Gresham’s law is really about currencies where coins have a ‘true value’ and a ‘nominal value’. Like, a silver coin has value as silver, and compared to a nickel coin with the same face value, it’s a ‘better’ coin, so people won’t spend it.
It’s not obvious how to apply Gresham to a conversation about dollars and bitcoins. Legal tender parity would be one way to make the law apply.
> Gresham’s law is really about currencies where coins have a ‘true value’ and a ‘nominal value’
Correct. Or, more classically, a nominal value and commodity value. Whether it’s legal tender isn’t functionally germane (though historically, it is).
> not obvious how to apply Gresham to a conversation about dollars and bitcoins
Bitcoins have a sloped demand curve. Liquidating ten billion U.S. dollars gives you ten billion dollars. Liquidating the same in Treasuries gives you almost ten billion dollars. Liquidating the same in Bitcoin yields an unknown amount—the commodity value of a basket of Bitcoin that size. The gap between the quoted “value” and that true value of a given aggregate creates a localised Gresham effect.
It’s not obvious how to apply Gresham to a conversation about dollars and bitcoins. Legal tender parity would be one way to make the law apply.