Bitcoin deflationary? If yes..Good or Bad?

aesma

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Quote from: Erdogan on August 11, 2014, 04:05:54 AM

Quote from: Mobius on August 10, 2014, 12:12:11 PM

Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?

Because most people don't live off bitcoins mined/bought at 1 dollar ? The farmer can't hold his tomatoes or peaches, either he sells them or they're worth nothing. He can hold grain though, and this has caused famines.

What is needed is neither inflation or deflation, both are bad. But the main problem isn't even there, it's in things like development, growth, way of life, etc. What do we want to achieve, what can the environment sustain, what will happen when all the Asians and Africans will be able to buy a car and an iPhone, etc.

I don't think Bitcoin is much help in this matter.

Most of you seem to be hailing from the US, so I will describe what's happening here in the Eurozone where deflation is upon us, thanks in part to a strong Euro : no economic growth and high unemployment. Good or bad, you decide, but it is what it is.

Professor Plums

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Quote from: Slark on August 11, 2014, 07:51:41 AM

Only time will tell what will happen in the future. I think its is good that bitcoin have tendencies to deflate. Standard currencies can only inflate as far as I can tell and that is not positive at all...

This is exactly what I was going to say. I think bitcoin will be a good experiment to wheter it is good or bad or not. Interesting to watch for sure.

Slark

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Only time will tell what will happen in the future. I think its is good that bitcoin have tendencies to deflate. Standard currencies can only inflate as far as I can tell and that is not positive at all...

TippingPoint

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Deflationary Bitcoin is the alternative to inflationary fiat currency.

Bitcoin deflation inforced by cryptography. Fiat inflation fueled by politicians seeking votes and continued power.

qwerty555

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Quote from: Erdogan on August 11, 2014, 04:05:54 AM

Quote from: Mobius on August 10, 2014, 12:12:11 PM

Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?

in reality people sell all the time no matter what the environment..depending on their specific circumstances..merchants will sell coin received due to cash flow requirements/ regulatory requirements or they may not yet be bitcoin converted people..

Others may be forced to sell for immediate needs or they are not definitely sure that the market will push ahead in their time frame or they sell in the hope to buy back cheaper on a future dip.

when sellers are in short supply ..that's the time for the next push up. and this is very pronounced in bitcin due to the relatively very limited supply. This can be inferred from the May 17th daily volume of only $19M at around $450 / bitcoin and the low volumes leading up to that low before the sudden upswing to $650 by June 6th and a volume of $179 M on May 24th at $550 where lots of sellers were suddenly found after the price rose

http://www.quandl.com/BCHAIN/ETRVU-Bitcoin-Estimated-Transaction-Volume-USD

Erdogan

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Quote from: Mobius on August 10, 2014, 12:12:11 PM

Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?

qwerty555

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Quote from: Brewins on August 11, 2014, 12:08:54 AM

First: let clear if you talking about monetary or price inflation:

https://bitcointalksearch.org/topic/inflation-and-deflation-of-price-and-money-supply-140793

Bitcoin by itself is not deflationary in any sense. Now there are around 3600 new coins mined every day, so Bitcoin no has monetary inflation, and so it will be until 2140 or so.

Also Bitcoin has no price deflation, because the price can go down too, like happened this year and years before.

Bitcoin only prevents EXCESSIVE and ARBITRARY monetary inflation, and nothing more.

For me it is good, because we need something to counter the all might central banks and they stupid decisions that I have no control over, and most of the times don't benefit me.

It is price deflation that I refer to.

This was posted in Feb 2013 when bitcoin was approx $25 / coin...how much price deflation has occurred since then ?

https://bitcointalksearch.org/topic/inflation-and-deflation-of-price-and-money-supply-140793

.Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

However having seen some of the posts....excesses to either will be damaging, although currently deflation for Fiat may be preferred for a while to counter act the awful ( real) inflation figures and particularly food/ utilities inflation this year.. Ultimately a stable price with little or no deflation or inflation is what should be aimed for ..but I would suggest after the current excessive inflation has been off set by some deflation..

http://www.bankofengland.co.uk/archive/Documents/historicpubs/qb/1994/qb940201.pdf

Indeed prices have risen more
quickly in the last 50 years than in any similar period since
1694; the index of prices tripled between 1694 and 1948,
but has risen almost 20-fold since.

titulng

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HubrisOne

How could deflationary on Bitcoin?

Brewins

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First: let clear if you talking about monetary or price inflation:

https://bitcointalksearch.org/topic/inflation-and-deflation-of-price-and-money-supply-140793

Bitcoin by itself is not deflationary in any sense. Now there are around 3600 new coins mined every day, so Bitcoin no has monetary inflation, and so it will be until 2140 or so.

