What you basically are saying is that Bitcoin is doomed by its increasing value. How is this a bad for the currency?
No. All value is irrelevant. The model is 'doomed' because there will only ever be 21 Million Bitcoins.
There are not enough bitcoins to sustain adoption by the masses, in accordance with population growth against an increasing number of internet users.
Aside from this, assume that say only 10 bitcoins a year are 'lost', because someone dies and no one knows the password for their wallet etc.
In the early days, on this forum, I once sold someone 1,200 bitcoins, they tried to transfer them to a usb via a linux 'live' cd... and lost them.
'No worries' you might say we can still trade 0.1 , 0.01 , 0.001 . 0.0001 , 0.00001 etc.
I does not matter how long this takes, once 21 Million bitcoins are generated, it will happen.
Reverse / flip this triangle image, as if it were my modeled graph.
C to A is the boom. Point A is 21 Million Bitcoins. A to B is the inevitable and intangible 'deprecation' back to zero.
In the actual models I ran C to A was usually more curved i.e. the opposite concave to this...
A to B was less steep and even flat, but the outcome is always the same. That's the model, reality will be different, but there is only one overall conclusion. Eventually 0 Bitcoins are left.
Perhaps eventually, I think a more realistic concern is that Bitcoin is rendered obsolete by some new technology or a huge portion of the worlds computers are destroyed by EMP or something of that sorts. I just don't think this is a legitimate concern.
Assuming that the network still functions, the less Bitcoins the more they are worth. If the price dropped, that means they are likely to circulate more, in other words becoming a valid currency again. If circulation drops, the price will rise.
Would you say that because eventually we may run out of gold, uranium or some other valuable metal, it would start to
drop in value as we got close to running out? I don't think so.
Furthermore, as much as most of us would hate it, from what I understand the system could be changed to bring back small block rewards if it became absolutely necessary.
