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Value is demand which is based on liquidity. The slow supply growth makes it a nice store of value assuming liquidity is increasing. Demand increases Witt new innovative crypto currencies and money transfer aps but fundamentally it has the best spread between increases in liquidity and increases in supply. Every new etf merchant or startup who takes btc makes more people want to hold it and invest in it
- In case the nominal income remains the same, inflation occurs, which reduces the real income. Inflation not only reduces the net worth of unprofitable assets but it also corrode other valuable assets, which reduces the real income of interest.
- When inflation rises, borrowers raise interest rates to offset inflation. This means that the amount of income that the lender must pay increases, resulting in a net income that the lender receives from the borrower and the lender is disadvantaged. This has resulted in unequal distribution of income between the lender and the borrower
A nice definition of inflation you can find in Palgrave dictionary of economics, some extracts here:
Quote Inflation is a process of continuously rising prices, or equivalently, of a continuously falling value of money (Laidler and Parkin, 1975, p. 741). Because there are several ways of measuring prices, there are also several different measures of inflation. The most commonly used measures in the modern world are the percentage rate of change in a country's Consumer Price Index or in its Gross Domestic Product deflator [...] Inflation has been a feature of human history for as long as money has been used as a means of payment, and as Milton Friedman (1970, p. 24) famously wrote, ‘inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output’. [...] Attempts to understand inflation have been aided by the insight that anticipated inflation has different effects from unanticipated inflation. Therefore the key concept here is an anticipated inflation (employers and consumers take future price changes into account) or unanticipated (when the price changes are not used in decision making etc.).
Inflation is an increase in the general level of prices, accompanied by a corresponding decrease in the purchasing power of money (depreciation of money) and leading to the redistribution of national income. Deflation is a reduction in the overall price level. Inflation is the main destabilizing factor of the market economy.
Inflation has a strong impact on economic agents, someone wins, someone loses, but most consider inflation to be a major problem.
very nice post based on economics it was very informative want more post like this from you people will be able to learn so much about the market i think
During the inflation, the money loses its purchasing or purchasing power. Then it takes more units of currency to purchase the same unit of product or service. Over time, the inflation rate reduces the price of each unit. On the other hand, during the monetary policy, money is increased in the purchase or purchasing power and the product or service takes less units of one currency for the purchase of the same unit. Always increase each unit of inflation currency. The price is very important for inflation. Especially for the money supply, the price plays a significant role.
Hey guys, I was kind of curious about the value of the bitcoin. I understand the basics of economics and how the price of money is determined by the supply and demand for it, but I am not completely sure why the price of bitcoins continues to rise. Is it because the demand of bitcoins is continually increasing at a staggering rate? Or perhaps people are trading their bitcoins for other currencies faster than it can be mined, thus reducing the supply? Some clarification would be helpful.
Thank you very much
I do not know the exact supply and demand. Sure, we can try and synthesize data from all trading floors, but we will never accurate because there is no exchange that can be counted for (OTC). Interestingly, we know the rate of MoneySupply and we know the exchange rate. From there, we can determine the true value of Bitcoin by multiplying only by two factors; A kind of view adjusts the inflation of the currency.
It's a percentage. It could be calculated and plotted in discrete yearly steps, but this chart shows the instantaneous (i.e., continuous) rate of inflation. "Annualized" just means that the rates are expressed at each point on the curve as though that rate of inflation were constant for a whole year and the money supply at the end of that year were compared to that at the beginning of the year. Inflation is usually expressed as an annualized rate. When you hear that the Federal Reserve is targeting an inflation rate of 2%, that's an annualized rate.
Value of a store of value depends of various elements
- Aceptance - Good and services which can de acquired - expectations about future prices
Good explanation about bitcoin in terms of inflation and deflation.
If the money supply expands, we get inflation, if it contracts, we get deflation. Everything is simple
This post made me return to my second year of Bachelor studies
 The thing described in the post is more likely about monetary inflation. But with goods there are only two types of inflation - demand inflation ans supply inflation. And in this case monetary inflation is dedicated to supply inflation (because costs rise up as many of them are closely connected to import). Goods inflation is also often caused by higher expectations, but it is related to demand inflation (as people expect inflation or deflation). This works the same with goods that could be bought with BTC. Hope I clearly shared my thoughts, i'm not a native English speaker:)
Good analysis sir. I learned a lot from you, thank you for sharing knowledge with us.
In my opinion, if bitcoin supply increases, the bitcoin price will automatically decrease. thanks.
A well analyzed topic thoroughly insightful
Great thread, I have learned a lot! Thank you very much thefiniteidea!
As the american dollar's value is increasing i think btc will decrease as both cannot go up, one currency's appreciation in most cases causes depreciation to the other coin. But i prefear to look at eth value to every currency
Talented people write simply and clearly, including about the breakthrough things in science. Your fabrications are very difficult to understand and do not bear practical application. They're powdering their brains.
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
I read the first message and was amazed. Price bitcoin from 10 to 20 bucks. Only then I saw the date of publication. Give me back my 2013 year... cry
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