Are holders of crypto-tokens that have real utility within a specific application disincentivized to spend their tokens because they fear that the value of the tokens will go up after they spend them?

If yes, are crypto-token powered applications running into issues since their users are afraid to actually spend their tokens to utilize their service?

  • This is almost the same question as this: If the supply of Ether is finite, are there any mechanisms to deter hoarding? Aug 30, 2017 at 17:34
  • @RichardHorrocks thank you. I'm specifically referring to crypto-tokens that have launched via Ethereum. For example, if I launch a new service, do an ICO, and require that users of my new service must use my crypto-tokens to transact, won't users be disincentivized to use the tokens they're holding to use my service if they believe that the tokens they purchased in the ICO will appreciate in price?
    – Passer
    Aug 30, 2017 at 17:41

1 Answer 1


If a token is created where it's primary value to the token-holder is its value compared to ETH, then yes, if a token-holder thinks the value will go up, that's a decent reason to hold it.

But if a token is created where it's primary use is to exchange it for something (for example, if a retail store replaced its "Buy ten X and your next X is free!" punch cards with tokens, so you can exchange ten "made a purchase" tokens for one X), then its primary use would be to users who want the thing being exchanged for. A secondary market might emerge where a user decides they no longer want the thing being exchanged for, and are willing to sell their token off to someone who does (similar to how there's a secondary market for gift cards in the real world. The primary purpose of a gift card is to spend it. But if you really don't like the store you have a gift card to, you can go through the effort of trying to find someone who is interested in that store. It would be very unlikely to hoard gift cards thinking their value would go up over time).

So, it depends entirely on what the designer of the token created them for, and what utility they do have.

  • Makes total sense, but I think the point is that there's already inherently a secondary market for tokens so there's always the worry that "the tokens I own are going to appreciate in value, I'd better not spend them to use the application they were made for because if I hold them I could stand to make lots of money once they appreciate in value". Has this phenomenon disincentivized the use of certain applications that utilize crypto-tokens?
    – Passer
    Aug 30, 2017 at 18:22
  • No, because you're ignoring the value of the utility of the token to the user. What you're describing ("Should I spend my X or hold it?") is the fundamental question for any currency/store of value. Walking around with a $10 bill in my pocket is a constant pull between how much I want the thing being offered for $10 versus what I think I can do with my $10 down the road (if the item goes on sale, or the power of the dollar goes up). Crypto-tokens are no different. The recent influx of ICOs and interest in cryptocurrencies in general have added incentive to hold, but it's not absolute. Aug 30, 2017 at 18:28
  • And I would also disagree with you that there's "already inherently a secondary market for tokens": exchanges are the main secondary market, and tokens are not added to them automatically; each exchange can pick and choose what they list or not. Marketing a new token and finding a community to transact in it is not a given, and in the current market with lots of new tokens being released, it would be even harder to stand out from the crowd and be noticed. Aug 30, 2017 at 18:31
  • That's a great analogy. But we haven't ever quite had a type of currency whose value is tied to the demand for/value of a service....and that can ultimately be exchanged for USD at any given point in time. I'm curious if this creates a dynamic that makes token holders tantalize about spending their tokens on the actual service they're supposed to be used for.
    – Passer
    Aug 30, 2017 at 18:32

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