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Bitcoin is not deflationary. It just has a fixed supply. People who held bitcoin from early on supported the growth of bitcoin by holding up it's value through

Bitcoin is not deflationary. It just has a fixed supply. People who held bitcoin from early on supported the growth of bitcoin by holding up it's value through the wild gut-wrenching rollercoaster ride that it has gone through. They should be rewarded for the risk they're taking on, having invested significant amount of their net worth in the face of harsh criticism such as yours. Bitcoin and "crypto" are completely different beasts. Cryptos are unregistered securities masquerading as Bitcoin 2.0.

Nasrudith 4y ago
A fixed supply with growing markets is deflationary. Cryptocurrency advocates wrongly insist thid is a good thing out of motivated reasoning.
- HashBasher 4y ago
  When describing the currency itself, bitcoin is strictly not deflationary as the supply of it is never reduced, it's actually inflationary for the next hundred years or so until the full 21 million is mined. It might create a deflationary economy in that everything gets cheaper over time, priced in bitcoin. What is so wrong with that? Why can't you expect to purchase more goods in the future than today with the same amount of bitcoin? There never has been a fixed supply world reserve asset, even gold has always been inflationary. I think it will usher in a "Golden" age for humanity where goods and services consistently increase in quality and value, while constantly reducing in cost. I'm very excited to step into the bold orange world. P.S. I'm a bitcoiner not a cryptocurrency advocate.
  - notahacker 4y ago
    > It might create a deflationary economy in that everything gets cheaper over time, priced in bitcoin. What is so wrong with that? Because then investment ceases to be about trying to capture a share of the growing pie, and more a zero sum game which the small minority of people holding most of the financial wealth have little incentive to participate in, and so the mechanism by which stuff gets cheaper over time, priced in Bitcoin, isn't economic growth but just increasing desperation of people without Bitcoin to obtain it. So all the worst parts of capitalism and none of the actual good parts, though I appreciate the idea is more appealing to people who imagine themselves as being the minority of idle rich. For related reasons, the world would not adopt a deflationary currency for very long...
  - qwytw 3y ago
    > What is so wrong with that? Imagine an economy with both ultra high interest rates and very high deflation at the same time. Let's say CPI growth somehow falls to - 20% and the Fed decides to hike interest rates to + 20%* what do you think would happen? Well take the Great Depression and multiple it by N (no idea, I'd assume N >= 20 though). Sound great? How does close to zero capital investment into the economy sound? No loans, no VCs, no new factories/offices/shops/etc. no new anything... Investing into anything would be both very risky and likely still have a negative return compared to just hoarding money. > I think it will usher in a "Golden" age I think it would usher societal collapse and the end of human civilization (I seriously do.. of course I'm close to 100% certain that it can never happen, then again I'm not great at predicting the future). *I would assume the numbers would be higher with btc.. but whatever
    - HashBasher 3y ago
      > No loans, no VCs I don't think so. There will definitely be companies and startups that yield better returns than bitcoin. Especially when bitcoin stabilizes at a very high value, holders will start speculating.
- csomar 4y ago
  This has little effects. Inflationary systems where promoted by governments so that they can inflate their debt away and print money as needed. You can have a deflationary system and the effects will be the same. People will always be looking for a stable store of value and a yield with variable risk. Instead of increasing/decreasing the money supply through interest rate, the price of Bitcoin goes up and down. Solving a stable store of value problem (through Bitcoin, completely decentralized) is a 100bn/1Trillion market. And also will be a legitimate use case for Bitcoin and Cryptocurrencies.
  - qwytw 3y ago
    Imagine an economy with both ultra high interest rates and very high deflation at the same time. Let's say CPI growth somehow falls to - 20% and the Fed decides to hike interest rates to + 20%* (and has no way to tweak or stop this policy anymore) what do you think would happen? (hint: the Great Depression would just be viewed as a mild temporary slowdown in relation) Something like that is really not avoidable if btc replaces $/€/etc. > debt away and print money as needed. Which on balance has been a positive development compared to the system that preceded this (permanent boom and bust cycles prior to 1930 accompanied by extreme price swings in either direction) Look at the 'USD inflation since 1800' chart. Would you really prefer the worth of your saving to swing up and down by 10% or more every few years compared to the relatively stable inflation after 1980s? https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C287.62%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t....
    - csomar 3y ago
      You got it wrong. The interest rate is used to manage the supply based on the rate/velocity of the economy. Not the other way around. If people want to build businesses, get married, have kids, build products, buy/sell, speculate, etc... having an interest rate, bitcoin, paper or gold, it simply doesn't matter. Places where the financial system is broken will use alternative means of payments. Bitcoin is flexible. If there is a certain demand or necessity, people can build on top of it.
ben_w 4y ago
> Bitcoin is not deflationary. It just has a fixed supply. Theoretically, yes, albeit with spherical cows in a vacuum models of how economies actually function. Practically, keys get lost, so it's deflationary even if it totally replaced existing currency and everything else became steady state. > They should be rewarded for the risk they're taking on, having invested significant amount of their net worth in the face of harsh criticism such as yours. If "harsh criticism" was sufficient reason to deserve money, I'd still use my Twitter account to have angry conversations about things that don't matter.
- qwytw 3y ago
  If you assume the economy is non stagnant it's always deflationary from the CPI perspective.
  - deleted 3y ago
    [deleted]
lowkey 4y ago
To nitpick, Bitcoin doesn’t currently have a fixed supply. It has a supply cap that takes effect sometime in 2140. Bitcoin currently inflates by 6.25 BTC every ~10 minutes. For the record, I agree that early Bitcoiners took an incredible risk on a highly volatile asset and they should be rewarded for such. As I see it, this latest banking crisis is showing the world that there is more than one type of risk. Bitcoin has market risk but not counter-party risk. As for bank deposits, while they have minimal market risk, they have significant counter-party risk. The world is waking up to the fact that bank deposits are an unsecured loan to a risky counter-party that uses those deposits for highly leveraged speculative bets.
- HashBasher 4y ago
  Agreed, self-custodied bitcoin is the best way to mitigate third party risk. If some of these start-ups held a small amount of their reserves in bitcoin, they would not have had to panic to make payroll.
- fellellor 4y ago
  Haven’t they already been rewarded for it? The magic Internet money is worth more than 20k USD, whereas it started out at 0.
  - HashBasher 3y ago
    They have and they deserve it. As bitcoin continues it's journey higher, all bitcoiners will be well rewarded (new or old).
- csomar 4y ago
  The big revelation is that deposits in a bank have two risks actually: A counter-party risk as you mentioned, but also a market risk. Inflation was/is in the double digit across the Euro and US economies. And that's for the government (CPI) numbers. People never considered these risks before. A bank is a bank is a bank. And in the developed world, inflation is low. Now you have a situation where both narratives are being challenged. The system is under lots of strain.
- 3y ago
qwytw 3y ago
> Bitcoin is not deflationary. It just has a fixed supply. Exactly. As the economy grows BitCoin will increase in value because its supply is fixed (not even gold or silver were even remotely as bad and when they were used as currencies). Imagine a financial system with huge * huge interests rates * and and * huge deflation *. You can't because no central bank is run by people who are stupid and insane enough to try that? Well... Something like that is 100% guarantee is btc becaomes a global currencies. > They should be rewarded for the risk they're taking on, having invested significant amount of their net worth in the face of harsh criticism such as yours. No they shouldn't. They contributed nothing to the society or economic growth. Even people investing in Credit Suisse should better rewarded than them from that perspective. Of course if there are other people willing to pay them huge amounts of money (yes money, not bitcoin) for their token well... it's their business). > Bitcoin and "crypto" are completely different beasts. Cryptos are unregistered securities masquerading as Bitcoin 2.0. Many other cryptos, well pretty much every one that doesen't have a fixed supply, like DogeCoin for instance would make much, much better global currencies than bitcoin.

