[CHART] Bitcoin Inflation vs. Time

[ZephramC]

At which point the concept of money becomes trivial at best, it wont go away, there will always be value for scarce things of use.... but the need for it will certainly decrease as time goes on.

That discussion is a bit beyond this particular thread, but market forces WILL ALWAYS dictate the value of scarce things (nearly everything). The only way your scenario can happen is if each human being can create this energy (mindpower x chi' + crystals^2, or something) for nothing, because there will always be original capital costs.

Truly infinite energy? Wow. No idea what happens then. All bets are off. I still think my comment above won't change. 8^]

Do not forget the knowledge, entertainment, art, qualification, friendship etc. Even with abundant energy (and Startrek-like replicator) those will be scare and wanted.

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[scox]

Great. Thank you very much

[IIOII]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

[deisik]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

Inflation as depreciation of currency is certainly not what is perfectly predictable. Inflation as increase in money supply (which you are obviously talking about here) is not that interesting in respect to its price and doesn't come across Bitcoin's deflationary nature...

[IIOII]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

Inflation as depreciation of currency is certainly not what is perfectly predictable. Inflation as increase in money supply (which you are obviously talking about here) is not that interesting in respect to its price and doesn't come across Bitcoin's deflationary nature...

The increase in money supply is the primary cause of depreciation of any currency. Therefore I prefer to use the term "inflation" for the former case.

Bitcoin will exhibit deflationary effects (= its value increases related to other currencies and goods) as long as its adoption increases. Once adoption reaches its maturation point these effects will decrease greatly. If there still remain deflationary effects it will be because other currencies and goods add more supply than bitcoin (= they inflate stronger than bitcoin). However at its very core, Bitcoin is still inflationary as long as more Bitcoins are mined.

[deisik]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

Inflation as depreciation of currency is certainly not what is perfectly predictable. Inflation as increase in money supply (which you are obviously talking about here) is not that interesting in respect to its price and doesn't come across Bitcoin's deflationary nature...

The increase in money supply is the primary cause of depreciation of any currency. Therefore I prefer to use the term "inflation" for the former case

It has already been proven statistically that bitcoin depreciation/appreciation (its dollar exchange rate to be precise) has nothing to do with its supply (inflation of monetary base)...

[IIOII]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

Inflation as depreciation of currency is certainly not what is perfectly predictable. Inflation as increase in money supply (which you are obviously talking about here) is not that interesting in respect to its price and doesn't come across Bitcoin's deflationary nature...

The increase in money supply is the primary cause of depreciation of any currency. Therefore I prefer to use the term "inflation" for the former case

It has already been proven statistically that bitcoin depreciation/appreciation (its dollar exchange rate to be precise) has nothing to do with its supply (inflation of monetary base)...

I doubt that - so where's the proof?

Please keep in mind that I'm referring to longer term effects (years), not short term fluctuations. I noted also that current value appreciation of Bitcoin is mainly a result of adoption which must reach saturation first before value appreciation will diminish.

[deisik]

These charts are really useful.

They illustrate nicely that the belief shared by a lot of people that Bitcoin is a deflationary currency is fundamentally wrong. The beauty of bitcoin is that it's inflation rate is perfectly predictable. I think that the predictability of inflation rate is one of the key features which make Bitcoin a reliable currency.

Inflation as depreciation of currency is certainly not what is perfectly predictable. Inflation as increase in money supply (which you are obviously talking about here) is not that interesting in respect to its price and doesn't come across Bitcoin's deflationary nature...

The increase in money supply is the primary cause of depreciation of any currency. Therefore I prefer to use the term "inflation" for the former case

It has already been proven statistically that bitcoin depreciation/appreciation (its dollar exchange rate to be precise) has nothing to do with its supply (inflation of monetary base)...

I doubt that - so where's the proof?

The proof is somewhere in this forum. There is a topic with all the mathematics and discussion thereof...

[deisik]

Please keep in mind that I'm referring to longer term effects (years), not short term fluctuations. I noted also that current value appreciation of Bitcoin is mainly a result of adoption which must reach saturation first before value appreciation will diminish.

90% of Bitcoin value is sheer speculation (if not more), so it is neither worth not particularly interesting to discuss the effects of Bitcoin's supply increase on its depreciation/appreciation... 

[IIOII]

Please keep in mind that I'm referring to longer term effects (years), not short term fluctuations. I noted also that current value appreciation of Bitcoin is mainly a result of adoption which must reach saturation first before value appreciation will diminish.

90% of Bitcoin value is sheer speculation (if not more), so it is neither worth not particularly interesting to discuss the effects of Bitcoin's supply increase on its depreciation/appreciation...  

I do not agree. I find it both interesting and relevant - maybe we will see an effect around the next reward halving...

[deisik]

Please keep in mind that I'm referring to longer term effects (years), not short term fluctuations. I noted also that current value appreciation of Bitcoin is mainly a result of adoption which must reach saturation first before value appreciation will diminish.

90% of Bitcoin value is sheer speculation (if not more), so it is neither worth not particularly interesting to discuss the effects of Bitcoin's supply increase on its depreciation/appreciation... 

I do not agree. I find it both interesting and relevant - maybe we will see an effect around the next reward halving...

You talk about longer term effects (years), but according to your own logic, the bitcoin supply (monetary base inflation) should turn negative with years (less new coins mined minus lost coins). How come?

