Why is this an inherent flaw?

When designing something that should work as a currency it means using it as a medium-of-exchange. Then its purpose should be to act as an intermediary that changes hand often and is not really owned by anyone. Much like a river facilitates travel of ships and therefore goods, a good currency should have a certain liquidity that allows a healthy movement of goods (and services). But if everyone is just holding on to their currency it would be as if everyone was building dams to hold up tributaries that feed the river. With what little water is left in the river the reach of ships would decrease, also the depth of the water would pose problems and so ships would have to be smaller and carry less.

That is exactly what is currently happening to cryptocurrencies. A large portion of coins or tokens are being held or HODL (or should that be HEDL?). When so much is being held there is not enough liquidity to allow fluctuations in quantity. People get used to the low water levels and decide to build right up to the water line thinking its prime real estate. Then when someone sells a large quantity of coins/tokens it would be like opening a large dam without warning. The water gushes down, rapidly increasing the water level of the river and destroying anything built close to the water.

This problem is caused by the aforementioned “stockhodl syndrome”. Because the cryptocurrency is viewed as and treated as an asset, and there is as of yet no clear daily use for it, when someone buys any crypto the initial reason for the buy is so as to sell when its value increases.

This “stockhodl syndrome” is made even more severe due to various methods of rewarding those who hold and penalising those who spend. This incentive to make people hold is just so as to create a false sense of scarcity to raise the value, which in turn gives positive reinforcement to the “stockhodl syndrome”.

There are a few cryptocurrency exceptions that do have some sort of intrinsic value or do provide value. However, it’s not so far off to say that 99.9% of current cryptocurrencies are designed as assets, in other words, are designed for you to “hodl” them.