Bitcoin Forum

hey guys, i'm quite serious on this topic because of the confusing people when talking about Bitcoin "deflation". As far as I understand, the deflation is that goods are cheaper than they are on time or because there is no need to buy goods or the supply of money gets lower.
So for Bitcoin, why is there a deflation? Although I know that miners will find it harder to mine bitcoins after every Halving event, the value of our goods stays the same and is based on fiat money. Bitcoin's price is still being manipulated and it is not necessarily a strong growth after halving. or the best example is Litecoin. after halving, its price is halved instead of rising higher.
So, the question is, does the Halving event actually cause deflation, or is it just some bullshit theory?
Ps: I highly appreciate the comments with sincere contributions. Thanks

Deflation is the opposite of inflation. Inflation is directed upward while deflation is downward. The fiat currency is deflating because it is losing value over time, while the prices of goods and services are inflating, and as a result the purchasing power of the fiat currency is getting weak over time. Bitcoin is inflating because its value is increasing over time, the exact opposite of fiat. The rewards of miners, however, are deflating due to halving which happens every 4 years.

Inflation makes money weaker and it is usually related with increasing the quantity of money available. Inflation makes goods cost more and more, showing that the money has less and less power.
Deflation should be the opposite.
 

But actually even deflation may be incorrectly used for Bitcoin.
Bitcoin is a coin with limited supply. 21M and that's all. Ever.
But the actual number of coins in circulation is still increasing with every block mined. So it can seen as an inflation (!) and halving will reduce that inflation.

So it depends on what's the reference point/concept: if it's the total supply, nothing changes; if it's the money in circulation, it's a decrease of inflation, not a deflation.

I understand that concept. But I mean the Halving event, not just bitcoin, but I want to talk about coins that have a PoW mechanism and a halving event every 4 years. I mean, lately I've been seeing a lot of forum members talking about halving as a deflation mechanism. I was just wondering if this was true or not, people were making theories themselves.

Oh, I realized the problem. because I don't quite understand how people talk about deflation, they often say that bitcoin or coins with a PoW mechanism often have deflation in place!
so I'm quite annoyed and I just hope that those who understand Halving and deflation will explain it more to me. Thank you very much and it has really clarified the problem. Hopefully through this article many people will identify and clearly distinguish between "Deflation" and Halving. ;)

As long as there is block inflation, it's exactly that, inflation. Only when the last one single satoshi has been minted, miners fully rely on transaction fees, then Bitcoin will start to be a deflationary currency. Why? Because people lose coins for 1001 different reasons. All the satoshis lost directly lower the number of circulating satoshis, and that happens year after year after year.

It's something we don't yet have to worry about because most of us won't live to tell what exactly is going to happen, and how the market will react to it.

The halving or the "halvening" causes the bitcoin that's being mined to be halved. The bitcoin that's currently being generated and entering the markets daily is 1,800. After the "halvening", the bitcoin generated daily will be halved to 900. Hence, being more scarce.

But remember, not because something got more scarcer, it doesn't automatically mean that the price will increase. The perfect example would be litecoin. After the halving, the generated altcoin halved. But yea, the price dropped too after a while. Why? Simply because there's not enough people buying litecoin. Regardless how many bitcoin is being generated per block or per day, that wouldn't matter if there are more bitcoin being sold on the market than being bought. In the end, it's always supply and demand.

PoW coins with a design just like Bitcoin and Litecoin have a mechanism to deflate rewards. That's what halving is all about. It is deflating the number of coins rewarded to miners. That is somehow following the line of thinking that in every 4 years, the value of Bitcoin is also inflating. Which means that despite the deflation in the regular release of Bitcoin through PoW, the value is moving in the opposite direction, and the miners still rewarded sufficiently. If it's the value that you are talking about, there is inflation; in fact, deflation to the reward through halving, is a factor supporting it.

The answer is No. The halving reduces the rate of increase in the bitcoin supply. The bitcoin supply is currently increasing by 12.5 bitcoins per block, and it will increase by 6.25 per block after the halving.

As for "deflationary currency" - that refers to the purchasing power of the currency. If over time, you can purchase more and more with a bitcoin, it's deflationary. We can currently purchase nearly three times more goods with bitcoin than we could in January. That means it's a deflationary currency.

If you can purchase less with your currency than you did before, than it's an inflationary currency. You can purchase only 5% of what you could purchase with the dollar in 1919, so it's an inflationary currency.

As for does bitcoin create deflation in the economy? Does it force prices of goods to fall. The answer is no - it would only be able to do that if it was the sole currency people were allowed to use. But there are loads of currencies people use, including loads of cryptocurrencies.

It's a bit more nuanced than that. Markets react to all available information, and halvings are publicly known beforehand. Litecoin rising from $22 to $146 in the first two quarters of the year was likely the market "pricing in" the halving. Litecoin outperformed BTC and the rest of the altcoin market during that period and I think halving hype was likely the cause.

That's what BTC did in 2016 too. It rallied hard into the halving (doubled in price) but crashed a month before it. And then it kept crashing afterwards.

Buy the rumor, sell the news. :)

Halving creates scarcity and a limited supply is needed to prevent inflation. I wouldn't necessarily say it causes deflation because the markets are more complicated than that but at the least it ensures a limited supply forcing there to be demand.

No, deflation isn't just the opposite of inflation. It's when the price of goods and services go down, whilst inflation rates are 0 percent, it's not the correct definition for a currency that gains value, etc.

I wouldn't classify it as deflation (the version you are referring to), since the supply is not being moved, but more and more bitcoin is getting injected in the economy. It's hard to describe what exactly is it, since it's not really a term that has been invented yet.

Actually truth is yes it would such a thing. Deflation isn't merely a direction or prices going down. It actually is a phenomena where the aggregate demand in the economy for money is much higher than that of Aggregate supply of money in the economy. This means that money is required in the economy but it's not being created at a similar pace. This would lead to shortage of money and money hoarding among people who would then try to buy lesser things and store their money. Such a situation will make a economic crunch in the economy. So, in nutshell, halving will really create deflation as pace of new supply would be much lesser.

Inflation/deflation is the effect, not the cause, and it measured via the price of goods and services to a particular currency. For example, let's say BTC price for one McDonald's Big Mac is 0.001 BTC. If next year the price increase to 0.002 BTC, then it's called inflation, conversely if the price decrease to 0.0005 BTC, then it's called deflation.