Nasrudith 4y ago

A fixed supply with growing markets is deflationary. Cryptocurrency advocates wrongly insist thid is a good thing out of motivated reasoning.

HashBasher 4y ago
When describing the currency itself, bitcoin is strictly not deflationary as the supply of it is never reduced, it's actually inflationary for the next hundred years or so until the full 21 million is mined. It might create a deflationary economy in that everything gets cheaper over time, priced in bitcoin. What is so wrong with that? Why can't you expect to purchase more goods in the future than today with the same amount of bitcoin? There never has been a fixed supply world reserve asset, even gold has always been inflationary. I think it will usher in a "Golden" age for humanity where goods and services consistently increase in quality and value, while constantly reducing in cost. I'm very excited to step into the bold orange world. P.S. I'm a bitcoiner not a cryptocurrency advocate.
- notahacker 4y ago
  > It might create a deflationary economy in that everything gets cheaper over time, priced in bitcoin. What is so wrong with that? Because then investment ceases to be about trying to capture a share of the growing pie, and more a zero sum game which the small minority of people holding most of the financial wealth have little incentive to participate in, and so the mechanism by which stuff gets cheaper over time, priced in Bitcoin, isn't economic growth but just increasing desperation of people without Bitcoin to obtain it. So all the worst parts of capitalism and none of the actual good parts, though I appreciate the idea is more appealing to people who imagine themselves as being the minority of idle rich. For related reasons, the world would not adopt a deflationary currency for very long...
- qwytw 3y ago
  > What is so wrong with that? Imagine an economy with both ultra high interest rates and very high deflation at the same time. Let's say CPI growth somehow falls to - 20% and the Fed decides to hike interest rates to + 20%* what do you think would happen? Well take the Great Depression and multiple it by N (no idea, I'd assume N >= 20 though). Sound great? How does close to zero capital investment into the economy sound? No loans, no VCs, no new factories/offices/shops/etc. no new anything... Investing into anything would be both very risky and likely still have a negative return compared to just hoarding money. > I think it will usher in a "Golden" age I think it would usher societal collapse and the end of human civilization (I seriously do.. of course I'm close to 100% certain that it can never happen, then again I'm not great at predicting the future). *I would assume the numbers would be higher with btc.. but whatever
  - HashBasher 3y ago
    > No loans, no VCs I don't think so. There will definitely be companies and startups that yield better returns than bitcoin. Especially when bitcoin stabilizes at a very high value, holders will start speculating.
csomar 4y ago
This has little effects. Inflationary systems where promoted by governments so that they can inflate their debt away and print money as needed. You can have a deflationary system and the effects will be the same. People will always be looking for a stable store of value and a yield with variable risk. Instead of increasing/decreasing the money supply through interest rate, the price of Bitcoin goes up and down. Solving a stable store of value problem (through Bitcoin, completely decentralized) is a 100bn/1Trillion market. And also will be a legitimate use case for Bitcoin and Cryptocurrencies.
- qwytw 3y ago
  Imagine an economy with both ultra high interest rates and very high deflation at the same time. Let's say CPI growth somehow falls to - 20% and the Fed decides to hike interest rates to + 20%* (and has no way to tweak or stop this policy anymore) what do you think would happen? (hint: the Great Depression would just be viewed as a mild temporary slowdown in relation) Something like that is really not avoidable if btc replaces $/€/etc. > debt away and print money as needed. Which on balance has been a positive development compared to the system that preceded this (permanent boom and bust cycles prior to 1930 accompanied by extreme price swings in either direction) Look at the 'USD inflation since 1800' chart. Would you really prefer the worth of your saving to swing up and down by 10% or more every few years compared to the relatively stable inflation after 1980s? https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C287.62%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t....
  - csomar 3y ago
    You got it wrong. The interest rate is used to manage the supply based on the rate/velocity of the economy. Not the other way around. If people want to build businesses, get married, have kids, build products, buy/sell, speculate, etc... having an interest rate, bitcoin, paper or gold, it simply doesn't matter. Places where the financial system is broken will use alternative means of payments. Bitcoin is flexible. If there is a certain demand or necessity, people can build on top of it.

