Bitcoin and Time Preference

Every payday, you make the same resolution. “This month, I’ll definitely save.” But before you know it, your bank account is empty and credit card bills are piling up. People around you say it’s because you “lack willpower” or “can’t plan ahead.” Is that really the case?

Looking at South Korea’s household savings rate statistics tells a different story. In 1988, Korea’s household savings rate was 25.2%. That means one in four citizens saved a quarter of their income. But as of 2024, it’s around 5%. In less than 40 years, it plummeted to one-fifth. During the same period, household debt surpassed 100% of GDP.

Have Koreans become five times lazier since 1988? Five times more foolish? No. People are the same — the system changed. It became a system where saving means losing and borrowing means gaining. Of course, other factors such as an aging population, changing consumer culture, and expanded welfare programs also play a role. But it is clear that one of the most significant underlying factors is the change in the monetary system, which fundamentally altered the reward structure of saving. To understand this phenomenon, you need to know the economic concept of “time preference.”

Time Preference: The Invisible Force Governing All Your Economic Choices

Time preference is the degree to which one prefers present consumption over future consumption. A slice of cake now versus a slice of cake a year from now — which would you choose? Instinctively, we choose the present. This is positive time preference. All humans fundamentally prefer the present over the future.

But the intensity varies dramatically. People with high time preference heavily discount the future. They choose 500,000 won today over 1,000,000 won tomorrow. The moment their paycheck arrives, they spend it immediately, taking on credit card debt to buy what they want right now. They make no long-term plans, and “live for today” is their motto.

People with low time preference discount the future less. They view 1,000,000 won tomorrow and 900,000 won today as roughly equivalent. They can voluntarily delay present gratification, prioritize saving, and willingly sacrifice short-term pleasure for long-term goals.

Austrian economist Eugen von Böhm-Bawerk positioned time preference as the core of interest rate theory in the 1880s. He explained that the fundamental reason interest exists is because people prefer the present over the future. Ludwig von Mises expanded on this, viewing time preference as the foundation of civilization’s progress. Without low time preference, capital accumulation is impossible, and without capital accumulation, economic growth is impossible.

Time preference is not merely an individual psychological trait. It determines the fate of societies.

Low Time Preference Built Civilization

Consider the agricultural revolution. Ten thousand years ago, a hunter-gatherer accidentally dropped grain seeds on the ground. Months later, they discovered crops growing there. A choice presented itself. Eat the seeds now, or plant them in the ground and wait months?

A person with high time preference eats the seeds. They are hungry now. A person with low time preference plants the seeds. They anticipate a tenfold or twentyfold harvest after months of waiting. Agriculture is the product of this low time preference. And agriculture created settled living, and settled living created civilization.

Look at the construction of medieval European cathedrals. Cologne Cathedral began construction in 1248 and was completed in 1880. It took 632 years. Admittedly, construction was halted for about 370 years between 1473 and 1842 before resuming, so the actual construction period was shorter than that. Nevertheless, the archbishop who decided to begin construction knew he would never see it completed. Neither would his grandchildren, nor his great-grandchildren, nor even his descendants twenty generations later. Yet he began anyway. This is a culture of extremely low time preference.

Korea’s Annals of the Joseon Dynasty are records spanning 472 years. The kings of the time could never read their own annals. They were compiled after death and made public for later generations. Yet they were faithfully recorded. Recording the present for future generations — this too is an expression of low time preference.

What does a high time preference society look like? Forests are cut down for short-term profit. Future generations’ resources are borrowed by the present generation through debt. Buildings meant to last 20 years are built instead of ones meant to last 100. Investment goes only to immediate applications rather than basic science. Short-term job training takes priority over education. Does any of this sound familiar?

1971: When the Monetary System Began Distorting Time Preference

On August 15, 1971, President Nixon appeared on television and announced: “The United States will no longer convert dollars into gold.” It was the end of the Bretton Woods system. From that day forward, the world’s monetary system fundamentally changed.

Before that, the dollar was backed by gold. It was fixed at $35 per ounce, and foreign governments could exchange their dollars for gold. This imposed a physical constraint on money creation. Without gold, you couldn’t print dollars.

But after 1971, that constraint disappeared. The Federal Reserve gained the ability to issue as many dollars as it wanted. And it made liberal use of this ability. The oil shocks of the 1970s, the Savings & Loan crisis of the 1980s, the LTCM collapse of 1998, the dot-com bubble of the 2000s, the 2008 financial crisis, the 2020 pandemic — every time a crisis came, the Fed printed money. The logic of “print more money and the problem goes away” was repeated over and over.

This money creation had a direct impact on individuals’ time preference. If a currency loses purchasing power every year, the incentive to save disappears. If today’s 10 million won will only have 9 million won of purchasing power in five years, it’s not rational to delay consumption. Furthermore, in a low-interest-rate environment, borrowing to buy assets is far more advantageous than saving. The system itself was designed to encourage high time preference.

Let’s return to the Korean household savings rate statistics. The plunge from 25.2% in 1988 to around 5% in 2024 is not because Koreans’ virtue deteriorated. It’s the result of a changed system. In a structure where saving erodes purchasing power and taking on debt to buy real estate yields profit, people responded rationally.

How Bitcoin Reverses Time Preference

Bitcoin poses a fundamental challenge to this distorted time preference structure. The key is simple: Bitcoin stores purchasing power.

Bitcoin’s supply is fixed at 21 million, and new issuance is halved approximately every four years through the halving mechanism. After the 2024 halving, the annual new issuance rate is about 0.8%, lower than gold’s annual mining increase of 1.5–2%. Over time, Bitcoin’s scarcity increases mathematically.

In this structure, holding Bitcoin naturally becomes an expression of low time preference. It is the act of voluntarily deferring present consumption and anticipating greater future value. The reason humanity saves — the expectation that the future will be better than the present — is built into Bitcoin’s monetary design.

The expression “HODL” used in the Bitcoin community is not merely an investment strategy. It is the natural savings culture created by sound money. Of course, Bitcoin’s short-term price volatility can also encourage speculative behavior. However, the behavioral pattern exhibited by Bitcoin’s long-term holders is the archetype of low time preference. Not being swayed by short-term price movements and maintaining a long-term perspective — that is low time preference.

The Changes Low Time Preference Creates for Individuals and Society

Changes in time preference extend beyond individual economic decisions to affect society as a whole.

At the individual level, people with low time preference invest more in education, take better care of their health, and value their relationships more. The ability to choose long-term satisfaction over short-term pleasure leads to better outcomes in nearly every area of life. The “marshmallow experiment” conducted at Stanford University in the 1960s showed how the ability to delay gratification was linked to children’s long-term achievement. However, a 2018 follow-up study found that when family background and socioeconomic factors were controlled for, this effect diminished significantly. Even so, this does not mean that the ability to delay gratification itself is unimportant.

At the societal level, a culture of low time preference enables basic scientific research, long-term infrastructure investment, and capital accumulation across generations. In contrast, a high time preference society produces corporations obsessed with quarterly earnings, politicians focused only on results within their term, and government debt that passes the bill to future generations.

Sound money — money that preserves value over time — is the institutional foundation supporting a culture of low time preference. Just as people saved gold coins during the gold standard era and those savings became a safety net for the future, Bitcoin can become sound money for the digital age.

Failing to save is not a matter of willpower. It is the result of distorted incentives created by a poorly designed monetary system. Bitcoin is an attempt to correct that distortion. A structure where saving is once again a virtue, where sacrifice for the future is rewarded — that is the direction Bitcoin points toward.