Many things could cause this inflation/deflation, such as:
- increase/decrease in the money supply;
- technological advancement;
- force majeure, etc.
(read about cost-push and demand-pull)

So back to the OP question, "Does halving really create deflation?" Not always, the money supply is only one out of various other factors. Using my Big Mac example, it depends on the cow population, bread availability, your burger preference, etc.

So in your opinion, deflation will not happen now, but when the supply of bitcoin is fully mined and the demand is high, then deflation will occur?
but there is another theory that bitcoin is just a tool for sharks to manipulate. So if one day, people realized the value of bitcoin and no longer needed to buy it, would it become zero and disappear? so there will be no deflation then? right?

When I read this kind of question, or even read some articles on crypto's I always feel there's a big misunderstanding about the term "inflation".
In layman terms, the term inflation refers to purchasing power of a currency. Inflation actually measures the rate at which the price level moves over a given time horizon. If prices go up, then we say there’s inflation, if prices goes down, we say there is a deflation.
On a side note, it very difficult to measure all the prices in an economy, so the inflation measure observe a subset of prices, the price of a given basket of goods: the composition of such basket greatly influences the outcome of the inflation measure.

In the recent years, in the US and much more in the EU we have observed a decreasing inflation: prices have always been increasing but at a much lower pace. Every CB has a target of inflation, as a sole or conjunct target of around 2%. So broadly speaking we can think at this of a current level of inflation, while back in the 80’s we observed levels above 10%.

This means that the fiat currencies lose value in real terms: if I have to pay 2% every year to buy the same liter of milk of loaf of bread this doesn’t mean milk or bread increased value, but we are using a devalued currency: it’s like measuring your height with a shorter and shorter meter, you aren’t getting higher, you are using a shorter unit of measure.
What causes inflation is a very complex matter, some indication have been written here on the thread, but I will analyses only one of those: “money supply”.
Let’s think about an economy with stable inflation at 0%: prices are still, and I have been able to buy my milk for 1$ since 10 years. Let’s think about the CB governor going nut ant printing more money: he decided to print 1 additional dollar for every dollar available: everyone eventually get his extra dollar: what do you think it happen to prices? Yes, the same old liter of milk now it’s sold for 2 dollars.
Money supply is then the most important figure to look at to look at when trying to figure out where inflation is coming from.

Now to bitcoin.
Bitcoin is a deflationist currency: contrary to fiat currencies who have lost most of their values over the years (a gallon of milk cost 1.65$, while today is 4$) it has always been appreciating in real terms, this means it has always (not always actually if we think at December 2017) gained value. Two large pizzas were sold for 10,000 BTC in 2010, but now they are sold for 0.004 BTC.
In this sense bitcoin is a currency that has exhibited a deflation, even if the money supply has always been positive, yet decreasing.

Bitcoin money supply is predetermined, and halves every 210,000 blocks, typically every 4 years.  Bitcoin money growth is the moment  around 3,70%, and it will be halved to 1,80% at the next halving event.
To recap: bitcoin is currency with a money supply growing at decreasing rate. The market forces driving his price have caused Bitcoin to exhibit a deflationist behavior.
Money supply is hard coded in the bitcoin protocol, while the deflationist property is only the result of the balance between supply and demand on the market.

Regarding the relationship between halvin/monetary supply/price relationship the best advicee i can give  you is read my thread in signature about SF model:

Stock To Flow Model: Modeling Bitcoin's Value with Scarcity (https://bitcointalk.org/index.php?topic=5191012.msg52690215#msg52690215)

It technically doesn't even rely on demand in my example, but demand is always a helping factor to keep coins *temporarily* out of circulation.

I do not believe in conspiracy theories. They're admittedly exciting to read, but don't take them too serious. Demand can drop, and it could perhaps drop significantly at some later point in the far future, but not to a point where Bitcoin's value nullifies entirely and everyone stops mining and running nodes.

Bitcoin started out as a small network where coins weren't even officially tradable on exchanges as we know it today. People were just exchanging them between themselves through forums and whatnot. I'm pretty confident that in the worst case scenario for Bitcoin it will be used in a similar fashion. Perhaps not interesting as investment, but very interesting from a use perspective.

The halving means less inflation. There's deffo no deflation on the cards.

This one will be a biggie because the inflation will fall below 2% which is often the figure of a decently managed normal economy.

When you think of the absolute tidal wave of new coins that were arriving yet still the price had some powerful rises and how much better and bigger the platforms are now it could make for a powerful scenario.

One of the important points by those who believe halving will increase the price alot is that the amount of bitcoins dumped by miners will reduce which will contribute to the increase in the price of Bitcoin.
My guess is that some will try to suppress any possible effect on the price by the halving. that is, if the community allows suppression to happen by then.

Thanks for defining it clearly. But still it is surprising to see the prices going down so steeply, with the next block reward halving only a few months away. The user base is increasing at a good pace, and with inflation at such low levels, ideally we should be witnessing a sharp jump in the exchange rates. But quite the opposite is happening right now.

It only counts when there's demand. If there's little to no demand then nothing and no one can influence the price in a positive and decisive direction. When demand is really crap then any inflation at all is going to hurt the price. The coins keep on coming with fewer people willing to pay for them.

Maybe we will know it later after halving when miners are going to have to seek profit versus the amount of energy they spent getting only 6.5BTC. Prices will appreciate through how much the sellers are going to bid while scarcity of supply kicks. I'm still wondering despite how much crypto news were spread all over social media sites, the demands are not increasing. We are all waiting for that deflation to happen, and I guess right now there are more manipulators who keeps preventing it yet to happen.

Deflation is not caused by halving (I mean maybe it is but that is not the topic) deflation is created because in reality bitcoin gets higher in value since there is less of it all the time.

There are always some people who send bitcoin to some unknown wallet or somewhere wrong and it is gone forever, people always say the max bitcoin there will be is 21 million but there must be at least a million bitcoin that is gone already to places that is no longer in use, sure if those people ever comeback they will be able to use it but more often than not there are not that many people that come back to it. So long story short deflation does exist but it is not because halving, halving only excels it and that's it, there is a deflation because instead of printing dollars like deal, we lose bitcoins instead.

Compared to the traditional economy when printing cash, immediate inflation is generated, bitcoin represents a deflationary economy when placed in direct contrast to this scenario and is able to combat inflation, see the case of Venezuela, Argentina, Chile.

