly "early adopters") isn't a problem. I'll copy-paste here:

Bitcoin was not designed to be a fair currency, just a more efficient currency than its alternatives. Dollars and Yens aren’t “fair” either.
It is not random luck that is rewarded – it is one’s ability to research and arrive at correct conclusions. In this scenario, the people that found out about bitcoin at “an early stage” and made the decsicion to either mine or buy them, are rewarded for a smart technological and economical decision – much like early investors in successful startup companies are rewarded.
It is not too late – in this “bitcoin wins” scenario”, the final value of bitcoin will be a few orders of magnitudes higher than its current value. If you’re reading this now and think that “it’s not fair only a few early adapters win”, you can still join us.
Perhaps the strongest argument IMO is the economical argument – If bitcoin “wins”, but its wealth remains concentrated in too few hands, it won’t be as useful to the rest of the world because of over-pricing and scarcity. As a result, this will be reflected in bitcoin prices, because the public will not be willing to pay the outrages amounts demanded by the early adopters – in fact, it will make bitcoin “lose a little bit”, or not reach its full potential. In turn, this will motivate said early adopters to sell some of their stash (nobody likes to be on a losing horse), thus moving bitcoin to other parts of the population. Once the market believes this is no longer a problem, the price of bitcoin may rise to its “real” and full value. In shorts, the market will auto-correct any such problem.


user27: This is very similar to consumer spending here in the US. If people save their money, it's not going towards the growth of the economy.
I think a lot of people make this comparison when it doesn't necessarily hold true for Bitcoin at the moment. 
My opinion is that if miners held onto their coins instead of dumping them on the exchange, it would reduce the volatility we're seeing. 
So spending Bitcoins is best, holding them is OK, and trading for other currencies is selfish.

user662: Bitcoin is really a little strange because it doesn't know if it is a currency or a commodity.  And this is why this question has many answers and is a popular item of discussion.   If Bitcoin were just a commodity, the thing to do is to hoard it.  There are lots of commodities that are almost totally hoarded.  For example: emeralds or works of art.
Now if Bitcoin is just a currency, then hoarding is a problem.  Economists, when they talk about money supply, also talk about the velocity of money, which is a measure of hoarding.  The amount of money times how fast it is moving is a measure of total money being used.  (Of course, with computers, money moves faster now than it ever has.)
So to answer your question, hoarding helps somewhat and hurts somewhat.  Which one overpowers the other, nobody can say.  The net effect will be shown to us all over time.

user85: 
TL;DR: No. The argument is basically that hoarding will make Bitcoins so valuable that nobody will be willing to offer people enough to part with them. Does that pass the giggle test? Another way of stating the argument is this, "If gold is $2,000/oz today but people think it will be $5,000/oz next year, nobody will trade any gold today." Again, think about it. Does that pass the giggle test either?