ben_w 4y ago

> Bitcoin is not deflationary. It just has a fixed supply. Theoretically, yes, albeit with spherical cows in a vacuum models of how economies actually function. Practically, keys get lost, so it's deflationary even if it totally replaced existing currency and everything else became steady state. > They should be rewarded for the risk they're taking on, having invested significant amount of their net worth in the face of harsh criticism such as yours. If "harsh criticism" was sufficient reason to deserve money, I'd still use my Twitter account to have angry conversations about things that don't matter.

qwytw 3y ago
If you assume the economy is non stagnant it's always deflationary from the CPI perspective.
- deleted 3y ago
  [deleted]

lowkey 4y ago

To nitpick, Bitcoin doesn’t currently have a fixed supply. It has a supply cap that takes effect sometime in 2140. Bitcoin currently inflates by 6.25 BTC every ~10 minutes. For the record, I agree that early Bitcoiners took an incredible risk on a highly volatile asset and they should be rewarded for such. As I see it, this latest banking crisis is showing the world that there is more than one type of risk. Bitcoin has market risk but not counter-party risk. As for bank deposits, while they have minimal market risk, they have significant counter-party risk. The world is waking up to the fact that bank deposits are an unsecured loan to a risky counter-party that uses those deposits for highly leveraged speculative bets.

HashBasher 4y ago
Agreed, self-custodied bitcoin is the best way to mitigate third party risk. If some of these start-ups held a small amount of their reserves in bitcoin, they would not have had to panic to make payroll.
fellellor 4y ago
Haven’t they already been rewarded for it? The magic Internet money is worth more than 20k USD, whereas it started out at 0.
- HashBasher 3y ago
  They have and they deserve it. As bitcoin continues it's journey higher, all bitcoiners will be well rewarded (new or old).
csomar 4y ago
The big revelation is that deposits in a bank have two risks actually: A counter-party risk as you mentioned, but also a market risk. Inflation was/is in the double digit across the Euro and US economies. And that's for the government (CPI) numbers. People never considered these risks before. A bank is a bank is a bank. And in the developed world, inflation is low. Now you have a situation where both narratives are being challenged. The system is under lots of strain.
3y ago

qwytw 3y ago

> Bitcoin is not deflationary. It just has a fixed supply. Exactly. As the economy grows BitCoin will increase in value because its supply is fixed (not even gold or silver were even remotely as bad and when they were used as currencies). Imagine a financial system with huge * huge interests rates * and and * huge deflation *. You can't because no central bank is run by people who are stupid and insane enough to try that? Well... Something like that is 100% guarantee is btc becaomes a global currencies. > They should be rewarded for the risk they're taking on, having invested significant amount of their net worth in the face of harsh criticism such as yours. No they shouldn't. They contributed nothing to the society or economic growth. Even people investing in Credit Suisse should better rewarded than them from that perspective. Of course if there are other people willing to pay them huge amounts of money (yes money, not bitcoin) for their token well... it's their business). > Bitcoin and "crypto" are completely different beasts. Cryptos are unregistered securities masquerading as Bitcoin 2.0. Many other cryptos, well pretty much every one that doesen't have a fixed supply, like DogeCoin for instance would make much, much better global currencies than bitcoin.