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> The "store of value" proposition of Bitcoin is that it can't be printed by a central bank, so you can be sure that your holdings relative to the size of the m

> The "store of value" proposition of Bitcoin is that it can't be printed by a central bank, so you can be sure that your holdings relative to the size of the money supply cannot be diluted. Except that's not true. The block reward consists of newly created coins of which there are 1800 per day. Currently, that is a 3.7% annual inflation rate in supply, which is far more than the 2% target most central banks from developed countries have. In value terms, at a price of $9300 per coin, that is $16.7M that need to flow into the Bitcoin eco system each day for it to remain stable. But "store of value" also means something beyond just money supply, namely stable buying power. And that is not something that Bitcoin has ever offered on account of being more volatile than a micro cap biotech penny stock. Bitcoin may very well be one of the worst stores of values imaginable.

eccodown 7y ago
The supply is currently being bootstrapped, the rate of new creation is falling as the supply get closer to the maximum. Some months from now new coins from block rewards should halve (3.7% inflation dropping to 1.85%), and the process repeats as maximum supply is reached in the distant future, at which point the mining reward would primarily be the transaction fees.
- neffy 7y ago
  This is I think the point OP is making. Up to this point in time, there has been a steady, and somewhat exponential increase in the supply of Bitcoin. As you say, that is about to start tapering off. At which point, the behaviour of the entire system can be expected to radically change.
papln 7y ago
You have to also consider the (hard to measure) rate at which Bitcoin is accidentally lost or intentionally destroyed, which is a deflationary pressure. "2%" is target for the growth in the ratio of money supply to product supply, not the money supply itself. BTC could be wildly above or below 3.7% (+/- deflation due to destruction) based on the growth of the GDP of the BTC-financed economy. In short, those two metrics are just not comparable types. BTC has no "target" inflation. At best, you could measure BTC's observed inflation.

eccodown 7y ago

The supply is currently being bootstrapped, the rate of new creation is falling as the supply get closer to the maximum. Some months from now new coins from block rewards should halve (3.7% inflation dropping to 1.85%), and the process repeats as maximum supply is reached in the distant future, at which point the mining reward would primarily be the transaction fees.

neffy 7y ago
This is I think the point OP is making. Up to this point in time, there has been a steady, and somewhat exponential increase in the supply of Bitcoin. As you say, that is about to start tapering off. At which point, the behaviour of the entire system can be expected to radically change.

papln 7y ago

You have to also consider the (hard to measure) rate at which Bitcoin is accidentally lost or intentionally destroyed, which is a deflationary pressure. "2%" is target for the growth in the ratio of money supply to product supply, not the money supply itself. BTC could be wildly above or below 3.7% (+/- deflation due to destruction) based on the growth of the GDP of the BTC-financed economy. In short, those two metrics are just not comparable types. BTC has no "target" inflation. At best, you could measure BTC's observed inflation.