 When Bitcoin halving occurs, just by pure logic, the value should increase, it may not happen instantly because the market even if it is fast can take, but in the long term it will be seen that that will be the behavior, only the fact that it has a limited supply is an imperative reason for it to be valued, if the cash were of limited naturalization it would never lose value, Bitcoin may fall in price, but not its value, it is not the same price as the value.

This is what I meant in my above post (https://bitcointalk.org/index.php?topic=5204940.msg53194230#msg53194230):

Read:


Money growth in bitcoin protocol is predetermined in code.



Read:

Well, actually money growth in US is around 6% and rising, never have been below 2% in the last 30 years (except a single read).
Inflation in US  is about 2%, in the same ballpark of many other economies.

To my opinion this is also another theory that isn't proved. The only thing that really influence the price is supply and demand ratio and everything else are side effects.
Halving might have certain effect but that is usualy not significant and long lasting.

Halving is litelrally the ONLY factor influencing the supply of bitcoin.

If you are looking at the price of the bitcoin, we are now experience a crisis that we called deflation that the cost of the coin is decreasing. It affects the market; there are a lot of reasons why it touches on the market. According to those theories, because of the persons who have the most substantial amount of the bitcoin, they are holding their coins that affect the supply and demand we called them "whales." In the previous year, the bitcoin is coming from the lower value, then decreasing every time. This process usually is part of the cryptocurrency.

LOL, chill mate ;D

We know that inflation != money supply growth, that is enough... No need to get agitated for public misconception. Just chill and remind the public occasionally, so that we don't get a heart attack.

By the way, lost BTC also affects the BTC total supply, but might be not that significant since Satoshi said it could be considered as a bonus.

Source: https://bitcointalk.org/index.php?topic=198.msg1647#msg1647

When you do something that increase the value of your currency, it directly influence the buying power of that currency. So with inflation your

currency lose some buying power and you can buy less goods for the same amount of currency that you had before it went down. The Halving is

supposed to increase scarcity of available coins and when something is scares, it normally goes up in value. (If the demand stays the same)

There are many factors influencing the impact of the Halving, but in most instances the price goes slightly upward after a Halving occurred.

Deflation will occur when the number of new coins being minted < the number of coins being lost. That point in time technically can't be known since nobody knows for sure when coins have been lost. However, it's likely to take place many decades before the supply is fully distributed.

By 2070, there will only be ~80 new coins minted per year. It's likely Bitcoin will be deflationary by this point, and perhaps a good deal sooner.

I reckon people mix up the concepts of supply and production too often. There's always enough supply if the price is right. Mined coins are likely to be more available than existing coins but many people are sitting on those existing coins until temptation strikes.

I am chill, I am the king of chill!
Lol, I didn’t want to nitpick or seem angry. But I just wanted to make sure everyone knows what we are talking about without mixing concept!

Anyway, point taken!

Bitcoins price deflation happens every second day when price of Bitcoin goes up compared to USD. Inflation happens next day when price goes back down.  
Emission inflation of Bitcoin is currently around 3.5% and at halving will go to 1.8%. There is no emission deflation. Supply of Bitcoins is inflating 3.5% a year.  

As such there should not be a problem of deflation with Bitcoin, because the supply is increasing and not decreasing. Deflation can only happen if there is a decline in the total supply. That is theoretically possible, given the large number of lost coins (i.e coins that can't be spent, because no one is having the private key to access them). People are more careful with the private keys, but even now a lot of coins are getting unusable every month, either due to deaths (such as the case of Gerald Cotton) or due to carelessness.

In that case of deaths, of course untouched coins remained non moving because it's still present in the circulation. Good thing for bitcoin's supply that it was still growing because of those reasons. In case there's a secondary owner of that private access, that's the time those coins will be potentially moving and being spent if ever the main owner will be gone. Always keep the access keys secure, and  don't even expose that to anyone whose cannot be trusted.

Even if the demand for bitcoin remain stable, I wouldn't really say that halvings cause deflation for it. Yes, there would be less bitcoins mined but it's still adding new bitcoins into circulation. Main difference is unlike fiat, you can just pump new bitcoins into circulation to increase inflation so in a sense, yes it's the opposite of inflation.


I think many of the bitcoins lost was from its first decade, when people still don't take it seriously. I know someone who got gifted a paper wallet which he promptly lost because he wasn't thinking much about it. Then he saw bitcoin in the news around 2016 and realized he used to have some.

These days with people being more careful about handling them, simple errors like forgetting the password to an email/exchange would probably be fewer and there is less and less bitcoin getting "lost".

depends on the coin itself, for example if shitcoin does half It will not give any effect because initially it's a coin that is not worth it, I do not know the case that occurs in LTC.
Then for manipulation if it is true the price of the coin is controlled then halving will not be too influential.
Inflation makes the value of money to fall, while halving is the opposite.

Still not have good effect with bitcoin halving at next year, bitcoin price still down and keep low day by day. I think when bitcoin halving day come several weeks later will have good and positive impact for bitcoin raise with higher price, maybe wait again for three months later to see bitcoin and altcoin back to higher price and give bitcoin member motivate for investing again with crypto.

Actually I think it depends on the direct community at that time halving can actually create inflation too, it can shoot up the prices , if in the market you saw something that you like and needed and there is only one left and there are like 5 people ,you guys are ofcourse gonna fight for it and..it would actually increase the value of that particular thing ; this could go both ways in my opinion .
But instead for bitcoins it was the bad one apparently :'(
Hopefully in the upcoming days it will recover.

We can’t really assure that the next halving will deflate the Bitcoins price however the market will still dictate its price. Though its scarce but if the demand is low what can we expect, I think no matter how many halving will occur high demand and adoption is still best factors we depend on.

deflation is the opposite of inflation. inflation is caused by the amount of currency circulating too much while deflation of the money supply is reduced. in my opinion when bitcoin is reduced by half, bitcoin will also experience deflation. and because of this deflation the reason might increase. and if we look at the history of bitcoin. bitcoin always increases after being reduced by half.

