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For the theory to hold though, everything needs to go down in dollars. That's the point. If Bitcoin is the only thing going up there are no deflationary or infl
by akhatri_aus 9y ago
For the theory to hold though, everything needs to go down in dollars. That's the point. If Bitcoin is the only thing going up there are no deflationary or inflationary forces at work.
- captainmuon 9y agoYou're right, there are not deflationary or inflationary forces at work. What is happening is simply supply and demand. I'm thinking in a simple two-goods model here. "Currency" vs. "Products" - or "USD" vs "BTC". "Too much" supply of currency or "too little" supply of physical products drives the price up. In this model, that's the same as inflation, but you are right, as soon as there is a third good you can compare prices to that good and tell if it is inflation (all prices rise) or not (only the price of one good rises). My point is not "it is inflation". Rather "it is inflation-deflation-supply-demand" (market reacting to changing supply and demand), as oppossed to "it is irrationality". If bitcoin is staying with us, and not banned etc., then demand for it will continue to grow faster than the supply will grow. I think the stable exchange rate of a fully established bitcoin will actually be at least a factor of ten higher than today.