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Tokens are neither deflationary nor inflationary. The idea that an asset is deflationary or inflationary implies that the supply of the asset determines its pr
by lottin 5y ago
Tokens are neither deflationary nor inflationary. The idea that an asset is deflationary or inflationary implies that the supply of the asset determines its price. This is incorrect from a theoretical standpoint, as well as from what empirical evidence tells us. It's a misapplication of the Quantity Theory of Money. QTM is a theory of money, it doesn't apply to stocks, tokens, assets in general, or in situations where there are competing currencies.
- chewbacha 5y agoHow would I rectify that against the model of supply and demand, where increasing supply without increasing demand would result in its price deflating?
- lottin 5y agoI don't understand the question.
- fivea 5y ago> The idea that an asset is deflationary or inflationary implies that the supply of the asset determines its price. Isn't this one of the most basic properties of supply and demand, though? I mean,what do you expect to happen if your supply is artificially capped and early adopters start to pump up demand for the stuff they own? In fact, isn't that the whole point of these schemes? I mean,do you know anyone who decided to waste their own money subsidizing anything related to crypto? Each and every single evangelist and proponent of crypto is invested in getting in cheap and pumping it up to get out with the maximum possible markup.
- notahacker 5y ago> Isn't that one of the most basic properties of supply and demand though. The most basic property of supply and demand is that price is determined by the interaction of supply and demand, so a fixing the supply alone determines nothing at all about its value, which is why the incessant pumping is necessary. The cryptoproponent's argument that cryptocurrencies must increase in value because there are hard limits on their growth rate is a cargo cult version of the law of supply and demand made to serve the pump
- skeeter2020 5y agoIf you were to take an introductory economics course the first day would prove you wrong. Resouce scarcity combined with increasing demand means prices go up. It most certainly applies when all currencies are designed to operate in the same way because they then move in concert and there is no alternative to counter this.
- lottin 5y ago> Resouce scarcity combined with increasing demand means prices go up. And? The demand for an asset is tied to its utility. You can't just assume that the demand will continue to increase forever, but that's exactly what the notion of "deflationary asset" implies.