It really does. Halving creates deflation because it makes mining even harder because the difficulty after halving will become higher and the reward will be half. If the demand will increase after the halving then it will drive the price higher because the demand will become higher than the supply which results for investors and traders to buy at a more expensive price.

not certain, halving can't be a reference for bitcoin deflation. because bitcoin runs according to supply and demand. but that can also happen, when mining becomes more difficult and bitcoin is increasingly scarce because there is too much holding. and waiting for prices to go up high. it should theoretically be possible. deflation can be made by halving.

Not really, there are many factors that could cause deflation and halving is just one of them. You see all those coin that have burning every few months aren't really increasing their price. People are hyped with the halving but it's actually just the halvening of mining rewards and in my opinion will not do significant change. But, if people are hyped up with the halving it can for sure create deflation because people believe that bitcoin will become scarce and people will raise their price standart once halvening commence.

I think this is because most people lack economic knowledge. they usually only talk about deflation but really don't understand what it is. For me, there was no deflation in bitcoin. The Halving event only shows that the supply of bitcoin is getting lower and lower and forcing more people to buy bitcoin. Since then, the price of bitcoin has been rising, it is due to the effects of supply and demand and deflation is unreasonable.

I greatly appreciate your comments. This is one of those ideas that is quite easy to understand and it really impresses. I have long thought that there is no deflation mechanism in bitcoin, only supply and demand creating higher and higher prices.
So let's try to think the opposite, until one day people don't see the value of bitcoin anymore, is the bitcoin halving event still important?

I didnt think that halving affects the bitcoin nor market value, years ago as we can observe, the effect of halving makes the price of bitcoin increase, so when it happens, we can see that bitcoin can make ATH or atlease the price will goes up, we can possibly think that by next year it could be a good year in bitcoin.

Halving can have some impact, but I am afraid that this time the impact will be more limited when compared to the previous two events. The first thing to consider is that the prices have already jumped by almost 200% so far this year, probably in anticipation for the upcoming halving event. And secondly, the ratio of annual mining output to the total circulating supply will be much lower this time.

From the start, bitcoin was present in a limited amount that is 21 million and out of which few coins also suffer loss due to blunders of holders. This limited amount automatically makes bitcoin deflationary in nature as we cannot increase its amount like governments do by printing more currency. Halving has nothing to do with deflationary. It is just a process where rewards get halved when 210,000 blocks are hit.

Make your salary as an example.
This year you are gaining $100 then next year you are just gaining $50 for every payroll.
You will ask yourself why?
Is our economy getting better or is it just that the prices of necessities is getting cheaper.
It could be the same.

Now, the halving is coming and miners will have problems also with economy. They are paying electric bills in high amounts while the ROI is not being  reached.
Same as your salary. It needs to be proportioned with how much you will receive.

but so far the movements are almost similar to the two previous halving cases, some of which seem to have declined before halving, news of the hack that just happened.
I didn't expect it to make a new ATH, but at least it could again touch $20k, that's really good.

I don't think we will hit new ATH but probably it could go closed to the latest ATH because halving usually make bitcoin's worth increase and will affect how the miners will sell their BTC at considering it become a lot rarer and hard to get.
But what I afraid is that if the reward is not worth it anymore some miners will just give up with the mining and therefore we will lose some hash power. Hopefully the price of bitcoin could keep up with the halving so that it still profitable.

I think everyone knows that but the thing is that the halving exist in order to keep up with the rising price of Bitcoin as well as to extend the reward that the miners receives because if there is no halving then all or almost the supply of Bitcoin are mined. Also, with Bitcoin the prices are deflating and I think this is a good thing since we don't get to lose the value of our assets unlike in fiat where you need to spend it rather than saving it especially when we talk about long term since the value gradually declines.

Deflation is a decrease of price of services and goods. In economics deflation usually occurs when the supply is too high that it cannot fulfill the demand. Deflation is a wrong context in halving, bitcoin has its own limited supply. It was designed by Satoshi to keep bitcoin inflation in check. Imagine if bitcoin is infinite and it is regularly created it would make definitely bitcoin to decrease its value since there are too many bitcoin in circulation. Halving was designed to keep bitcoin inflation under control. Since the supply decreases the demand increases, and so the inflation exist.

I'm trying to account for that. Based on most estimates for lost coins, (https://fortune.com/2017/11/25/lost-bitcoins/) about 500K BTC were lost per year over the first 8 years of Bitcoin's existence.

My estimate for the year 2070 reduces that number by 625,000%. People will no doubt be more careful with private key storage, but humans are not infallible. There will definitely be coins still being lost 50 years from now. We just don't know exactly how many.

I absolutely agree because while new coins are being created it is more correct to talk about inflation. The actual deflation will be possible to speak at the termination of creation of new coins and their receipt on the market. Therefore, halving by itself does not automatically mean deflation.

BTC500k, imagine the worth of all those during the ATH.  :( Would suck to be one of those that lost them. I'd just like to think that those lost bitcoins will be doing us a favor in the future by making the supply much smaller than it possibly can.

Yes, hard to get an accurate amount on those being lost but I just assumed it'll get smaller. We still are prone to errors.

You should be careful before making such assumptions, because this time the prices have already increased a lot, in part due to the hype surrounding the block reward halving. And another thing is that the investors may be a bit reluctant, after the 85% decline we had in 2018. Many of those who purchased Bitcoin at ATH prices are still stuck with their investment and they are looking for a way out. If the prices reach 10K or 12K again, then we may see a lot of sell-off from this group.

Never thought about that. Next year could possibly start with unseen sequence of events - btc halving, price growths, sell-off from mentioned group of people, price falls.
And only god knows what will happen afterwards

but that's a fact that you can see it, has it increased even more now? I think this is just recovery because if there is no recovery it can go down even further, and in my opinion, there is no hype from halving for now, but it will start next year. The majority of those who should buy at ATH should have sold above $10k because mid-2019 the price had risen to $13k.

If you look at the past market situation the hype does not start after the halving and when the market steadies themselves you will see that the market starts to go higher and that is what we are expecting to happen this time around, the regulation is a major topic and it all depends upon how these major nations are trying to regulate the market and we can expect them to come up with regulation in the next year.

Next year will be the start of various cryptocurrency regulation. But what do we expect from it, a quite stable market or a more volatile one? Surely people who will first engage with cryptocurrency next year will be excited and hype about it, A big factor to predict what to happen next. I agree, the previous halving provides a significant price increase no matter what the market situation is. But then again it is still unknown for us, it is called just an expectation,anything and everything could happen here in any direction at any causes. So let us just wait for it to come.