Hoarding increases the value of Bitcoins, increasing the profits from mining. This encourages more people to mine, increasing the total hashing power and thus the security of the system. 
It also makes holding Bitcoins more profitable. This helps to encourage people to accept them in trade because they are less worried about them decreasing in value while they are holding them. Using Bitcoins as a currency inevitably means people sometimes have to hold them and having them drop in value while you hold them is a risk. Hoarding reduces this risk. But it also makes it harder to price things in Bitcoins because the value will tend to change more. Merchants don't like to change their prices twice a day.
Contrary to claims, it should not affect the trading volume or the willingness of people to use Bitcoins to pay for things.
The argument that increasing value means people would prefer to hold Bitcoins rather than spend them is specious. While it will make people want to have Bitcoins more, it will also make people want to convince others to give them Bitcoins more so they can have them.
Think about it, do people prefer to pay for goods in dollars or garbage? By the reasoning of this argument, they should prefer to pay for goods in garbage, since they'd rather hold their dollars and get rid of their garbage. But, of course, people don't like paying in garbage because nobody wants garbage. If you can pay with the currency others want, you can get a better deal. So you actually prefer to spend the currencies sellers most want.
If Bitcoins are valuable because inflation doesn't deprive them of value, then a merchant would rather get my Bitcoins than my dollars, so he'll accept fewer of them. This will cancel out the effect of me preferring to pay in dollars rather than Bitcoins. So it should be a wash.
Or, put another way, whatever the present and future prospects, there should always be some equivalence between dollars and Bitcoins that people roughly agree on. So whether I pay X dollars or Y bitcoins, where X and Y are in this ratio, will purely depend on whether I prefer the characteristics of dollars or Bitcoins for the transaction.
A consequence of this is that hoarding won't negatively affect the trading volume either because that's only dependent on people's use of Bitcoins to buy and sell things. If hoarding makes Bitcoins worth twice as much, only half as many will be used to buy and sell things and the volume (the total value traded) will be the same.
I don't believe it's lost opportunity either. It's not like people who want to trade Bitcoins can't get them because they're all being hoarded. (Nor will it ever be likely to be an issue, since that would just raise the price and thus fewer would be needed. Bitcoins have effectively unlimited divisibility.)
So why do so many people think currency hoarding is bad? Because it usually is, and empiric studies even show that it is. But the logic of why currency hoarding is bad doesn't apply to Bitcoins, especially when it's a minority currency.
Bitcoins are different enough from physical fiat currencies that empirical studies don't apply unless the suspected mechanisms for the observed effects are believed to apply to Bitcoins too. For example, if a penny were enough money to buy a car, how useful would dollars be?

15: <p><a href="https://www.technologyreview.com/2011/08/23/191860/cryptocurrency/" rel="nofollow noreferrer">Some people believe that hoarding hurts the Bitcoin economy</a>.</p>
<p>But are they really right?</p>
<p>As long as corresponding goods vendors and services will be here to stay and reinforce people's faith in Bitcoin, hoarded bitcoins simply do not take part in daily business and do not hurt anyone.</p>
<p>Quite the contrary, they will <em>decrease</em> the supply of bitcoins in active circulation, thus <em>increase</em> the demand for bitcoins, and thus <em>raise</em> their over-all value, right?</p>
<p>Update: This question also comes with a premise or insight that Bitcoin &quot;power users&quot; have savings and spendings wallets or similar setups, and that those two forms of wallets will not tend to &quot;compete&quot; with each other so much. The bitcoins in the spendings wallets will rather compete with the fiat money that respective users will use to buy for goods and services. The bitcoins in the savings wallets will rather compete with more traditional forms of assets and investments.</p>
 446: <p>Yes. Hoarding does hurt the currency, but not because somebody's getting rich off of it. The problem is that due to the fixed quantity of coins, it's obvious that the value is going to go up if bitcoin achieves widespread adoption.</p>

<p>And what's keeping bitcoin from widespread adoption?</p>

<p>"Currency risk" is one of the primary reasons, and it's easy to see why. If the price is at risk of wild swings in value, then how is a merchant going to feel confident in pricing his goods? Imagine an internet merchant who prices his goods at 8pm, goes to bed at 9pm, the price of bitcoins doubles at 10pm, and all night long nobody will buy from him because his goods are now way too expensive.</p>

<p>This is a serious disincentive to the adoption of bitcoin. And it exists whenever the possibility of bitcoin going way up in value exists. It's a catch-22. Bitcoin can't achieve widespread adoption (and therefore make hoarders rich) without having value stability, but value stability implies by definition that you can't get rich off of it.</p>

<p>The good news is, we can modify bitcoin, or create a competitor, which has value stability as a goal. The funny thing is that this currency, while being less "valuable" by design, would actually have more value to the community because of its stable value.</p>

<p>Whew, is your mind bent yet?</p>

<p>If not, <a href="http://www.phauna.org/papers/freecoin/freecoin.pdf" rel="nofollow">here's the paper</a> that explains it more thoroughly.</p>
 11513: <p>Why would anyone holding bitcoins want to put an end to hoarding? Let's say I own a mining rig. I invested x dollars of my money into securing the bitcoin network, and earned a reward of y bitcoins. Now, instead of spending my btc, I hoard them. What I've actually done is worked for the good of the bitcoin network, and demanded nothing in return! Its a pretty good deal for everyone else, since by hoarding instead of spending my btc, their bitcoin value is unaffected, due to my preventing y btc from increaseing the supply, with the resultant price inflation. Had I spent those btc, the value of everyone else's btc would have dropped by (y/MarketCap) * YourBitcoins.</p>

