In the short term, over the next year or so, there isn't going to be a deflation problem with Bitcoins; there will be significant inflation. The BTC supply is

In the short term, over the next year or so, there isn't going to be a deflation problem with Bitcoins; there will be significant inflation. The BTC supply is set to increase something like 30% next year. Right now the value of BTC has been going up (relative to USD) hand over fist due to increased demand. But eventually -- and I think it's going to be pretty quickly -- the buying spree is going to end and the miners are still going to be churning out new Bitcoins. It's going to feel more like holding Zimbabwe dollars than Krugerrands for a while, I suspect. Long term, yes, Bitcoins are designed to deflate. If they remain popular past c.2020, prices will gradually decrease and smaller and smaller fractions of Bitcoins will need to be used for transactions. (Actually the number of Bitcoins in existence will probably go down slowly over time, as people lose Bitcoin wallets and thus take the BTC out of circulation forever. There are 9000+ BTC "lost" this way at present.)