Are you talking about full time regulation to the usage and transfer of bitcoin? Or regulation of maybe exchanges.
On the latter, I hardly see that happening with bitcoin or maybe not in the near future.

Anyway, as for devaluation that op asked. bitcoin is not fiat and I don't think is going to have a direct impact on the fiat.

The effect of the next halving would probably be the same like the previous one. People witnessed the effect of last halving to the price of bitcoin and just like what happened in litecoin, the price increases because the people are so hyped up about the halving and it would be the same to bitcoin, people are now into bitcoin because all they want is fast money. Greediness will become the fuel for bitcoin to spike up and have a parabolic move again.

Indeed the halving will decrease the rewards of miners by half but still they are making some huge earnings. Do not consider miners as some common people who cannot afford electricity bills. They are actually the real whales. After one successful mining, a miner gets almost 12 bitcoin at present. Even if we half this amount, 6 bitcoin is not a small amount at all. Miners can also manipulate market.

If people used only bitcoins to pay for goods and services and halving was expected ahead, it would definitely create deflation. That is, people would not buy goods in the hope of growing their bitcoins. But since Bitcoin is now an investment asset, and in everyday life people pay with Fiat currencies, Bitcoin does not create deflation.

when bitcoin halving, bitcoin miner income will decrease, for example, miners a month get 1000 BTC every month, but if bitcoin halving certainly revenue from mining will be reduced by half for example a month to 500 BTC, if the price goes down the miner will feel loss because the value is cheap and while the buyer demand bitcoin is very high, most other investors are HODL, so what do you think if the value is low, does that make sense? soon 2020

let's take a look first at what exactly the definition of deflation itself before making any statement.

"Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time"
via investopedia

"deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but deflation increases it."
via wikipedia

which means in this case that bitcoin price become cheaper -the bitcoin purchasing power become weak and low- despite the halving day in the next few months that expected to make bitcoin even more expensive.
deflation usually about fiat money but here we are in different dimension where bitcoin itself considered as a digital money -some people believe bitcoin itself is free fro inflation with its unique valuation- , but with op questioning about the deflation it just makes me even more confused lol.

i mean here bitcoin for now still debatable wether it is considered as a money or an asset, if you agree to consider bitcoin as money then it has deflation but if you agree bitcoin is an asset then at this point it should not has a deflation just like any other asset.
confused?
yes me too.

The deflation really makes sense as miners continue to mine bitcoin and bitcoin continues to increase in value. If one day bitcoin is no longer mined and the value of bitcoin drops, then Bitcoin is nothing more. The real value of deflation must come from demand. Litecoin is an example, the amount of hashrate has decreased since the last deflation. The value of Litecoin has dropped. Not always deflation increases the value of that asset.

Few months later for bitcoin halving but still not looks good for bitcoin and altcoin have higher price, will be next bitcoin halving can't make bitcoin and altcoin back to higher price again? we are excited waiting bitcoin halving but looks with bitcoin and altcoin price still down, maybe after reached one months later for bitcoin halving give higher price impact for bitcoin and altcoin.

First of all, Bitcoin is naturally a deflationary currency since the start. Given the fact that it has limited supply, time would come that when supply is maxed out and demand keeps increasing, its value would increase, and with higher price, makes its purchasing power higher (opposite of inflation imposed by government on fiat by producing more money/supply).

Now for the halving, slower supply generation with assumption of steady Bitcoin demand, would short the supply and create the same effect (deflation). That's why halving is associated with uptrend of prices. Also to mention that the sudden half supply generation is quite a large percentage in one blow (50%).

No, I don't think halving can cause deflation. I also see most people talk about deflation of bitcoin every 4 years but I feel this is not true. Bitcoin's price has not grown with every halving event and it is constantly fluctuating. maybe it returned $ 3k. so this may be a false conclusion and the halving event only creates supply scarcity and only makes the price of bitcoin increase, done.

Halving is just the reducing of block reward and nothing more, there's no guarantee that the price will go up after halving and all these people saying that the halving will significantly increase the price is just a speculation. Last year it doesn't give significant change to the price of bitcoin and even unique the price has pumped far before halving and when halving just occured the price already back to normal. people are just too optimistic in this matter I guess.

In my opinion the definition of inflation with respect to a particular currency is that it will buy fewer goods and services over time. Deflation is the reverse. so you will be able to buy more in the future. there's no way to say that a particular currency is deflationary by definition, it all depends on what people will sell you for a particular unit. but the idea that BTC is deflationary because the supply of bitcoin is limited and there will only ever be 21 million bitcoins in existence. It has nothing to do with halvening event.

In a way this is a trick question, we all know there will be just 21 million Bitcoin, what people don't understand about Bitcoin is part where it can have more decimals. If miners agree on that one day, they can do that. Theoretically, Bitcoin can be modified, modification can lead to inflation or deflation, or to be made to be suitable for mass usage. All that depends on miner's decisions, and all others who help the network somehow, cause before everything that's decentralized network, all of them need to agree before they do anything.

In the later years it has been that way when it's the time of halving the mining rewards gets reduce and Bitcoin's price starts to sky rocket probably because investors where reminded how limited the supply of bitcoins every halving we see a pump in the price.
Now this years halving serve as to delay the generation of bitcoin with its 2million plus supply left in circulation. Its just new to see that current btc halving doesn't have any big move either to the upside or the downside.

in short - halving is the main mechanism to create deflation , yes
in bitcoin ecosystem this event has very big impact on both the hashrate and the price of bitcoin
and usually , the price is not peaking before or during the halving , but its increasing eventually a couple of months afterwards
the not efficient and smaller miners will have to stop their miners and cease operations , thus cutting the flood of the coins to the market
since they have to sell fast , unlike big companies who could wait for the price they need
while this , in theory , leads to more centralization of the mining , it serves its purpose of the deflatory mechanism perfectly

The litecoin halving happened recently and nothing happened as of yet and i am not expecting the price of litecoin to rally alone and people who are investing in any market is not looking for the novelty of the market and all they expect is to earn the profits through smart decisions and if people see the bitcoin market as the fastest way to earn profit then who can complaint that ;).

Nothing to be overrated, each theory is bullshit unless we consider it as a major innovation. Such news appeal to the community and when we see it as a high grade innovation, we buy and price rises. Halving is also an innovation like this, and when that happens, it will be more difficult to mine BTC, and looks that will be enough for market to be affected.