<p>Now if I buy up additional btc with dollars, the story gets even better. Lets say I take a portion of my weekly salary and buy up Z bitcoins. Now, in addition to the fact that I am working now and deferring my demand into  future, I increased your btc purchasing power to (Z/MarketCap) * YourBitcoins! </p>

<p>If you're now thinking this deflation will suck the btc economy down a black hole, are you more likely to blow $10,000 at a strip club if you (a) have a billion dollars worth of btc in your wallet or (b) exactly $10,000 worth of btc in your wallet? Hopefully the answer is obvious, which makes one man's hoarding your night out. So next time you meet a hoarder, give them a pat on the back for making you richer by working for free!</p>
 3441: <p>Inflation transfers capital from the middle class savers to those who capture the debasement. Typically the rich can position into investments and/or "political capture" which capture inflation, and the middle class may not individually have the economy-of-scale to do this as well.</p>

<p>Deflation transfers capital from the middle class to the rich, because they save a much higher % of their income. And discourages risk taking, technological innovation, and deploying human capital (e.g. Dark Ages because <a href="http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#FinanceabilityofKnowledge" rel="nofollow noreferrer">stored passive capital can't create knowledge</a>, and even more so in this knowledge age of digital innovation with cheap CPUs).</p>

<p>Thus a store of value is only a sustainable representation of human capital (cost of child rearing, education, etc) if it encourages prosperity for the humans. Deflationary gold standards always fail politically over time (<a href="http://esr.ibiblio.org/?p=4757#comment-394401" rel="nofollow noreferrer">when the import of capital peaks</a>) because they destroy prosperity.</p>

<p>The problem for Bitcoin is that if the model is <a href="https://bitcoin.stackexchange.com/questions/5584/why-is-the-supply-of-bitcoin-not-pegged-to-its-demand/5590#comment11014_5590">primary driven by ponzi appreciation</a>, and not by transaction growth, then eventually capital importation will peak, and there will not be enough transaction growth to counteract the hyperinflationary spiral due to a stampede to extract value before others do. This capital importation peak can be accelerated by a competitor which brings to the market a system that has a significantly higher transaction growth rate, because ponzi schemes rely on future expectations-- confidence.</p>

<p>The money supply growth of Bitcoin is decelerating while the nature of ponzi schemes is they accelerate in value as they drive towards a peak, because of the mass delusion of crowds and the stampede to not be the last to buy. This is a dangerous juxtaposition, but it seems we are not yet close to this day-of-reckoning although a competitor could accelerate it. This would probably beneficial because otherwise Bitcoin may setback crypto-currency adoption significantly after the hyperinflation spiral wipes out the majority who come in near the peak.</p>

<p>I think it is just common sense that rewarding early adopters with 1000-fold increases in wealth simply for buying a store-of-value, is antithetical to prosperity. Imagine the poverty and inequity of a society that spends its time searching for ponzi speculations instead of innovating and producing.</p>

<p>The counter-argument is that this initial speculation interest is necessary to drive adoption which will drive transaction growth. However, do we see this happening as the dangerous juxtaposition is accelerating?</p>

<p>I know speculators in silver who are now ready to jump into Bitcoin. That is what brought my immediate attention to study this developing juxtaposition.</p>

<p>I am also expecting this answer to fly over the heads of some voters. Apparently some of the participants either don't have a very good grasp of economics (or have a vested interest or I am wrong and they didn't comment to tell me why). I would appreciate if downvoters would at least try to defend their logic with a comment below my answer. That gives me an opportunity to debate them and show them why I think they are wrong (or to admit my mistake). The point is to make sure we collectively have the correct logic.</p>
 59: <p>Even if it is not actively hurting bitcoin it is not helping bitcoin while being hoarded, while bitcoin being exchanged for goods and services would be helping. Its an opportunity cost for the health of the system.</p>
 323: <p>I don`t think hoarding Bitcoins is bad for them in itself, but rather spending the hoarded coins.</p>

