Topic: Is Bitcoin anti-inflation? - page 5. (Read 1107 times)

You might think that Bitcoin is anti-inflationary because the supply is fixed, but that is not the whole story.

Inflation (rising prices) can come from 3 factors, as shown in this relationship: P = MV/Q. Here is how Bitcoin can impact inflation:

• Rising money supply (M). The number of bitcoins is fixed, but Bitcoin fractional reserve banking (FRB) is inflationary and it can increase the apparent bitcoin supply by a large multiple.
• Rising velocity (V). This is how often the same money is respent. Bitcoin transactions are more efficient, so Bitcoin is inflationary with respect to velocity.
• Falling transaction volume(Q). A contraction in the economy is inflationary because the same amount of money is available for fewer goods. Bitcoin has no effect on this.

I really don't know if this bitcoin can be an anti inflation asset or not. Bitcoin had a price of $0 when it was first introduced by satoshi. Maybe initially bitcoin was created as an asset that experienced inflation in its first years, but so far it is possible that the percentage of inflation will go down. Getting a little extra information from the bitcoin.org site, I don't think bitcoin was created as an anti-inflation asset, but there's always a chance that inflation won't happen on a much larger scale.

This is definitely not that simple. All those you mentioned apply if the demanding and every other determinant for that service/product remain the same. You could define it shortly and more properly that way: Your salary remains the same and the total monetary units increase; thus, your purchasing power decreases.

I found something interesting from this tweet

from this I can conclude that
Bitcoin Unlike most other currencies and assets, bitcoin is a deflationary currency due to its unique monetary policy. bitcoin is specifically designed to operate as a robust and secure store of value, and as an alternative to existing banking systems, financial networks, and currencies.
Two distinctive features of bitcoin that distinguish it from bank-issued or operated currencies are its decentralized nature and fixed supply. The supply of Bitcoins is capped at 21 million and as a result, it is impossible for more than 21 million bitcoins to exist.
besides referring to the words of economist Robert Murphy of the Austrian School of Economics who said that
“Part of where this fear of deflation comes from is, historically, it's associated with very bad economies. So, during the Great Depression of the 30s, there were falling prices. And there are other periods where prices fell when things were bad, but I would argue that the causality was the other way around. Partly what was going on there was people were concerned because the economy was so terrible. And, so what do you do when you're afraid? You don't want to invest in companies and things like that. You rush to liquidity. You rush to hard money. That's why you often see in periods of panic people will rush to the money, so you see prices of all other things quoted in money fall. So, it's not that the falling prices caused the bad economy. It's the other way around”
from his words i can conclude that bitcoin deflationary monetary policy will only increase the demand for bitcoin in the long run. As Burniske notes, already 80 percent of the bitcoin supply is in circulation and bitcoin creation will be limited as the years go by, after “halfing the miner reward.
so no need to worry about bitcoin because there will be no inflation in it.

First, come what inflation actually is. Suppose in past you had to spend 100 USD for your daily necessity, but the same thing you have to cost more than 100 USD now, that means inflation is occurring. another example, in the previous you took a service for 100 USD cost, but at present same service spent you more than 100 USD, means inflation occurred.

Now, look what about Bitcoin?? In here Gain is several times more than loss. @bitmover, why you don't take about your signature campaign as an example, the very beginning they had to pay out around ~2BTC in total for your weekly service, Now the same service costs them not more than 0.2BTC according to last week payment. So there is no room for inflation in Bitcoin, it is far away from inflation.

Now come to money printing, If they control Money printing(though I believe they can't), Inflation may occur for excessive demand of any service/products, or excessive production cost, sometimes Unscrupulous traders hold products to make fake Inflation. So, money printing is a factor, and it relies on many other co-factors.

Overall, Bitcoin is the actual solution to inflation, not actually ''anti-inflation''. It has a limited supply with a fixed flexible issuance rate. It is free from arbitrary and authoritarian regulation. you talked about the volatility problem, volatility may impact the short investors, but in the long run, volatility is a blessing.

Bitcoin has it's own inflation rate that is produced with mining every day but it is decreasing with halving every 4 years, so I would not say that Bitcoin is ''anti-inflation''.
However, if we compare Bitcoin with fiat currencies than you can say that it is better to hold Bitcoin than fiat currencies long term, and Bitcoin has a clear advantage.
People who profited most from Bitcoin are ones that forgot about their hard drives with mined or purchased Bitcoin and found it few years later, but if same thing would happen to someone in Venezuela with suitcase full of Bolivars, he would be a broke and poor man.

Indeed, that is a concept that is easy to understand, that limitations make it a hedge against fluctuations in inflation. Because Bitcoin is the opposite of printing dollars that are constantly being multiplied.
the analogy of paper money being printed on a large scale causes inflation, while Bitcoin is printed in limited quantities, it can be said simply that Bitcoin is thus positioned as deflation.

I think OP meant "Is Bitcoin a good hedge against inflation?" although it is difficult to know for sure from his wording.

If this is what he meant, I would say yes, at least so far it has proven to be the best, despite short-term volatility. Just look at how many dollars you would get 10 years ago with 1 bitcoin and how many you get now. The limited, finite nature of Bitcoin is the key.

In my opinion and based on what I know (you can argue) There are several types of inflation in this case, one of which is Bottle Neck Inflation, where I think Bitcoin falls into this category. Of course I have reasons why Bitcoin is included in the Bottle Neck Inflation type.


Meanwhile, according to William De Vijlder, said that

There is nothing in this world that is actually anti-inflation when we talk about things that matters, more or so they are going to be affected by time and the economic situation per say. When we talk about bitcoins and other cryptocurrencies they are ofcourse going to change according to the situations.

If we are talking about bitcoins then you have to understand that bitcoins will change drastically according to the time but at the same time there will not only be more profitable situations for people who are going to hold it for a long term but it could also benefit the people who are using it for Inter-day trading.

I do not understand your question well because when you are considering bitcoins, I do hope that you realize that it's volatile and it's a really important part of the whole situation.

Did you possibly mean “deflationary”?

This is what happens when inflation occurs. But, inflation is caused when money supply grows faster than the rate of the economic growth.

As a person who really loves Bitcoin I respond that it is currently inflationary. Everyday 900 BTC enter the circulation. When the lost coins exceed the newly mined coins, then it'll be deflationary.

I think this is the main cause of inflation. However, the effect is not so easily observed in real life.

Central Banks are also able to control inflation increasing interest rates. When interest rates are high, inflation tends to go down.



Bitcoin  may protect you against inflation, just like gold. The problem is that bitcoin is still very volatile, so you are exactly protecting yourself against inflation. You lose much more money than you would lose to inflation (especially if you live in a country where inflation is controlled), but you may also have huge gains.

So, I think that it is a nice protecting against inflation, but it shouldn't be your only protection against inflation, due to its high volatility.

According to many analyzes, inflation is caused by the printing of money by the Central Bank. Excessive printing of money will create an imbalance in supply and demand, which will have a negative impact on the balance sheet.
As a person who really loves BTC, I want to ask, is Bitcoin anti-Inflation?