The bearish market also contribute whether the halving could affect the market or not. people always believe that halving could bring double profit but that's not actually true. if the market is at good condition it could probably make the price double but otherwise when the market is bearish it will do nothing. atleast thats what i experienced from so many halving ive been through and its not something that we should put our hope in.

That is what I was thinking about. Crypto market is still a market and rules (partly) by peoples interest.Not the way they want it to be, but according to their behaviour/willing to buy or sell/actions.
So halving basically is just another line of news in the feed of users (not that simple actually, but you got the point)

deflation means the amount of money circulating decreases. when bitcoin halves the amount of bitcoin mined will decrease. but the demand for bitcoin remains or increases, this is what can make the price of bitcoin increase.
indeed not all coins can experience an increase as mentioned op. but if we look at the history of bitcoin, one year after halving bitcoin will pump.
hopefully bitcoin next year will be like that. we have been in the bear market for a long time, hopefully next year we will start entering the bull market.

Bitcoin from the very beginning was deflationary in nature due to its limited number of 21 millions that can not be increased. If we look at the main cause of problems like inflation and hyperinflation, these happen when the amount of the currencies is increased largely but this is impossible with digital coins. Halving has more to do with keeping a balance and not giving all the bitcoin to miners as their reward.

Historically the price of bitcoin starts to increase well after halving and to reach the rally frenzy it will take over an year, we have experienced those in the past and we expect the same in the future too but you cannot call the current market situation in a bear trap, the market was stable for a while and if the market is not having the strength to move higher usually it will have a shake up and that is what we saw in the past few weeks.

Each new BTC price cycle is longer than a previous one, and this time we have as well rather bearish factor called FATF guidelines.

I don't think it actually creates deflation. Here, deflation is the appearance of negative interest rates or our money can buy more goods than last year. halving will make the value of Bitcoin grow and it can buy more goods but we still cannot say that it is a deflationary mechanism. we should say it is a reduction in inflation. means that there is still inflation happening but Halving will reduce the inflation level and balance it.

Deflation depends on users' needs and maybe a 50% reduction in rewards can create greater demand.  I have faith in the next round of rewards reduction of Bitcoin mining.  Because in previous years Bitcoin did the same thing as continuous increase in value after halving.  But looking at the Litecoin Halving event that took place, I got a different perspective.  Litecoin miners have dropped, they are moving to other more profitable crypto mining. The value of Litecoin is now decreasing compared to before Halving.  So maybe Bitcoin will have the same fate as Litecoin.

The miners get some reward for mining and it is somewhere equal to 12 bitcoin at the moment. Once the blocks in bitcoin chain become 210,000 halving is programmed into the system which decreases the mining reward. The miners that now have bitcoin can definitely sell out bitcoin according to their values and this community increases the values of bitcoin for buyers. This is why halving increases bitcoin worth.

Halving does not cause price deflation. The only sure halving does is to cut reward in half. That translates to less supply. Regarding price, you need to consider its demand. I think this is where the discussion gets confusing. If demand for a coin dropped, its price would drop too. Price is an equilibrium point of supply and demand.

In the case of Litecoin, its demand drops faster than its supply halving. Therefore, its price drops. Bitcoin may experience a similar decline if it fails to keep up its demand. But Bitcoin may benefit from deteriorating macroeconomics.

On the other hand, price can rise with inflating supply. If the demand for an inflating coin rises faster than inflation, its price will rise.

Once the halving occurs, the miners and other holders should not focus on selling their bitcoin because it is better if they will hold it because once the majority of the people in the community knows that the supply will be harder to sustain then it will create a panic buying because people don't want to get left behind in having a bitcoin which will result for a price spike.

Do you think miner doesn't need to the money they just mined to pay for the expenses which are quite big? They could only hold after spending some portion of their mined coins into paying the expenses and to be honest, it's not that easy. The plat that you elaborate also purely speculative and doesn't guarantee better profit because you don't know what might happen in the future and how do you know there'll be panic buying while the total supply remains the same? it's not like most people are really concerned about the decrease of miners reward anyway.

Mining bitcoin really electricity consuming given that they uses a high rated GPUs so undoubtedly what they earn from mining comes huge to their expenses to continue unless they are mining from a country that has a low electricity rate or using a renewable energy for low electricity costs. Some miners even have a warehouse or establishment dedicated just for mining. Miners could hold their mined btc for a while indeed but talking about the risk it's not worth at all.

Each and everyone of us are really affected of what is happening right now. In which most of us didn't expect that it may reach as halve of the value of each coins. Also, we can't even control the market due to it's volatility and it's definitely relying the support of many here in crypto currency community.

In my opinion, the halving doesn't create deflation but the hype does. The hype is only the reason why the price is going up because if there is no hype then halving will not become special event because people will just disregard it and the miners will see it as a threat for their mining rigs and they will decide to abandon it just like what happened in litecoin.

I think it is a longer projection than people may think. Everyone is wondering what will happen BEFORE the halving, what will happen AFTER the halving and all of that but nobody realizes there is a longer period that it will affect. From halving to later it will always be 900 per day instead of 1800, that means 900 less bitcoins mined every single day, in one day it is around 6 million dollars, in 30 days it is literally 180 million dollars, in 6 months it will come to 1 billion! dollars.

So, while you are discussing the price of bitcoin due to halving, don't look at one month before and one month after, after the halving there is no turning back and it will forever be missing out and miners will have to sell for higher eventually and the more hashrate comes the higher that will go too.

Few month later for bitcoin halving but still not anything effect for bitcoin and altcoin price, right now price still down both bitcoin and altcoin, looks not have positive effect although bitcoin halving just few months later, maybe will grow up of bitcoin and altcoin price after one month later for bitcoin halving coming, we glad waiting what happen with bitcoin halving have good price or not.

Good explanation. One could think that 900 bitcoins less per days won't have big impact on the market considering daily trading volume is around 1 million BTC on exchanges.
But
A lot of that trading is day trading when people sell and buy back soon after, preferably at lower price to make profit. On the other hand 1800 bitcoins that miners get every day, mostly get just sold. Miners sell bitcoins to pay for electricity and equipment, and they never buy back those bitcoins. So they only contribute to price decrease. While day traders who generate most of the trading volume, usually sell AND also buy so they also push the price up.
Fact is 900 bitcoins less will be sold per day, 27,000 BTC per month and this will have impact.

deflation will form and emerge and especially when many traders realize that Mempool is flooding again, but the hype is still relatively related to market sentiment, miners, and networks. Litecoin comes in at a different time, I don't consider anything responsive after ltc halving, but bitcoin is in a more complicated halving zone, and every institutional opinion always drives the price reaction.

Not deflation but reduced supply I guess, because halving day as a phenomenal event is risky if used as a reference for future price increases. However, what is clear, is that inflation and supply of Bitcoin units certainly decreased as happened in the previous year, 1 year after the halving moment, the price of Bitcoin increase drastically.

Maybe yes halving really create deflation for bitcoin and altcoin price, you can ready now for investing with bitcoin and altcoin depend which one do you want because after close with halving all crypto price become fantastic with higher price, maybe you can hold now for your assets and re investing again to get much profit and chance never come twice in your investing.

Reducing supply is not the right word here because that means the total supply that already planned to at 21 million of bitcoin will be reduced and there's nothing like that in the bitcoin blockchain. The halving itself only affects the reward that'll be given for each block while the reward from the transaction fee will also remain the same for the miners and I don't think something like this could really create deflation.

It would never be worthless as we push our desires for holding huge amount of crypto, because after halving more opportunities will start to change our views for finances. When investing, there's always ups and downs as part of the journey that we follow. Deflation takes place after several fluctuations roll over, beyond our control and we need to be optimistic on that point.

It could create deflation because the miners will have a harder time to mine bitcoin and that will affect the current supplies that are circulating in the market. As the supply is not enough and as the demand goes higher than before then it will push the price to go up and that is deflation for the price of bitcoin in the market.

Holding bitcoin or any other potential digital coin can never ever bring harms to the respective holders. So far, all those investors who did not doubt these coins and held them for long got huge amounts of profits, specifically the bitcoin holders. Bitcoin is going to have worth more than most of the people can even imagine. Halving will demonstrate a bit of its real strength. Moreover, bitcoin was deflationary in nature since its creation.

I think it does create deflation but not by goods becoming cheaper but by currency becoming more expensive. Due to the basic of supply and demand. Halving reduces circulating supply in Economy of Bitcoins which are being mined. This will make Bitcoin Scarce and therefore people will find it more valuable and it's price will skyrocket after some time. Halving will have some impact but skyrocketing thing is not as yet confirmed it's just seen from past behaviour of Bitcoin that it does happens.

I don't think it is any of the laws that exist. This is all due to the sharks' price-push scheme. I now fully believe in the manipulation of the sharks. So, halving or whatever happens is from the shark. they spend money to buy news and then push the previous price to sell off when people buy. Don't blame me for having too many negative thoughts about the market, I'm just saying exactly what the market is doing.

Bitcoin look keep exist the same amount although few years later, maybe just increase limited if some one have lost their private key because I got tread where some one lost their bitcoin address data and he has more than 1k btc in his wallet, But although bitcoin keep limited supply price always down and now bitcoin have back again with lower price at new year.

Big hope with bitcoin halving can bring change how crypto back with higher price, although four months later many people have ready with reinvesting on bitcoin and altcoin because many expectation with bitcoin halving give positive effect how bitcoin and altcoin have higher price, many time we got with higher price always when bitcoin halving coming.

The half-life process will, of course, lead to an increase in price because the current production costs will not change, but the amount of Bitcoin that the miners will earn will be 50% less. For this reason, miners will sell at a higher price and will sell at a price level that will cover these costs and even make a profit. This will of course lead to deflation, but the main reason for the price increase here is the reduction of the miners' sales pressures. Nowadays, miners are constantly selling in order to transfer their earnings into cash quickly and to pay their current costs. These sales also create pressure and prevent price increases. Since the miners will have to sell at higher prices, the prices will rise rapidly and reach a new balance.

Those two statements don't jibe.  When a currency is inflating, it's losing value and goods and services cost more as a result.  Bitcoin is supposedly a deflationary currency because of its finite supply, as opposed to the USD as an example, which has a nearly unlimited supply.  Inflation, as I learned in economics courses, is too much money chasing too few goods and services.  That can't happen with bitcoin.

But I have no idea how the halvenings affect the deflationary aspect of bitcoin.  Coins are just being generated at a slower rate, which will make absolutely no difference once all the coins are mined (if bitcoin survives that long).  Coin supply is still increasing toward its limit even with the mining rewards going down.  It's an interesting question, but I can't say I have a good answer for it. Nor have I read any answers here that would clarify it for me.

As far as I know halvenings affect bitcoin in 2 directions:
1st - value of Btc is rising (because it is harder to get) and the price of it goes up obviously
2nd - price of it falls because more miners come to equalize supply and demand
But I'm not totally sure

There is a lot of misunderstanding about the terms inflation.

For Keynesian Economics inflation relates to price inflation: i.e. purchasing power of money
For Austrian Economics inflation relates to money inflation
For many Bitcointalk users inflation refers to price level of the coins, hence "deflation" deferred when price of Bitcoin expressed in USD goes south, or the "fiat deflation" when USD loses value over time (when actually there is inflation, or the opposite).
I already ranted about this, a few post above.  (https://bitcointalk.org/index.php?topic=5204940.msg53194230#msg53194230)
I think it is a lost battle.


First effect is analysed in the Stock to flow models. Please red here:  Stock To Flow Model: Modeling Bitcoin's Value with Scarcity (https://bitcointalk.org/index.php?topic=5191012.msg52690215#msg52690215)
Second effect is a nonsense, to me at least. Would you pls clarify?

 

The explanation of fillippone is of a masterful order, the concepts of Inflation and Deflation can cause some kind of confusion regarding the particular explanation of each person, however a great example of Inflation is what happens in Venezuela, inflation is so high , that the indexes no longer calculate them.

The effect of Bitcoin Halving by nature should help the price, because the reward is reduced, however, it does not mean that the price will increase instantly, something similar is with the "lost" Bitcoins that some have lost their private keys, the effect in bitcoin market can occur later in some moment of the time, but is secure..

Actually the post (https://bitcointalk.org/index.php?topic=5204940.msg53194230#msg53194230) with the example of the 1 liter of milk and that of the pizzas, in a very simple like fillippone explains it.