<p>In the world of material things hoarding currency means there is less of it to circulate and make economy go around. For example, if people were still trading in gold (scarce resource), 99% of it was hoarded and not used, and you wanted to have the same volume of trade, the remaining 1% of gold would have 100 times the buying power (if you could buy a loaf of bread for 100 gold coins in the past, now you would pay only 1 gold coin). But with physical currency lies a problem - how do you divide it to have roughly the same amount of coinage to go around when it is worth orders of magnitude more? You can have goals bullions, coins, then go to thin gold film, and eventually you would reach a limit of how much you can divide your currency.</p>

<p>Similar example can be made with normal (fiat) currencies, like the dollar, but there is a difference between them. A dollar bill is not all that scarce. It is mostly cotton and linen, which can be made in big quantities and turned into dollars if the need for more money to circulate would arise.</p>

<p>Bitcoins are infinitely divisible, or at least can be made like that if the need would arise. You can pay in Bitcents, mili-bitcoins, etc. and it wouldn't matter much. So if someone would own all but one Bitcoin, the economy could still manage just fine. On the other hand Bitcoins are scarce by design - there is a finite amount of them that will be created. Nobody can control the economy and release new coins to make sure they are worth the same through the whole time in relation to other currencies.</p>

<p>This is where there is a problem with hoarding - say you own a 100000 coins now and store them for a long time. If Bitcoin turns out to be successful and all the internet is fuelled by the coins, a value of a single coin could be pretty high, lets say equivalent to 10 000$. Then you would have 1B$ worth of coins in your wallet, a significant amount. Now if you were to spend all those coins at once you could disrupt the economy and put a dent in the worth of Bitcoins. This sudden influx of coins into the economy is probably the only bad effect of coin hoarding - a rapid change of value of the coins. If the volume would be big, it could damage the economy quite badly. Compare this to the scenario of a couple wealthy countries abandoning USD and selling off all their supplies - the value of the dollar would fall, causing rapid inflation and possibly destroying the economy of at least some countries.</p>

<p>On the other hand, if you were to just kick back and spend your coins slowly the impact of your coin hoarding wouldn't be negative. It might even help the economy by making people sell more and thus earn more, but this would probably even itself out with the economy being worse off while you were hoarding coins instead of spending them. The situation is similar to the one right now - a lot of people mine coins for profit, but since they are not worth too much, they hoard them for later, instead of circulating and spending them.</p>
 85: <p>Yes, hoarding does hurt Bitcoin. For Bitcoin to have a successful future, people need to be able to use Bitcoins as a medium of exchange.</p>

<p>If Bitcoin succeeds, in the far future you won't need to exchange between Bitcoins and other currencies to do business. But that's in the far future. Long before we get there, business will need to transact in both Bitcoins and national currencies. You may be able to buy a T-shirt for bitcoins, but the company that sold it to you is going to have to pay their rent and their employees in dollars.</p>

<p>For that to work, the value of Bitcoins relative to national currencies needs to be fairly stable. If the price of Bitcoins halves overnight, then the T-shirt company can't pay their rent or their employees and will take a loss. If they have to charge me a premium because of the risk that Bitcoins will drop in value, I might as well just pay in dollars.</p>

<p>Note that the exact exchange rate is basically irrelevant. It doesn't matter if Bitcoins are $1 each or $1,000 each, we can trade them just the same. But speculation and hoarding increase volatility, and that's a problem. Speculators and hoarders hold Bitcoins with the hope that they'll increase in value. When they see Bitcoins moving up in value, they buy more. When they see Bitcoins moving down in value, they often sell out to avoid a possible crash or to buy back when the drop bottoms out.</p>

<p>As a result of these transactions, they cause minor fluctuations in value to be much larger than they would otherwise be. This discourages precisely the type of uses of Bitcoin that are essential for its next phase of growth.</p>

