Look at bitcoin, its value is expected to go up, so owners never use it, they don't even feel the need to put it in a bank account to hedge against inflation, because the likelihood is there'll be the opposite, deflation (because theres a fixed number of coins that can be made). So now you have all this cash sitting there doing nothing. Not being lent to businesses, so they can grow, or invent hover boots or what ever, it's not being put in a bank, so they can lend it to someone to buy a house.
It just gums the system up, the haves accrue more by doing literally nothing. The have nots have no opportunity to improve their lot, or the lot of the haves.
I don't think the things you're saying are really accurate. Bitcoin isn't used very much for payments because it isn't easy to use it for payments. The scaling technology to enable it is in development but not good enough yet. Once payments hit a certain critical level, the network slows. Lots of people spend Bitcoin when they can.
Additionally, lending and borrowing is becoming a really popular application for crypto. You should take a look into things like Compound, Dharma, dYdX, nuo, BlockFi, and others. [1] Decentralized lending + borrowing with collateral is super hot, with amazing interest rates. On dYdX right now you can get a 6.2% APY on USDC, which is a stablecoin pegged to the US dollar. My bank savings account only gives me 2.2%. That's a 2.8X multiplier on the best bank rate available right now. And not on a volatile asset - a pegged-to-USD asset.
It's actually practical - more practical than traditional finance - if your goal is to save via compound interest. The idea that crypto is sitting around doing nothing isn't accurate at all.
But besides all that, the idea that "money sitting there doing nothing" is bad is wrong anyway, since the money that "does something" becomes worth more. This argument confuses numbers for value. Economic output doesn't care about how we quantify it, it cares about resource allocation. The value of our flappy paper tabs changes to reflect economic activity and its own scarcity in the economy, not vice-versa.
I picked on bitcoin because there will only ever be a limited number of coins, I could just have easily picked on gold. This is in contrast to the USD, where more can be printed bringing about inflation.
Money that "does something" ie gets lent to businesses to expand, or to people to buy houses is being allocated, its being allocated to something productive, whereas under the mattress isn't. Under the mattress isn't economic activity, lending it out is, or can encourage it at least.
Every transaction with Bitcoin is subject to capital gains tax. There is a penalty for using it to purchase things. It's a little silly to try to explain why people don't "use" Bitcoin and skip over that fact.
capital gains tax is paid on capital gains (you've made money!!!). If a gain hasn't been made, theres no tax to pay. And anyway assuming you plan on spending your money some time before you die you're not going to be able to avoid the tax so why should it put you off spending that bitcoin?
Plus in my jurisdiction I get a capital gains allowance, so its better to spend the bitcoin now and make full use of each years allowance, than save it up for whenever.
If it in effect doesn't exist, then the rest of the money in circulation is worth more due to its scarcity being increased. Net economic activity is thus unaffected.
I've always seen this as an over-simplification that leads down an incorrect path of thinking. It "doesn't exist" if you think the only thing that has an effect on the economy is the number of dollars in circulation at a given instant. A person that has money saved may behave differently in the economy vs that same person with no money saved. They may buy different things or take bigger financial risks with the money they are spending.
That money is also out of circulation, so not contributing to inflation. The government will print (or create through interest rate adjustments) the same amount as it pursues an interest rate target.
