Uh, wat? No hard cap is terrible for everything.
as a store of value it's more than perfect. as long as enough people want in the only way is up.
Well, I'm not sure. That's not rhetoric to say "I'm convinced of the opposite". It is a true statement: I don't know.
But I have my doubt about the validity of the rebuttal on "deflationary spiral". In the bitcoin wiki, this is waved away with the following argument:
https://en.bitcoin.it/wiki/Deflationary_spiral"Everything is the opposite of the popular fractional reserve banking system (because Bitcoin isn't a debt but an asset). Bitcoins only deflate in value when the Bitcoin Economy is growing. "
In other words, this took the stance that bitcoin was mainly a currency, and that its value increased because of Fisher's formula: people were buying more stuff with it, the demand for bitcoin, in order to buy more stuff with it, increased, and that increases the price of bitcoin (decreases the price of stuff as measured in bitcoin). In other words, that bitcoin's price was backed by the "economy" that could be bought with it as a currency, which is the usual backing of a normal currency.
But this is clearly NOT what is happening. Bitcoin's price is not rising because of the rising demand for it to buy stuff on the internet. Bitcoin's price is totally determined by traders wanting to see it as a speculative asset, which is the argument of a deflationary spiral, that if people notice that their "currency" is gaining more value by just HODLing it, they would be crazy to spend it. So they don't use it as a currency (they use a substitute, here, fiat, for that). Of course, you can spend it, if you take into account a *KNOWN* deflation (or inflation): you correct for the prices and the time lapses. But nobody knows the deflation of bitcoin (the value growth of bitcoin). And very few people spend it as a currency.
So bitcoin becomes essentially a hoarded asset, and the amount of bitcoin in circulation is small as compared to the amount of hoarded stuff, giving a false impression of a huge market cap. This is fine and dandy as long as the price is rising, which will be the case as long as *new capital* (mainly new users) are flowing in, because the price is rising. However, at a certain point, this influx in capital will dry up: there is not an unlimited amount of capital outside, available to flow into this ; at a certain point, the influx in capital needed to sustain a rise, larger than most ROI in the rest of the economy, becomes larger than what is available. So the rise cools down to less than spectacular deflation. What happens then ?
People thinking they are sitting on a trillion $ worth of coins cashing out ? The market cap is simply not representing the stored value, but only the size of the coin pool, times the *last* gains, when there was only a small amount of coins in true circulation, all the rest hodled.
The question I don't know how to answer, is: can such a system potentially be maintained at that high level without extra growth, or will it necessarily crash down when people don't see growth any more, and want to cash out ?
