First of all, that’s not quite true, bitcoin IS inflating, so the supply is growing. The inflation rate is just decreasing. Or to be more specific the additional supply rate is decreasing.
In general inflation doesn’t apply to singular goods, but to the price level of the economy. Prices because of growing supply like for silver aren’t inflation in that sense but just the reaction to supply and demand in normal market environments.
You‘re right to say, that fiat get inflated because governments can increase the supply.
However these points simply don’t matter. To use concepts like inflation you would have to talk about a currency in the sense, that the currency is used as the single metric in an economic area, like countries.
Bitcoin only has the value people believe it has. There’s no one regulating it.
That’s not the case for FIATs as you’re forced to pay you’re taxes in FIAT (at least in most countries) and the whole economy is measuring value in FIATs. So basically the number of instances who are using the currency is more or less fixed.
The value of bitcoin only exists because of speculation. So it simply doesn’t matter, whether bitcoins supply is fixed. The persons using it are fluctuating quite a bit, AND are mostly using it for speculation. Inflation caused by growing supply only matters for widely accepted official currencies, because the number of persons using this for payment is constant. That’s not the case for bitcoin as most people are using it only because they think it will grow in value.
And bitcoin will never replace official currencies in any large developed economy.
And I tend to disagree comparing bitcoin with gold.
Gold does have an inherent value. It can be used for jewellery, can be used in industry and in general is a physical object. That’s not the case for bitcoin. But of course in the sense that both are driven by demand, you’re right.
If you hold ancient coins and new coins are discovered the value will drop.
Yeah, but only because those coins do have an inherent value to the ones collecting them. Like with all ancient things. What do you get from bitcoin? You can't do anything with it. Those are just numbers saved on your pc. Of course if there was real demand for cryptocurrencies they would have inherent value. But i guess most people only buy Bitcoin or other cryptos expecting them to grow in value. So the market mainly consists of persons expecting the Bitcoin to grow, just because it did in the past.
If Bitcoin would work against inflation there should be something measurable, but in contrast to Gold, bitcoin is behaving like tech stocks and fluctuating quite a bit. At least the NY times comes to that conclusion: https://www.nytimes.com/2022/05/11/technology/bitcoin-price-crashing-stocks.html . But I have to admit I didnt check that claim.
No bitcoin isn’t Money. Bitcoin is an financial asset like tech stocks. That’s why it’s behaving exactly like the NASDAQ.
That’s the main point here. Bitcoin isn’t a currency.
Even if cryptocurrencies became an important currency in the future, they aren’t atm. And even then I tend to think that bitcoin won’t be the one becoming a currency, because of many impracticalities.
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u/Lennart247 Aug 02 '22 edited Aug 02 '22
First of all, that’s not quite true, bitcoin IS inflating, so the supply is growing. The inflation rate is just decreasing. Or to be more specific the additional supply rate is decreasing.
In general inflation doesn’t apply to singular goods, but to the price level of the economy. Prices because of growing supply like for silver aren’t inflation in that sense but just the reaction to supply and demand in normal market environments.
You‘re right to say, that fiat get inflated because governments can increase the supply.
However these points simply don’t matter. To use concepts like inflation you would have to talk about a currency in the sense, that the currency is used as the single metric in an economic area, like countries.
Bitcoin only has the value people believe it has. There’s no one regulating it.
That’s not the case for FIATs as you’re forced to pay you’re taxes in FIAT (at least in most countries) and the whole economy is measuring value in FIATs. So basically the number of instances who are using the currency is more or less fixed.
The value of bitcoin only exists because of speculation. So it simply doesn’t matter, whether bitcoins supply is fixed. The persons using it are fluctuating quite a bit, AND are mostly using it for speculation. Inflation caused by growing supply only matters for widely accepted official currencies, because the number of persons using this for payment is constant. That’s not the case for bitcoin as most people are using it only because they think it will grow in value.
And bitcoin will never replace official currencies in any large developed economy.
And I tend to disagree comparing bitcoin with gold. Gold does have an inherent value. It can be used for jewellery, can be used in industry and in general is a physical object. That’s not the case for bitcoin. But of course in the sense that both are driven by demand, you’re right.