Also Bitcoin has no price deflation, because the price can go down too, like happened this year and years before.

Bitcoin only prevents EXCESSIVE and ARBITRARY monetary inflation, and nothing more.

For me it is good, because we need something to counter the all might central banks and they stupid decisions that I have no control over, and most of the times don't benefit me.

Mobius

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Quote from: 1986 on August 10, 2014, 12:16:50 PM

Quote from: Mobius on August 10, 2014, 12:12:11 PM

Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

But people are spending it, though I reckon more people probably hoard it.

There are a lot of people who are hoarding bitcoin. I think the number of people who are doing this has gone down somewhat this year as we have not seen the extraordinary returns this year as we have sen in the past, but there are still a lot of people who are doing this.

odolvlobo

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Quote from: bitsmichel on August 10, 2014, 08:39:03 AM

Deflation is good, because the assets will be worth more money, but at the moment there is still a high number of new bitcoins getting in the market.

You have that exactly backwards. Deflation causes (or is, depending on how you define it) falling prices.

Lethn

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Quote from: bitsmichel on August 10, 2014, 08:39:03 AM

Deflation is good, because the assets will be worth more money, but at the moment there is still a high number of new bitcoins getting in the market.

That's inflation forcing up the prices, deflation makes absolutely everything cheaper so people won't need to have assets rise in value in the first place, when a currency is deflationary it makes it easier to buy things because of this, inflation does the opposite.

It's all to do with the amount of currency actually in circulation when you have less it's usually worth more so it can buy more things, when you have something like paper which can be printed in infinite quantities then you get the Zimbabwe and Weimar Republic problem of having so many notes that you need tens of thousands of them to buy anything.

Japan and Argentina are currently heading towards that stage as well, in Japan depending on where you go of course a detached house can cost ¥8,500,000 whereas if we're talking British pounds it will be something like £50,000.

acs267

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Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

I'm sorry, but are you a troll?

I'd rather not use my USD that are getting pumped out faster than paper. It really makes no sense, right? And your saying it's bad for buying?

Inflated currencies lose value quickly, and are lower in value. If your saying it's bad for buying, then, holy god.

And if it can't be a currency unless it's inflationary, how come it's recognized as a currency?

1986

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Quote from: Mobius on August 10, 2014, 12:12:11 PM

Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

But people are spending it, though I reckon more people probably hoard it.

Mobius

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Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.

Finchy

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Quote from: HarmonLi on August 10, 2014, 09:27:42 AM

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

I don't see how it can't be a real currency. Who wants one that a central bank can ruin at any moment?

odolvlobo

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It is interesting that none of your 8 reasons why deflation is bad actually described something bad happening -- except #8, which is false.

Both inflation and deflation are "bad" because they cause inefficiencies in the economy. At the same level, neither is worse than the other.

HarmonLi

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Honest 80s business!

Quote from: TheGame on August 10, 2014, 09:06:38 AM

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

HarmonLi

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Honest 80s business!

It totally depends what we want to do with bitcoin! If we intend to use it solely as a store of value, it is a very good thing, because we can be sure our wealth won't lose value by becoming artificially inflated. But as a currency, the typical caveats of a deflationary currency to apply. At the moment we can't be sure it's only deflationary, there are still a lot of coins being generated, but it gets less every 4 years or so. It now totally depends on the rate of new money coming in.

Ron~Popeil

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Quote from: yayayo on August 10, 2014, 09:01:51 AM

Quote from: qwerty555 on August 10, 2014, 12:35:01 AM

Many in the community believe bitcoin is deflationary..so

1 Is it really and to what extent if it is?

I don't understand this question. The situation is quite clear. It has been visualized in this sticky thread: https://bitcointalksearch.org/topic/chart-bitcoin-inflation-vs-time-130619

So bitcoin offers a predictable monetary inflation rate that is diminishing over time. This monetary inflation is currently lower than the rate of adoption (and far into the future may be lower than the amount of lost coins) so the effect is deflationary.

Quote from: qwerty555 on August 10, 2014, 12:35:01 AM

2 Is that a good thing or a bad?

It depends on the perspective. If you are a debitor deflationary effects are bad, because the value of your debts keeps growing. If you are a creditor this effect works in your favor. I think overall deflation discourages loans and consumption of unnecessary goods. It encourages saving and preserves resources. Given the devastating effects of debt-bubbles that we have seen in recent years I think this is positive.

ya.ya.yo!

Agreed. Less debt is good news for everyone but the aristocracy.

A huge debt bubble is right around the corner in the form of student loans.

Topic: Bitcoin deflationary? If yes..Good or Bad? (Read 4125 times)