<p>Unfortunately, without any speculation, Bitcoin would likely die out completely. With no demand and no market, there'd be no value at all. So the puzzle is how to grow Bitcoins without causing volatility. As far as I know, nobody knows how to do that yet.</p>
 1657: <p>The value of bitcoin stems from scarcity and usefulness. Scarcity is set (21 million) and hoarding just increases the demand.<br />
Now does hoarding hurt the usefulness of bitcoin ?<br />
Bitcoins are useful to transfer value from A to B over the internet.<br />
To transfer value requires a certain amount of bitcoins, corresponding to a price denominated in central money.Let's say a buyer wants to purchase a 10-dollar item using the bitcoin network.He/she buys 10 dollar worth of bitcoin, let's say 1 bitcoin for simplicity, from a bitcoin payment processor that will send it to the seller. The seller in turn may want to cash out the bitcoin for 10 dollars after x number of confirmations i.e x times 10 minutes. 
The processing of the transaction has created a demand for 1 bitcoin for x times ten minutes.<br />
The more transactions are processed using bitcoins, the higher the demand for bitcoins. Hoarding has no effect on the ability of the bitcoin network to process transactions: volatility does. If the exchange rate varies widly in a 10-minute interval, then the payment processor cost of hedging the exchange rate risk goes up. The payment processor passes the cost of hedging in fees applied to the sellers: the cost of accepting payments through the bitcoin network goes up. In the end, if the hedging fees become higher than the bank card fees, then the seller may end up refusing payments through the bitcoin network. However the likelihood of the bitcoin volatility becoming so high is rather thin: even with the small volume and active speculation that we experience today, the volatility is perfectly manageable over a period of 1-hour (6 confirmations) with fees far more attractive than the bank card fees.</p>
 145: <p>Hoarding and saving is the same thing. So is having a savings account bad? Save as much as you can, spend what you need to. If you feel bitcoin is too risky, dont invest that much or diversify and sell if your btc becomes too much of your portfolio. Support merchants that use bitcoin whenever possible. </p>

<p><a href="https://en.bitcoin.it/wiki/Deflationary_spiral" rel="nofollow">https://en.bitcoin.it/wiki/Deflationary_spiral</a></p>
 78: <p>A while back I wrote a <a href="http://ripper234.com/p/the-bitcoin-early-adapter-problem-and-why-it-isnt/">short post</a> about why hoarding (or more exactly "early adopters") isn't a problem. I'll copy-paste here:</p>

<ul>
<li>Bitcoin was not designed to be a fair currency, just a more efficient currency than its alternatives. Dollars and Yens aren’t “fair” either.</li>
<li>It is not random luck that is rewarded – it is one’s ability to research and arrive at correct conclusions. In this scenario, the people that found out about bitcoin at “an early stage” and made the decsicion to either mine or buy them, are rewarded for a smart technological and economical decision – much like early investors in successful startup companies are rewarded.</li>
<li>It is not too late – in this “bitcoin wins” scenario”, the final value of bitcoin will be a few orders of magnitudes higher than its current value. If you’re reading this now and think that “it’s not fair only a few early adapters win”, you can still join us.</li>
<li>Perhaps the strongest argument IMO is the economical argument – If bitcoin “wins”, but its wealth remains concentrated in too few hands, it won’t be as useful to the rest of the world because of over-pricing and scarcity. As a result, this will be reflected in bitcoin prices, because the public will not be willing to pay the outrages amounts demanded by the early adopters – in fact, it will make bitcoin “lose a little bit”, or not reach its full potential. In turn, this will motivate said early adopters to sell some of their stash (nobody likes to be on a losing horse), thus moving bitcoin to other parts of the population. Once the market believes this is no longer a problem, the price of bitcoin may rise to its “real” and full value. In shorts, the market will auto-correct any such problem.</li>
</ul>
 27: <p>This is very similar to consumer spending here in the US. If people save their money, it's not going towards the growth of the economy.</p>

<p>I think a lot of people make this comparison when it doesn't necessarily hold true for Bitcoin at the moment. </p>

<p>My opinion is that if miners held onto their coins instead of dumping them on the exchange, it would reduce the volatility we're seeing. </p>