Bitcoin and deflation is weirdly related. Deflation means that the set amount of money can buy you more goods than before. In case of bitcoin the supply doesnt really define the deflationary or inflationary property of bitcoin. It is more dependent upon the demand as there is no set cap upon the valuation. Bitcoin can hold any value which is more dependent upon the demand. If you notice, leaving a few instances, bitcoin value is growing year after year. The halving wont create much of a difference as you are increasing the supply anyway. How much the demand is increasing will make a difference.

I dont think it counts as deflation until we have less of them available.   That can occur naturally as there is some natural wastage to BTC from idle or lost accounts but its only slight.   The reduction is new BTC produced and available to the market does not to me qualify as deflation, its actually lower inflation rate but its still an expansion all the same.
   We believe it has a deflationary effect because the presumption is one of growth for BTC and with more addresses used then the demand for BTC rises as this supply declines but its not deflation to me.
I believe they refer to Victorian definitions circa the monetary standards of that time, so that would be by reference to the monetary base in total not circulated.    We missed one important modern definer of inflation and thats the FED and they will adjust prices to account for technology and advancements.   Its possible they might write off the same car costing 5k then 10k some years later as no inflation, their account is the car spec improved and its utility hence price to performance is not moved nor any inflation should be noted.   This is known as Hedonics and a link to Austrian econ website - https://mises.org/library/illusions-hedonics

Bitcoin as I know has controlled inflation i.e. we will have 21 million coins that will be slowly generted until the last bitcoin will be generated in 2140. With coin halving we have less number of coins that will be coming into the available pool of bitcoin. If there will be more people that are looking to buy bitcoin we will surely have increase in price.

I think not and even make the value of the business become lower with time of development. We talked about Bitcoin a lot, let's look back at the Litecoin halving event, it's no longer a miracle that makes the price of any coin grow. This shows that the crypto market can turn around anytime.
For the Bitcoin halving event in 2020, if capitalization is to land on all the alts then the Bitcoin halving event will be of no value.

Litecoin is just a copy cat of bitcoin. So the price movement after the halving is normal to me because the people loses their hype and the market settles down on the right price for each altcoin. When the bitcoin halving is done, the price of bitcoin will go up because the miners will stop if the price goes lower than they expected because it is where they base if they are still earning or not. It all depends on the profitability of the miners and also the demand in the market that will make halving produce a deflation or inflation.

Let's look at a straight sense. A balance between limited bitcoin and too many people is sought. In this case, the price will increase if there is demand for bitcoin. Miners system is the main backbone. The system works with them. Now I can not say that I do not have a connection with deflation.

You don't have connections with deflation, that's for sure, on other side bitcoin halving will not create deflation. In economic sense deflation is a reduction in money supply, halving is reducing block rewards for miners, but in same time we expect price of bitcoin to grow, when that happens miners will get similar rewards in value. Bitcoin have many decimals and that is a game changer for the economy, we can apply many economic laws in crypto market, but we cant apply them all.

Yes, that's true! The nature of the trading market always needs the existence of supply and demand, lack of either of these factors; it will create an imbalance and cause market volatility.

The value of a cryptocurrency depends a lot on its community. From the beginning, almost the "newbie" knew the concepts of "Altcoin" and "Cryptocurrency" were all through Bitcoin. So from the start, Bitcoin had a much better liquidity market than Litecoin - one clone crypto of Bitcoin. Litecoin lost its value in half after Halving just because its community was too small, so it was not enough to attract investors to hold it and push the price. Or at least keep its value.
IMO, I see the Litecoin community even smaller than Ethereum or Ripple at this time.

After reading through this thread I'm going to sum up my conclusions.

1. No, halving does not create deflation. We'll start getting a real deflation only when the last coin is mined. As @NeuroticFish rightly pointed out, we can say that in our case halving is a decrease of inflation.

2. The price of BTC shouldn't necessarily rise after halving, because demand is a big factor, and it's unpredictable.

3. We can expect the price rising, because it is pretty unlikely that the demand will drop to the extent so that it will counterbalance the vanishing of 900 BTC from the market daily.

yes we haven't experienced a deflationary halving yet with the previous halving occurred but as we slowly coming to the final halving the market will start to deflate.
Well then the halving will surely bring back the memories of the past and that will generate a high demand after that although we are still not sure what the incoming halving will actually bring to us.
There's a high chance that it will be going to happen again.

The price grows due to the halving of block reward is what people really want but the reality usually different. The price could just not move at all because the market is not really influenced by the blockchain reward which miners received. So, you just don't expect that thing to happen. Although, by halving the reward it will make people become more aware of how much their coin actually worth.

Think about it this way, if there is scarcity of bitcoin which creates some sort of demand for it to stay same but the supply gets lower and lower both because less mined bitcoins but also more people hoarding and losing their bitcoins, what do you think would happen? How could people think that less bitcoins can never mean deflation, of course it does.

However, one true reality that always looms over our heads is that, will bitcoin one day actually die? We have talked about how awesome bitcoin is and how it will never die but we are forgetting that technology is ever improving and market doesn't care about ideology it cares about profits. So, if bitcoin stays popular then for sure it will definitely get more expensive with halving but for how long? We don't know.

Halving bitcoin on May next year and take about five months later but bitcoin and altcoin have been with lower price today, I think still long time for bitcoin halving day and have chance for bitcoin and altcoin back with higher price again, just wait and see what will happen with bitcoin price later on halving day, have higher price or not because we can't prediction with bitcoin price.

How can you say that reality is different, when after every halving we have higher price.
https://coinmarketexpert.com/wp-content/uploads/2019/09/BTC-4-1024x271.jpg

Market is influenced in many ways by many factors, from all of them two are very important ones, its supply and demand, halving is changing the supply, which can affect the price in long run.

If you mean 2140, I think it's too far away from us to think about it. But what's interesting is that we don't know for sure how many coins are lost every year, so, theoretically, it's possible that we have already entered the deflationary phase. According to Chainalysis, between 17 and 23 percent of all BTC is already lost irrevocably. Who knows how many BTC will be lost during the year after the next halving, and whether that amount will not be greater than what will be mined during the same period of time?

I mean it's not that hard to calculate how many BTC will be mined from May 2020 to May 2021.

We have around 52,560 blocks per year, so

52,560 x 6.25 BTC = 328,500 BTC

It's only around 1.6%, so it's possible that over that amount will be lost during the same time.