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The value of bitcoins floats with supply and demand, that is correct. However the demand for any currency is tied to the supply/demand for the total number of g
by DasIch 14y ago
The value of bitcoins floats with supply and demand, that is correct. However the demand for any currency is tied to the supply/demand for the total number of goods that are sold/bought with that currency. As the value of these goods rises over time towards infinity demand for bitcoins will rise over time towards infinity. Supply of bitcoins on the other hand is inevitably slowing down and thereby the value of bitcoins will rise towards infinity.
This makes it very cheap to "import" goods but prohibitively expensive to "export" any. It also provides a huge incentive not to spend or lend any money. Demand will fall, loans will be harder to get, innovation will come to a standstill and overall the economy will collapse.
This is called deflation and this is why we have huge central banks full of well educated people carefully monitoring the economy to adjust inflation and deflation.
- unoti 14y agoInteresting. Do we have the same situation with gold? Continuous deflation, caused by constant supply combined with increasing demand, causing its value to rise to infinity? How is gold different?
- DasIch 14y agoIndeed it does apply to gold and to currencies using the [Gold Standard](http://en.wikipedia.org/wiki/Gold_standard http://en.wikipedia.org/wiki/Gold_standard) which has caused problems in the past, which is why it isn't used anymore as a currency on any significant scale.