<p>So spending Bitcoins is best, holding them is OK, and trading for other currencies is selfish.</p>
 662: <p>Bitcoin is really a little strange because it doesn't know if it is a currency or a commodity.  And this is why this question has many answers and is a popular item of discussion.   If Bitcoin were just a commodity, the thing to do is to hoard it.  There are lots of commodities that are almost totally hoarded.  For example: emeralds or works of art.</p>

<p>Now if Bitcoin is just a currency, then hoarding is a problem.  Economists, when they talk about money supply, also talk about the velocity of money, which is a measure of hoarding.  The amount of money times how fast it is moving is a measure of total money being used.  (Of course, with computers, money moves faster now than it ever has.)</p>

<p>So to answer your question, hoarding helps somewhat and hurts somewhat.  Which one overpowers the other, nobody can say.  The net effect will be shown to us all over time.</p>
 85: <blockquote>
  <p><strong>TL;DR</strong>: No. The argument is basically that hoarding will make Bitcoins so valuable that nobody will be willing to offer people enough to part with them. Does that pass the giggle test? Another way of stating the argument is this, "If gold is $2,000/oz today but people think it will be $5,000/oz next year, nobody will trade any gold today." Again, think about it. Does that pass the giggle test either?</p>
</blockquote>

<p>Hoarding increases the value of Bitcoins, increasing the profits from mining. This encourages more people to mine, increasing the total hashing power and thus the security of the system. </p>

<p>It also makes holding Bitcoins more profitable. This helps to encourage people to accept them in trade because they are less worried about them decreasing in value while they are holding them. Using Bitcoins as a currency inevitably means people sometimes have to hold them and having them drop in value while you hold them is a risk. Hoarding reduces this risk. But it also makes it harder to price things in Bitcoins because the value will tend to change more. Merchants don't like to change their prices twice a day.</p>

<p>Contrary to claims, it should not affect the trading volume or the willingness of people to use Bitcoins to pay for things.</p>

<p>The argument that increasing value means people would prefer to hold Bitcoins rather than spend them is specious. While it will make people want to have Bitcoins more, it will also make people want to convince others to give them Bitcoins more so they can have them.</p>

<p>Think about it, do people prefer to pay for goods in dollars or garbage? By the reasoning of this argument, they should prefer to pay for goods in garbage, since they'd rather hold their dollars and get rid of their garbage. But, of course, people don't like paying in garbage because nobody <em>wants</em> garbage. If you can pay with the currency others want, you can get a better deal. So you actually prefer to spend the currencies sellers most <em>want</em>.</p>

<p>If Bitcoins are valuable because inflation doesn't deprive them of value, then a merchant would rather get my Bitcoins than my dollars, so he'll accept fewer of them. This will cancel out the effect of me preferring to pay in dollars rather than Bitcoins. So it should be a wash.</p>

<p>Or, put another way, whatever the present and future prospects, there should always be some equivalence between dollars and Bitcoins that people roughly agree on. So whether I pay X dollars or Y bitcoins, where X and Y are in this ratio, will purely depend on whether I prefer the characteristics of dollars or Bitcoins for the transaction.</p>

<p>A consequence of this is that hoarding won't negatively affect the trading volume either because that's only dependent on people's use of Bitcoins to buy and sell things. If hoarding makes Bitcoins worth twice as much, only half as many will be used to buy and sell things and the volume (the total value traded) will be the same.</p>

<p>I don't believe it's lost opportunity either. It's not like people who want to trade Bitcoins can't get them because they're all being hoarded. (Nor will it ever be likely to be an issue, since that would just raise the price and thus fewer would be needed. Bitcoins have effectively unlimited divisibility.)</p>

<p>So why do so many people think currency hoarding is bad? Because it <em>usually</em> is, and empiric studies even show that it is. But the logic of why currency hoarding is bad doesn't apply to Bitcoins, especially when it's a minority currency.</p>

<p>Bitcoins are different enough from physical fiat currencies that empirical studies don't apply unless the suspected mechanisms for the observed effects are believed to apply to Bitcoins too. For example, if a penny were enough money to buy a car, how useful would dollars be?</p>
