Topic: Inflation and Deflation of Price and Money Supply - page 52. (Read 1456404 times)

Debt muddles the picture a bit. The most important things to not about debt is that it expands the total amount of money (which might reduce the urge to hold and therefore the value of the currency unit), that debt is transient, and that you have to pay interest for the loan.

Interest is the value of consuming now, compared to consuming later. Said another way, the compensation you want to have in exchange for going to the back of the consumption queue.

The appreciation of bitcoin is not interest.

Brilliant. However "money" is a term that is subdivided upon bonds and exactly money. Total wealth in economy equals the total amount of bonds plus quantity of money in circulation which equals to the quantity of bonds supplied plus quantity of money supplied. The total amount of bonds and money that people want to hold must equal to the total amount of wealth in ecosystem because people can't purchase more assets than their available resources allow. Thus demand is defined the aggregated amount of bonds and money people hold in the period of time, moreover all goods, property and bonds that can ever be supplied must equal the amount of the bonds and money that can ever be demanded. Thereby both supply and demand are equally equating to the equilibrium interest rate of any kind of money/asset. Supposing that cryptocurrency substitutes bonds the demand for cryptocurrency and an interest rate should be negatively related by using the opportunity costs, the amount of interest (expected return) sacrificed by not holding the alternative coin. If an interest rate on a certain coin rises, an opportunity cost of holding money rises and thus money is less desirable and the quantity of money demanded must fall. However permanent growing an interest rate on a coin due to the reducing of available money supply can possibly heavily rise an opportunity cost of holding another coins/assets.

Demand comes from the urge to hold, supply from the want to hold less.

So the real question is what the supply and demand depend of...

The whole trading pictures depends from the supply and the demand. That creates the value of a given currency - such as bitcoin.

I think is true and agree with you about Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency.

a country will develop if analyze and improve the market share of Bitcoin.

Regards,

But, as the value of Bitcoin increase and the value of fiat decrease (based on relative inflation rates and adoption rates), if you have a balance in Bitcoin and a balance in fiat, the share of your wealth denominated in Bitcoin will increase compared in the share of your wealth denominated in fiat.
At some time, the share of your wealth denominated in fiat will become irrelevant compared to the share denominated in bitcoin.

The question about economic activity is a trope of keynesians, pseudo and post.
The problem with an inflating currency is to push for too much economic activity (investing and consuming). Economic activity is too much compared to the ability of the system to support it. People engage in too much consumption, not enough savings, too much investing and not enough savings. I wrote about "NOT ENOUGH SAVINGS"?
Until the effect of increasing the money supply last, people do not realize their investments are a failure. But as the effect wore off, the investments done because of inflation must be liquidated at a loss (for the investors or someone one else like the taxpayers). Then the government push for another round of inflation (lowering interest rates). And another, and another. Until interest rates go to zero. They they can not do anything, because the currency become, essentially worthless. In the mean time they have favored debtors and consumers at the expenses of lenders and savers.

People saving, AKA people producing and selling good and services without consuming, stop working as hard as before, because the value of their savings lose value and they can not same more of a certain amount.

People saving 50% of their income can not save more than 5 years of their income in currency in inflation is 10% every year (increase of money supply), because at the end they lose exactly as much value as they add (they are working for nothing, essentially). So they decide to spend more in consumption now because they know they will not be able to consume it later. But this take away real savings - like briks, mortars, wood, drugs, etc. - from people looking for loans to start productive enterprises. And given less stuff is produced and more is consumed, prices start to go up.

This situation would be very unlikely to happen in the real world. I would say that most people that have the ability to acquire bitcoin also have fiat based assets they can spend.

Even in your situation, people will delay consuming for as long as they can because they think the value of bitcoin will increase. This will ultimately lead to lower economic activity because people will delay purchases for as long as they can hold off.

The reason that the level of bitcoin economic activity is where it is now is because some people do not think the price will always rise, but rather there is some chance it may not.

Real money? Gold and Silver , because they have an intrinsic value

us dollar have intrinsic value? no, only the value of the paper and ink it is printed on

still print more paper money?

just my opinion  

watching

Because as a living being you CAN NOT stop consuming (and spending).
You could delay some consumption, but you can not stop from consuming goods completely.

For example:
You have only BTCs and need to buy food to eat. You could delay consumption for a day, maybe three, but then you will be hungry and the desire to eat will probably be stronger than the desire to profit from a future increase in value of your BTC. Or maybe not and you will die starving. You will probably just use the minimum quantity of BTC you could spend to buy ramen and delay buying Champagne and caviar for the future.

This is an extreme situation, but there is a large number of people with different (often very different) time preferences, so there always be at least a small flow of Bitcoin to be exchange for goods and services or fiat.
If I acquire Bitcoin just to pay for my new tablet, because I can only use Bitcoin if I'm in Ghana and want to pay a shop in the US, my time horizon is very short. If I buy Bitcoins because I want protect my savings from inflation in Argentina, my time horizon is much longer.

You can imagine how you behave in this situation about how to behave like other people say. Probably someone from the people who received early bitcoin prefer to spend it on shopping.

Confused at first, espically the definition. You guys differenciated from each other.  Finally get clearer and clearer

Trying to pinpoint inflation amounts is impossible because right now Bitcoin's value is really determined by the bilateral currency (i.e. The $US). If QE4 or 5 were to pop up around the corner, that will increase the supply of US$ a lot, making one dolloar worth less and making any fixed supply currency more valuable.... i.e. Bitcoin. Notice how since QE is slowing, Bitcoin's value has pretty much just flattened?

Basing inflation rates on the fundamentals of Bitcoin itself (without accounting for the US$ or the formalized fiat) is insane because Bitcoin hasn't been completely adopted (and won't be) and because it's value is still a function of other currencies.

Bitcoin's price is based on supply (which is fixed), demand (which is a function of both inflation in non-digital currencies and general acceptance and adoption). That's why modeling Bitcoin's price is actually quite possible.

Indeed, thanks for the heads up on this, telling it how it is, just like Dylan and Watchmen did!

This is the very useful information, thank you very much. And a nice song btw

Thanks for this information, I've read through it and it's very detailed and well structured.

For the people concerned, I was updating my charts today with the last data of the Federal Reserve and, for the first time, the differential between the past 52 weeks inflation of BTC supply and M1 supply is under 1% (0,87%).

In the next year BTC supply inflation will  be between 10% and 12.5% where the inflation of the $ M1 will be north of 12% (Money Base inflation just bounced over 20% falling from 40% of last November).

BTC will actually inflate LESS than the USD for the first time in just few weeks (maybe four, maybe eight, surely by the end o f the year this will happen).
This is when the next hyperbolic will start.

https://www.youtube.com/watch?v=4JqZgGvxjQY

2140 is just when the last satoshi will be mined.

But, if you look at the schedule, you will see by:
2016 - 3/4 of all btcs will be mined
2020 -7/8 of all btc will be mined
2024 15/16 of all BTC will be mined

I would say inflation after 2016 become very low and after 2020 become inconsequential.
in 2016 inflation will drop to < 4.5%/year
in 2020 inflation will drop to < 2,5% year
in 2024 inflation will drop to < 1,25%/year

The games will be over well before 2140.
Already after 2020 there will be little to be decided.

To have some some aim -very important