That's deflationary currency 101
However, note that collusion is tricky in a decentralised setting
One big whale liquidating can trigger a massive sell off, admittedly becoming less likely with every day thy passes without it happening
Topic: Why bitcoin's exchange rate won't drop too much - page 3. (Read 5097 times)
Bitcoin's exchange rate won't drop too much because existing holders can support it
One extreme example:
Suppose that one guy have 31 million dollars, he bought all the 21 million coins at $1, and sold 10 coins to others. Then, he still have $10 million at hand. Then he refuse to sell any coins below a market price of $1 million and are willing to buy any coin at a price of $1 million. Then bitcoin's market price will be $1 million, and his total net worth will be $21 trillion (By using only 31 million dollars, he raised his net worth to 21 trillion dollars)
If there are 21 million users, each of them bought 1 coin at $1, and refuse to sell any coin below a market price of $1 million, then bitcoin's market price will also be $1 million
So, when the price drops, the existing coin holders will have a good way to protect their wealth: They can simply refuse to sell the coin below a certain price and even step into exchange to buy (This is actually what central banks do on Forex market), it will easily break the downward trend
Of course that will not stop the inflow of daily mined coins, but today's miners all carry a very high cost, so they would also refuse to sell the coins below their cost
If the coin supply is unlimited, this strategy will not work
One extreme example:
Suppose that one guy have 31 million dollars, he bought all the 21 million coins at $1, and sold 10 coins to others. Then, he still have $10 million at hand. Then he refuse to sell any coins below a market price of $1 million and are willing to buy any coin at a price of $1 million. Then bitcoin's market price will be $1 million, and his total net worth will be $21 trillion (By using only 31 million dollars, he raised his net worth to 21 trillion dollars)
If there are 21 million users, each of them bought 1 coin at $1, and refuse to sell any coin below a market price of $1 million, then bitcoin's market price will also be $1 million
So, when the price drops, the existing coin holders will have a good way to protect their wealth: They can simply refuse to sell the coin below a certain price and even step into exchange to buy (This is actually what central banks do on Forex market), it will easily break the downward trend
Of course that will not stop the inflow of daily mined coins, but today's miners all carry a very high cost, so they would also refuse to sell the coins below their cost
If the coin supply is unlimited, this strategy will not work
Jump to: