Bitcoin Forum

Full article on Trilema (http://polimedia.us/trilema/2013/some-basic-discussion-of-bitcoin-macroeconomy/).

"To say Bitcoin is deflationary is akin to saying a married woman is sterile. No, she’s not, the balance of new life is created by married women."

Not the best written analogy i've read, lol..

Atm Bitcoin is inflationary due to the new coins mined.
But in the long run Bitcoin is deflationary by the amount of coins lost.

What's wrong with it?

oh.. umm..  nothing at all  ::)

 LOL

The article uses, as do you, a meaning of inflationary based on percent new coins added, but that isn't correct.  Inflation could also occur with fewer coins, with higher monetary velocity, or it could NOT OCCUR, with more coins, but with usage increasing at a similar rate as new coins.

There is also the "latent inflation", which is existent but yet to be realized in price levels on the street, and this is typically seen when governments start printing money like crazy.  I suppose there could be some similar thing with bitcoins.

There may not be anything wrong with an analogy that is not clear except that it isn't clear, and that's important, since an analogy should clarify the cause and effect relationships, not further confuse them.

I also did not see the analogy.

It's common, especially amongst the Austrian types on this forum, to use inflation in it's original (monetary only) meaning, while others (typically the Keynesians and monetarists) use it in it's more modern price inflation meaning. If we're using the modern meanings of inflation and deflation, then Bitcoin is very strongly deflationary at the moment. If we use the original terms, then it's strongly inflationary, but demand is increasing even faster than supply.

I know I'm only talking about the supply side, not the demand one.
It's the build in deflation/inflation of Bitcoin, of course this doesn't translate to the one on the market (we all can see how volatile it is right now).

This is a sizable quantity of words which do not seem to carry any sort of meaning. If you'd be kind enough to proceed systematically from some sort of commonly known point it'd probably help.


Let's illustrate the illustrative analogy by the help of an illustrative analogous table:

Thesis. In the general discussion of currency (A) at issue is the problem of inflation (B). The fact is that Bitcoin allows creation of new currency (C) through market-controlled mechanisms (D) but not through fiat, or if you prefer political, mechanisms (F).

Analogy. In the general discussion of human life (A') at issue is the problem of procreation (B'). The fact is that marriage allows the creation of new people (C') through intra-marriage mechanisms (D') but not through public, or if you prefer orgiastic, anonymous, polyamorous, loser-gets-some-action-too mechanisms (F').

Therefore bitcoins are the analogue of married women, Bitcoin (as a protocol) the analogue of marriage, politics the analogue of irresponsible, venereal-disease ridden, slovenly, high-risk sexual behaviors. Finally Bitcoin finance is the analogue of wholesome family relations.

A pregnant analogy, perhaps. And a pretty clever one at that.

Has it really come to this?... So far, the "coins lost" argument is out to be the best of all GOLD 2.0 arguments that have ever been brought up on this forum.

It happens that any non-monetary "definiton" of inflation fails to be a definition and practically works as either a red herring or strawman in any discussion of economics. Should somebody finally be able to construct a non-monetary definition that actually works as such it may be taken into account (at some point, by someone). As it is, the keynesian pseudo-inflation is pretty much only interesting to politicos.

I think about 1 million coins is already lost, when they were worth like nothing.
It's difficult to tell a number, but I believe that about 0.5-1% of coins are lost every year due to forgotten passwords, burned machines, unspendable small amounts that are forgotten and so on.
Once the mining doesn't produce a lot of coins anymore that is quite a bit of growth for all other coins.

I agree completely. I count myself amongst those "Austrian types." ;) Eventually, Bitcoin will switch to being properly deflationary, but given that a) it will be a very gradual slope, or at the very least very long plateaus between deflationary events (lost or destroyed private keys) and b) lost and hoarded coins are functionally identical, and unless a private key is known to be lost, it's unwise to treat it as actually gone, I don't see it being a problem. When/if it does become a problem, Bitcoin2 is a simple code fork away.

I can agree with you on this, it's not a problem.

Are you accounting for the fact that most of the miners would eventually move onto the next best thing (some alternative and profitable implementation of crypto-currency? Wouldn't all your bitcoins be lost then? Look, contrary to a popular believe in the GOLD 2.0 era, the pump and dump schemes (the drivers of USD/BTC exchange rates today) don't create deflation in BTC... The deflation in a BTC-based economy can only be created through increases in BTC spending, not through BTC trading. How many miners do you know who are spending their bitcoins like there's no tomorrow? Hoarding still seems to be the popular choice today.

Miners will still be able to gain money with transaction fees, but it's not new money.
But yes, it's possible that a better crypto-currency takes Bitcoins place and all BTC will be worthless then (it's not the miners who decide this though).

And how exactly do you see this happening when hoarding seems to be everyone's favorite pastime? As you can see, lost coins don't drive BTC's deflation... No spending = no deflation.

Let me just make sure I understand how you're constructing your model, here.

You're basing your assumptions about what will happen in a stable, mature marketplace on what is currently happening in a new, unstable one?

Yes, something like that, except that GOLD 2.0 would probably continue to be the focus of the larger bitcoin community for many years to come... Until the community finally succeeds at creating yet another MMORPG economy (https://bitcointalk.org/index.php?topic=190411.msg2019460#msg2019460), which will eventually become a ghost town when someone invents a much better MMORPG economy, offering bitcoin miners the opportunity to explore new technological advances in a GOLD 3.0 era.

That Bitcoin is the functional equivalent of WoW gold is a long established point of fact (http://polimedia.us/trilema/2012/the-reasons-why-bitcoin-securities-cant-be-regulated-by-the-sec/).

I've often wondered what an MMO with a non-inflationary currency would look like.

Now I know?

While the subtleties, complexities and general mystique of the forum quotation syntax being apparently outside your zone of comfort might suggest this isn't exactly your cup of tea, it's nevertheless what Bitcoin is all about: entire strata of dialects etc.

That aside, your "thousands of years" and other references are both weak and the hallmark of ignorance. I don't think we can be friends, and I don't think you have any sort of future here.

That's exactly my point!!! Now, how long before we go back to an inflationary MMO currency?

Why would we? Have you seen the prices of a mechano-hog on the WoW market?

Compare that to the motorcycle that was recently purchased with BTC.

I'll take BTC, thanks.

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

But here's why you're wrong on the no spending = no deflation idea...

If people horde the currency rather than spend it (rather, their demand for the currency increases,) then there is less of that currency actually being circulated to service the function of exchange. This will naturally create higher equilibrium prices as defined in that currency than would come about if people were to spend all that they had been hording.

As for deflation in the money supply sense, that one is dependent upon how you measure the money supply. If you measure only what is being circulated, then reducing the number of coins being spent necessarily reduces the money supply.

Actually that entire spending deflation thingie is amply discussed in Let's dig a little deeper into this entire deflation "problem" (http://polimedia.us/trilema/2012/lets-dig-a-little-deeper-into-this-entire-deflation-problem/).

Uhh, I don't think you really got what was being talked about there... That blog post really doesn't hit the issue at hand.

I was referring back up to BTConomist's claim that there isn't deflation without spending -- that hoarding doesn't cause deflation. The article referred some to turkeys and oil (a reference to products/real wealth available to purchase,) but it doesn't talk about how hoarding of a currency changes the money supply or how that changes the way money is valued against products or services.

I like people who spend more time typing than reading. Did you actually read the linked article or did you just ineptly skim it?

I'm getting the feeling you didn't read the article, even though I surmise that you wrote it?

By all means, there are some good ideas that are presented in the article, but perhaps you were thinking of another one if you're trying to respond to the arguments at hand, because this one just doesn't address the issues being discussed. Essentially, this article is about consumerism and ecology rather than issues surrounding deflation in relation to the money supply.

By the way, I agree with the point about inflation encouraging consumerism, and I agree that we would be in a better world if there wasn't this built in disincentive to save/invest in the future.

And one more thing, the relation of the supply of dollars to turkeys is flawed in that any actual currency will always have more supply than all of what could possibly be bought in the connected (or nearly connected) market than what the current price multiplied by the supply of any good will be... This is because the currency is chasing after more than just that good... Essentially, that portion of the argument does not prove the point that there's an ecological problem, else you would make the claim about any monetary unit.

Did I answer your question? I'm rather certain I actually read the article (as well as that which was linked in the original post.) You should really stop making it a habit of being condescending to people you don't know.

Are you for real?  The average person does not digest that sort of thing.  An analogy should be a way of describing a complex manner in "lamens terms", not further complicating it. 

Yes I'm for real. Not my analogy, and not your place to say what it's for now is it? Not normally spelled "lamens" either.


You surmise wrongly. That's unsurprising.


How is this not about "the question at hand"? Deflation does not prevent spending. Deflation simply prevents misallocation of resources (http://polimedia.us/trilema/2012/the-problem-of-too-much-money/).

I assure you that in your case my condescension is amply merited. You don't know how to spell "hoard" and "hoarding", for instance. This is not a mistake, this is illiteracy. This is not a problem limited to spelling either; your approach to this discussion comes from a rich vein of ignorance about words and their meanings, and from the clearly entrenched practice of "surmising" superficial relations that are about on the level of what a kid trying to guess the etymology of words might come up with.

100 bitcoins says MPOE-PR is shorter than 5'7
who's in?

You're at least very closely related to the person who did write it, if any of the connections that your account has with the supposed author are accurate.


The issue isn't about deflation preventing spending. You're putting the cart before the horse here. The discussion was on how hoarding affects deflation.

The fact that you've missed this repeatedly is telling me that you're really not worth any more of my time. I've already explained not only that this is a different issue, but that the article you linked includes points that I agree with. I'm rather certain that I've made it clear I understand what those article(s) are attempting to say.

Also, for future reference, it's wise to link to more than a single source time after time. If you wrote it, then fine, but you suggested otherwise already, and even if you wrote it there should be links to outside sources within the articles rather than further linking within the blog.

Can we just agree that EVERYONE Austrian or Keynesian expects the exchange rate for real goods and services against BTC will rise and BTC's will buy more in the future.  All you Austrians have been arguing that will happen, have been advocating people hoard coins in anticipation of future consumption higher then the consumption deferred to buy and hoard the coins and so far (outside of some crashes) your prediction has been correct, BTC appreciated massively.

Now if a Keynesian when using the term 'deflation' means that price appreciation then by golly they are correctly describing BTC by what that word means to THEM.  If someone else with this weird idea that these words mean only nominal changes in money supply says BTC is inflating then yes they are also right by what that word means to them.  All we have here is a disagreement over what words mean, not the nature of BTC which everyone agrees on undeniable fact, that of growing supply and appreciation in value.

Now I'm going to argue that the so called 'Keynsian' (really everyone excluding a few wackos) definition of inflation/deflation is correct.  Why because it actually MEANS something to an economy and an individual, where as the nominal money supply tells us nothing about an economy or what to do as an individual.  Real inflation is an incentive to spend, real deflation is an incentive to save, BTC clearly falls under that latter kind of incentive structure (the Austrian and Keynsian would now have an actual disagreement over if this is good or bad).  If I make a statement about nominal money supply while ignoring the population of users, the quantity of production and the demand for consumption of those users I've ignored so many CRITICAL factors that I no longer say anything meaningful about the signals being sent, are individuals under an incentive to spend or to save, I haven't said one way or the other unless I make the assumption that ALL the other factors are constant which this narrow definition explicitly excludes if it mean ONLY nominal money supply.

And you know who else agrees with Mr. Keynes on this definition, VON MISES, quoted directly from Theory of Money and Credit, at http://archive.mises.org/19306/inflation-and-deflation-austrian-definitions/

That's a quote taken well out of context. Mises would acknowledge the semantics of price inflation/deflation, but he would stick to the supply issue of it.

But as you said, that's all semantics.

I'm responding to you to mention that there is in fact reason to look at the supply of money, and more importantly, changes in that supply. This is because money is a non-neutral good, and prices take time to change through an economy.

If you are to expand the supply of money exactly with the population, it isn't as simple as just saying that prices will adjust accordingly. You must know the qualitative issues that surround the means by which the supply of money was increased. If that money goes first to X individual, then that individual benefits most from the newly created money regardless of the aggregate data surrounding the change involved. Likewise, person Y who receives the new money (as in, who is last to adjust to the change in supply,) is actually made worse off because of the lower purchasing power of their money in the time until prices adjusted.

This is why the issue of "price stability" is really impossible to answer for the "best" outcome. There is no such thing as price stability when the market of millions of goods have independently changing prices. You may be able to make aggregates of the prices (CPI, PPI, etc,) but those aggregates hide the meaningful information that prices give to an economy.

A way to better think about the issue of qualitative analysis in the change of the money supply is to see how someone feels when they lose their Bitcoin wallet. This is the exact opposite of the inflationary mechanism described above.

No one denies that the supply of money is a FACTOR that can contribute to inflation/deflation, and yes how new money is added (or old money removed) has massive effects and has to go through a messy process of rippling through the economy to rediscover new equilibrium points (and some people get screwed in this process).  None of that is even remotely in dispute, you seem to be assuming I support inflation simply because I don't spit on Keynes grave every time I mention him as is the normal etiquette here on the forums.

I am simply arguing that deflation/inflation as terms describing the change in the purchasing power of money are useful and meaningful and the orthodox meaning of these words amongst ALL economists.  The deeper ramifications, goodness badness, supply vs demand side mumbo-jumbo is irreverent here because I'm just trying to point out that semantically their is no disagreement.

And I have no idea what your lost wallet statement is supposed to mean as that's not inflationary by anyone's book, losing a crytpo coin wallet decreases money supply and all things being equal will cause deflation if it is not being offset by an equivalent decline in demand for money.  Mises and Keynes agree on this simple point.

Not sure what you are getting at here.  But you are conversing in the realm of logic, and our understanding of history, and it's relation, if any, to current events.

So don't get mad at me.  In the realm of discussions of logic, nothing is true because you or I say it is, and everything is open to be verified or refuted.  And of course there's nothing I've said that I can't back up....or I wouldn't have said it...

Well said, let me only add one thing. 

Modern "Keynesian economics" is NOT the economics of Keynes.

To tell you the truth, your statement caught me off-guard for quite some time. ;)  Nevertheless, after a few sips of some fine cuban rum and a wisdom spark, I think I may have found just the right words to clarify my initial position. So, here it goes. Ready? Let us first agree on the following play of words... If trading USD for BTC can be considered buying BTC, then trading BTC for USD will be considered buying USD. Does this sounds about right? So, if by buying BTC you would be engaged in demand creation for BTC, then by buying USD you would be engaged in demand creation for USD... But where is the value creation in that?

By trading one currency (say BTC) for another (say USD) you are merely engaging in the transfer of some assumed value between those currencies, and nothing more. Now, if the underlying value (not to be confused with the exchange rates) of each such currency has not changed between the two back and forth transfers, then both transfers would simply cancel each other out. But if one currency's underlying value (BTC's) was suddenly projected to increase relative to another currency (USD's), then the exchange rate between the two currencies would eventually self-adjust (due to some market forces) to reflect that projection. And we all know what would happen then: you would receive back less BTC for every USD than what you had initially used to buy those USDs (when you initially transferred some assumed value from BTC to USD).

Hopefully these badly-structured sentences were somewhat helpful in shining some light on why the increase in the underlying value of a currency is derived from the assumptions/projections about the increase in economic activity, rather than the increase in trading activity (i.e. back and forth buying/selling BTCs for USDs). Unfortunately, the only way to increase economic activity in a market-driven economy is to increase consumption of products/services produced in that economy — this is what I call the increase in spending. And when it comes to BTC-based economics, deflation is just a pretentious way of saying inflation.

My point wasn't that you're arguing for or against inflation, but in regards to the use of terms, inflation and deflation are actually quite good for both price and supply issues. This is why I personally just say "price inflation" or "deflation of the supply of X" because it tends to get over this semantic hurdle with most people while still applying the ideas of inflation and deflation to both spheres.


This is why I said that it's exactly the opposite of the inflationary mechanism. The point was that the first person to lose the currency is the worst off while the last ones to adjust (rather, to be forced to adjust) to that pricing shift are the best off. It was just inverting the issue to try to make the point about the necessity of qualitative analysis rather than looking at the aggregates of price inflation and deflation.




If you're trying to relate Bitcoin deflation to the relative inflation of the Dollar against Bitcoin, then sure...... But that doesn't really make a meaningful point above and beyond saying that Bitcoin has deflated relative to the Dollar...

I'm not really sure where you're going with all of that. In terms of spending more in an economy, if the size of the market of goods being bought using the currency increases at a faster rate than the reduction in hording, then price deflation will occur even as the supply of currency being circulated is inflated... But that's completely relative... So again, I'm not really sure where you're going with all of this.

Me. I'm picking MNW as an escrow, ready to go?


It's in my signature after all, neh?


More whats? Will BTC buy more S.DICE shares in the future? Perhaps. Will BTC buy more S.MPOE shares in the future? Perhaps not, at least if history is any guide (http://polimedia.us/trilema/2013/smpoe-is-one-year-old/). Will BTC buy more iPhones in the future? Certainly, Moore's law. Will BTC buy more blow jobs in the future? Perhaps, if the population keeps growing. Will BTC buy more tuna in the future? Perhaps not, as tuna seems to be going extinct, and for all its virtues the USD can't buy any mastodon meat and never could. The list goes on and on and on.


This is a mistaken view much akin to the notion that "go left" MEANS something to a topology and an individual. In practice GPS uses actual coordinates. Which then it translates into go lefts and go rights for the need of the barely literate driver, sure, but what bearing does this have?

I for one eagerly await the first mastadon steak on my parrilla.

http://www.besttopnews.com/news/anomalous/27-07-2007/46455-mastodont-0/

Oh... Now I see where our viewpoints diverge... When discussing inflation/deflation you are referring to the appreciation/depreciation of one currency against the other, whereas I'm referring to the appreciation/depreciation of a currency against the value of goods and services it is used to buy (as measured by the demand and supply of those goods and services, independent of any given currency). Thus, my argument about there not being a BTC-based deflation without the increase in BTC spending basically comes down to the notion that we can't say whether BTC is deflating or inflating unless it is being used to buy goods and services directly.

It is deflationary long term because there will never be more than BTC21,000,000, and those will be gradually removed from circulation. Sure, right now there is inflation, but over time it will drop, as it started to do in December. Am I missing something here? This is all old news so I wouldn't point it out if I didn't think it mitigated your point.

Fiat money has been inflated by a 400% since 2008,  that is the inflation, but why the price of everything did not rise at least 200%? This just proved that inflative money will not necessary cause price rise, when majority of people are in panic mode, the money supply can increase by 10 fold without causing any significant price appreciation on goods and services, since everyone is saving

The price level is typically decided by consensus

The USD is strongly propped up by it's use as the currency of choice in black markets the world over. Which is in turn propped up by it's enforced use to trade oil. The dollar is a house of cards.

Yeah. Like the actual article, the discussion offered/arguments brought etc. But aaanyway, you're not the first guy here intent on describing what "he thinks" rather than educating himself.

The other reason for this is fractional reserve banking, during the recession, bank reserves increased and the amount of active loans dropped which lowered the effective money supply even though there is actually more currency in circulation.

It's an illusion, and unfortunately it's temporary.

So I guess I should just assume you are rude to everyone who doesn't just take what you say as gospel?

No, I'm direct to everyone. Some take it better than others. This, I suspect, is a function of them.

In a similar vein the production of new BTC dose not necessarily lead to reduction in purchasing power of BTC relative to real goods and services.  Their is good evidence that most newly mined BTCs rapidly end up in cold-storage and only a small amount is actually circulating and bidding on goods (including dollars), thus we see things like the volume on exchanges being fairly consistent over the years even as total coin base increased substantially.  The effective coin-base may actually be decreasing as bubbles grow, we saw the depth of BTC offers on MtGox eventually decline to just 2 weeks worth of mined coins just prior to the crash.

When looking at an economy wherein two units of exchange are used and there is significant enough opportunities to execute arbitrage, comparing the two currencies against each other for price inflation/deflation is sufficient to establish price inflation/deflation of either currency, supposing that prices accounted for in one of the two currencies is stable as is the case with dollars.

I think what you're really trying to say, however, is that Bitcoin can't deflate if it isn't used as a currency in the first place.


What fiat money, and which measure of supply are you using to determine its inflation rate?

When looking at the dollar, it's really not very accurate to say that "the money supply" has been inflated by 400%.

M2 has a relatively insignificant (and already corrected for,) change in response to the 2005 housing bubble and subsequent 2008 financial collapse.
http://research.stlouisfed.org/fred2/series/M2 (http://research.stlouisfed.org/fred2/series/M2)

M1 on the other hand has just about doubled since 2008.
http://research.stlouisfed.org/fred2/series/M1 (http://research.stlouisfed.org/fred2/series/M1)

The monetary base, on the other hand (also called M0 in some circumstances,) is actually higher than M1.
http://research.stlouisfed.org/fred2/series/BASE (http://research.stlouisfed.org/fred2/series/BASE)

My point is that it isn't as simple as attempting to look at aggregates and ask for immediate results. Money is non-neutral and will take time to "feed" through the economy. There are also many other issues involved that I won't go into here because it would just take far too long and most people would probably get bored with the explanations.


Isn't it interesting that you're somehow impervious to this fault, MPOE-PR? If I had a superpower, that would be it. Lucky for you, you obviously have that superpower already. I'm jealous.

That's exactly it!... Thanks for restating my main point in such short and precise form.

Once I realized what you were saying, it made perfect sense! The problem is that very few people actually use the proper terminology, so I'm stuck making guesses on what people actually mean. Just be careful to make yourself as clear as possible ;)

I may have taken your statement wrong, but I don't think I need a degree in economics to have an opinion. That line of thinking is exactly what keeps Keynesian-Authoritarian economists in power.

The Bitcoin Other the Counter funded Credit Swap derivative is both wildly inlationary and wildly deflationary because it has no stable exchange-valuation, the number of BTC means squat to it's "inflationary or deflationary" exchange-values every 10 minutes, when those  exchange values are solely determined by an anarchistic gaggle of penny stock speculators on a penny stock market.

In fact even it's given exchange-value at a given second is merely notional since it is impossible to move any large amount of liquidity in BTC through a so-called "exchange" penny-stock market at or even near any given last-price for any reasonable period of time. For a large wallet to exchange BTC credit-derivatives for any genuine, stable Medium of Labour Exchange "currency" the seller must assume huge losses under-asking all current asking prices to obtain money as any buyer needs to assume huge losses over-bidding all current bidding prices to obtain obtain any substantial value of our funded credit swaps for it.

What's worse small speculative haggling over tenths of a BTC have as big an effect on it's inflationary/deflationary exchange-valuations as 50,000 lot bid/asks do. Even worse the Credit Swap Derivative's exchange value has little to do with what you paid it's last holder for it that he made off with, for it is only worth what a next owner feels willing to part with to you for it if/when he is good and ready to do so..

For a large institutional seller or buyer to use/move/exchange large liquidities of BTC it would cause a "penny-stock market panic" at the OTC Derivative "Exchanges" every and any day.

A.  400%, not correct.
B.  That is not the inflation.
C.  Re why did prices not rise 200%, latent inflation.  Check historically countries that printed money during wartime, including the US during Vietnam.  Inflation lags the printing by a couple years.
D.  People in panic mode, you have this reversed.  Hyperinflation occurs when they dump currency any way possible, increasing the money supply dramatically.

As was pointed out at the beginning of the thread, there is the base currency inflation/deflation, and there is the inflation/deflation due to financial instruments (the M3, etc.). As bitcoins mature, protocol defined inflation will be under 1% within a couple decades, maybe poster above is correct that 1% are lost every year, but I suspect that the total inflation/deflation will swing in larger amounts up and down based on the financial instruments and credit built upon the bitcoin system, totally dwarfing the M1 change, which will be rather small.

Pretty much. Encouraging, not everyone on btctalk is a self contained million monkeys with a keyboard apparatus.

I think the analogy is not horrible, it was just worded poorly. It seems to be saying "a woman" when it should be saying "women", because clearly there are specific married women who are sterile, which confuses the reader, when instead it should be referring to married women generally. I might be just nitpicking from a native English speaker perspective.

An analogy is like a joke, if you must explain it then it failed. Now, whether that is the teller or the hearer's fault might depend on the circumstances.

No, I don't think we can all agree about that. We can all agree that the supply of bitcoins is increasing, therefore there is (monetary) inflation. But the price of bitcoins requires knowing other things, which can be guessed at but are unknown. These things include the adoption of bitcoin, the usage vectors of bitcoins, and the amount of credit built on top of the bitcoin economy. We can say that if things continue to go the way they are now going then the price in bitcoins will go down and we can describe it as price deflation, but that relies on events unfolding as you predict them to.

If you look back at the historical price of bitcoins, there have been several upward movements which are correlated with influxes of people to the bitcoin economy, followed by long, slow downward trends. This is because bitcoins are in fact inflating, and without influx of new money the price is pushed down by the increased supply. If you look at the historical price data (it helps to put it on a log chart so you can see the movement a couple years ago), you can see that this effect was more pronounced years ago when bitcoins were inflating at a higher rate.