3 ms·
Understanding economics does not necessarily provide insight into understanding cryptocurrencies. That's been evident by the wildly varying posts about the top
by kordless 13y ago
Understanding economics does not necessarily provide insight into understanding cryptocurrencies. That's been evident by the wildly varying posts about the topic over the last few months.
Regardless of the nice graphs, Bitcoin is currently NOT deflationary. Every 10 minutes 25 new coins are minted and placed into circulation. The rate of new Bitcoin creation will be halved every four years until there are 21 million BTC in circulation. Additionally, there are a slew of other cryptocurrencies with varying degrees of mining rates - some have a constant rate of inflation built into them. Time will tell which ones are adopted.
The miners who are minting these new coins are helping secure the currency (adding value) are putting work into the system by way of capital expenditure on equipment and costs associated with power. They expect a return on their investments and are probably the determining factor to the current price.
- philwelch 13y agoThat's not what inflation means. Inflation is when prices rise because the growth in currency outstrips the growth in economic activity. If the growth in currency is less than the growth in economic activity, even if it's still >0, prices will drop, which is the definition of deflation.
- nhaehnle 13y agoEven that is a problematic take on it, because you ignore savings and what MVPQ people call the "velocity of money". When firms like Apple sit on hoards of cash, the amount of currency can grow quite a bit faster than the economy without inflation.
- philwelch 13y agoYeah, the actual definition relies solely upon whether prices rise or fall in aggregate, for reasons that can be solely attributed to monetary factors. Which is a bitch to figure out, because you have all these libertarians screaming about how gasoline and groceries are more expensive, therefore inflation, when really it's because petroleum is expensive.
- gnaritas 13y ago> Bitcoin is currently NOT deflationary. Incorrect, demand alone has made it hugely deflationary; if everything were priced in Bitcoin right now, prices would have to be adjusted downward constantly, that's deflation. Money supply inflation is not inflation which generally refers to the overall prices of goods and services rising and money supply deflation is not deflation which is the fall of overall prices of goods and services. Bitcoin is currently hugely deflationary.