[IIOII]

Please keep in mind that I'm referring to longer term effects (years), not short term fluctuations. I noted also that current value appreciation of Bitcoin is mainly a result of adoption which must reach saturation first before value appreciation will diminish.

90% of Bitcoin value is sheer speculation (if not more), so it is neither worth not particularly interesting to discuss the effects of Bitcoin's supply increase on its depreciation/appreciation... 

I do not agree. I find it both interesting and relevant - maybe we will see an effect around the next reward halving...

You talk about longer term effects (years), but according to your own logic, the bitcoin supply (monetary base inflation) should turn negative with years (less new coins mined minus lost coins). How come?

You are mixing things up conceptually. I was talking about the relation between supply and value depreciation as a longer term effect in general (i.e. for any currency). If Bitcoin doesn't fail, i'm quite sure that adoption will reach the saturation point long before bitcoin supply is so low that the calculation new coins minus lost coins is negative.

So I predict that my statement - "increase in money supply is the primary cause of depreciation of any currency" - will also hold true for Bitcoin (even if the effect is small).

[deisik]

So I predict that my statement - "increase in money supply is the primary cause of depreciation of any currency" - will also hold true for Bitcoin (even if the effect is small).

In fact you just can't say that an increase in money supply is the primary cause of depreciation of any currency. It all depends since there are other independent factors at play here...

[IIOII]

So I predict that my statement - "increase in money supply is the primary cause of depreciation of any currency" - will also hold true for Bitcoin (even if the effect is small).

In fact you just can't say that an increase in money supply is the primary cause of depreciation of any currency. It all depends since there are other independent factors at play here...

Why can't I say that?  I'm saying in general there is one cause of primary importance and there may be others less important. I even recognized the factor "adoption" as another factor in the case of bitcoin.

Well, but this discussion is not very fruitful. So I leave it here.

[painlord2k]

Looking at the chart I linked, appear to me that major increase of price coincide with marked reduction of the inflation rate of BTC.

The first sharp reduction of inflation was coincident with the time frame Bitcoin started to acquire a monetary value (the pizza exchange) and it caused an increase of hashing power sufficient to INCREASE inflation for a while afterward.

The second sharp reduction of inflation happened in late 2010 and caused the increase of price to 32$ of June 2011 and again the hashing power grow enough to INCREASE inflation for a while afterward.
Then the price decreased so much it forced some miner to exit and causing inflation to fall under the scheduled level. When inflation reached a minimum, price resumed to rise and returned to the scheduled rate of inflation.

Inflation continued to slow down during 2011 and 2012 and the price continued, slowly, to raise (remember it was something like 25-27%/year. in november 2012 when the halving happened.
The peak of the first and second half of 2013 were caused by this sudden reduction of inflation.
The effect of the increase of price and introduction of ASICs was to seriously increase inflation from 1.02% to 1.31% (probably a bit more). Inflation, in exchange increased the quantity of bitcoin mined and the cost and competition of miners reduced the profit margins, increasing the quantity of BTC sold.
Higher profit margins for miners allow them to keep some bitcoin as profit after paying for expenses and capital. Low margins increase the quantity of coin on the market, but negative or zero margins reduce the quantity of coins mined.

As we reach mass adoption of state of the art ASICs, the hashing power of the network will grow slower and inflation will return to the scheduled rate (but we have anticipated the next halving already to August 2016 and if the hashing power increase 10% every two weeks, instead of 18% like now, we probably have the next halving in June-July 2016).

I believed, before computing the number, BTC inflation was already a little lower than US$ inflation and just above € inflation.
In reality BTC inflation is 6-7% higher than the US M1 and Currency (there is a 14% spike of M1 in February I would like to confirm as data come out - It appear they doubled down before tapering QE).

My opinion is the price is, in some way, exponentially proportional to the inverse of the inflation rate differential.
What will be interesting is when the inflation rate of BTC will go under the inflation rate of € and $.
That will be the game changer.

Until then we will see an slower exponential increase in price driven only by the increase of the network size as users and merchants continue to increase use and adoption.

[deisik]

So I predict that my statement - "increase in money supply is the primary cause of depreciation of any currency" - will also hold true for Bitcoin (even if the effect is small).

In fact you just can't say that an increase in money supply is the primary cause of depreciation of any currency. It all depends since there are other independent factors at play here...

Why can't I say that?  I'm saying in general there is one cause of primary importance and there may be others less important. I even recognized the factor "adoption" as another factor in the case of bitcoin.

Well, but this discussion is not very fruitful. So I leave it here.

It's good that you're leaving, really. Money supply is absolutely not the only cause of primary importance (the ABCs of economics). The other factors that determine depreciation/appreciation of a currency are money velocity and productivity. And the latter can easily override the former and be more important...

[CrazyBit]

That's pretty cool! Things you can learn on here.

[zimmah]

https://docs.google.com/spreadsheet/ccc?key=0AnWZ8CNHuTE3dGo3RTBoSHdvQnZsZkpZdHB1ZUhQLWc&usp=sharing

I, with help, compiled a chart with actual data about Bitcoin actual inflation rate and compared this with data about the M0 (currency) and M1 data published by the Federal Reserve.

wow, both M0 and M1 are increasing quite rapidly. It's amazing how the dollar is still standing.

[Kiki112]

looks quite promising, can't wait for 2037

[billysweird]

cool thanks！
It is really useful!
I think the predictability  of inflation rate will be  one of the key features for bit coin  change to real currency.