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Hamster and Squirrel Money

Bad digital assets driving out good digital assets

By David Parsons co-founder of TrustMe Property Exchange

 ou have no doubt seen in the press numerous types of digital assets, as with government money, there are many different types. With digital assets, some are used for paying out of fees or interest on invested digital asset funds or goods and services, others are used for long term storage of value and seldom used in commercial transactions. The main difference between these two types is one depreciates in value and the other appreciates in value. We will explore how these two types of digital assets along with their cousins (government money) are used differently.

The original hamster money

The value of government money such as US Dollars, English Pounds or Euros, depreciates in value and has negative interest rates when combined with monetary inflation.

In an uncertain economy, people and businesses tend to hold on to their money while the economy improves. This behaviour weakens the economy further, as a lack of spending causes further unemployment, lowers profits, and drop in prices. This reinforces economic uncertainty, giving individuals and companies even more incentive to hoard their money. As spending continues to slow, prices drop again, creating incentives for people to wait as prices fall further. This deflationary spiral is counteracted with monetary policies e.g., quantitative easing from central banks, debt monetisation, social spending and more recently negative-interest rates.

With negative interest rates, government money deposited at a bank forces the depositor to pay the bank to hold their money. This means that depositors are penalised while borrowers enjoy earning money by taking out a loan. This has a perverse effect of penalising responsible behaviour e.g., saving your money and promoting irresponsible behaviour i.e., borrowing for speculation (a.k.a shorting the currency).

Depreciating or “Hamster Assets”

Some digital assets share the same value attributes just with much more volatility. Dogecoin is a good example. The coin has no inherent control over the money supply so from an inflationary perspective it’s relative value as a unit of account can be capriciously increased in an uncoordinated method. It’s rampant speculation based solely on demand leads to massively gyrating values of hundreds of percent in a short period of time. This type of assets can only be used in the moment as a unit of payment based on another unit of account e.g., USD, GBP, EUR. It can not be relied upon for constant purchasing power in an employment, mortgage or commercial contract.

Appreciating or “Squirrel Assets”

Some digital assets are used almost exclusively for storage of value. Bitcoin is a good example. The coin has control over its supply so from an inflationary perspective it’s relative value as a unit of account can be predicted and modeled precisely. It’s speculation based solely on demand leads to gyrating values of hundreds of about 10 percent in a 24 hour period of time. Long term, its value has been increasing relative to government money. This type of asset can only be used in the moment as a unit of payment based on another unit of account e.g., USD, GBP, EUR. It is not useful in long term contracts since its price instability but very useful as a unit of payment at time of payment.


Gresham’s law which has its origins back in medieval times, is a simple way of summarising  “Hamster and Squirrel” assets. Gresham’s law is the concept of a good digital asset (asset which is undervalued or asset that is more stable in value) versus a bad digital asset (asset which is overvalued or loses value rapidly). The law holds bad assets drives out good assets in circulation. Bad digital assets are considered to have equal or less intrinsic value compared to its current value. Meanwhile, good digital assets are believed to have greater intrinsic value or more potential for greater value than its current value. One basic assumption for the concept is that both types of assets are treated as generally acceptable digital asset currencies, are easily liquid, and available for use simultaneously. Logically, people will choose to transact using bad digital assets and hold balances of good digital assets because good digital assets have the potential to be worth more than their current value.

Gresham’s digital asset law can be seen in the marketplace of digital assets. Currently (May 2021)  bitcoin and etherium have maintained a constant rising value with respect to government monies. They are being held for their storage of value and their appreciating value. Other lesser known digital assets have either stagnated or disappeared from the marketplace because of their lack of staying value power.

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