Inflation and Deflation of Price and Money Supply

[Dark_Felix]

Hey guys, I was kind of curious about the value of the bitcoin. I understand the basics of economics and how the price of money is determined by the supply and demand for it, but I am not completely sure why the price of bitcoins continues to rise. Is it because the demand of bitcoins is continually increasing at a staggering rate? Or perhaps people are trading their bitcoins for other currencies faster than it can be mined, thus reducing the supply? Some clarification would be helpful.

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[Md.Sufian]

During the inflation, the money loses its purchasing or purchasing power. Then it takes more units of currency to purchase the same unit of product or service. Over time, the inflation rate reduces the price of each unit. On the other hand, during the monetary policy, money is increased in the purchase or purchasing power and the product or service takes less units of one currency for the purchase of the same unit. Always increase each unit of inflation currency. The price is very important for inflation. Especially for the money supply, the price plays a significant role.

[xwshamim]

very nice post based on economics it was very informative want more post like this from you people will be able to learn so much about the market i think

[kipo]

Inflation is an increase in the general level of prices, accompanied by a corresponding decrease in the purchasing power of money (depreciation of money) and leading to the redistribution of national income. Deflation is a reduction in the overall price level. Inflation is the main destabilizing factor of the market economy.
Inflation has a strong impact on economic agents, someone wins, someone loses, but most consider inflation to be a major problem.

[crypto_bit]

A nice definition of inflation you can find in Palgrave dictionary of economics, some extracts here:

Inflation is a process of continuously rising prices, or equivalently, of a continuously falling value of money (Laidler and Parkin, 1975, p. 741). Because there are several ways of measuring prices, there are also several different measures of inflation. The most commonly used measures in the modern world are the percentage rate of change in a country's Consumer Price Index or in its Gross Domestic Product deflator [...] Inflation has been a feature of human history for as long as money has been used as a means of payment, and as Milton Friedman (1970, p. 24) famously wrote, ‘inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output’. [...] Attempts to understand inflation have been aided by the insight that anticipated inflation has different effects from unanticipated inflation.

Therefore the key concept here is an anticipated inflation (employers and consumers take future price changes into account) or unanticipated (when the price changes are not used in decision making etc.).

[phamtheanh888]

- In case the nominal income remains the same, inflation occurs, which reduces the real income. Inflation not only reduces the net worth of unprofitable assets but it also corrode other valuable assets, which reduces the real income of interest.

- When inflation rises, borrowers raise interest rates to offset inflation. This means that the amount of income that the lender must pay increases, resulting in a net income that the lender receives from the borrower and the lender is disadvantaged. This has resulted in unequal distribution of income between the lender and the borrower

[mifanmuzny]

Value is demand which is based on liquidity. The slow supply growth makes it a nice store of value assuming liquidity is increasing. Demand increases Witt new innovative crypto currencies and money transfer aps but fundamentally it has the best spread between increases in liquidity and increases in supply. Every new etf merchant or startup who takes btc makes more people want to hold it and invest in it

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[barryallen1999]

Bitcoin is money, it just has all the infrastructure ( Fraud checking and storage etc. ) already built in and only exists digitally, you just have a bunch of people who Bitcoin threatens denying everything and openly refusing to class it as money.

[Roboabhishek]

Bitcoin is money, it just has all the infrastructure ( Fraud checking and storage etc. ) already built in and only exists digitally, you just have a bunch of people who Bitcoin threatens denying everything and openly refusing to class it as money.

Inflation is a noun which means a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of the currency. People who believe in the neo-Keynesian field are often guilty of making up words and not the following mathematics simply to try and confuse people

[bitcoinFPT]

Inflation is a situation where it takes more money for a unit of goods or food or in other words inflation is a currency that diminishes its value.
Deflation is the uniform devaluation of the price of goods and services over time. In other words, deflation increases the value of each currency.
A typical example of inflation is the country of veneuzila, the inflation of the large currency devaluation, the money can not count to pay but must weigh
crypto can solve the inflation problem and ensure trade balance between countries

[STT]

I'm not sure it qualifies as 'money' just yet, because it isn't accepted by the vast majority of businesses.

A form of exchange is only worth as much as the receiving party values it at, which is the inherent difficulty with establishing BTC as a widely-accepted method of payment. People just don't trust it yet and there is no centralised system vouching for its value.

Mass adoption will just take a bit of time. Rome wasn't built in a day etc. etc.

It very much qualifies as money for the reasons you state.   Just because people regularly acccept it as value in exchange of goods and especially because its done the world over.   Even the most bearish of critics of Bitcoin I have heard declare Bitcoin is money.   Business is way less important then the confidence of the people, thats why they are always trying to advertise things to us and convince of the quality of some product where is Bitcoin is accepted off the back of its own qualities in use.

The bearish critics dont have any real belief in Bitcoin lasting as a high value exchange of worth.   They believe there is better alternatives but even the most negative view will accept its used as money and so it is money.  The confidence and regular exchange of a secure token happens and so BTC equates to money.

   Here in this picture is a demonstration of other systems existing over many years as forms of money in various parts of the world:

[aqrulesms]

I feel like somebody wants to troll me. I mean, please, the definition of inflation is not that contradictory of a topic.

[ferdoush]

which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies

I'm not sure if it's just me but I had a hard time understanding the underlined. Is that redundant? from itself and other currencies?

Anyways, with the ASICs coming out soon, what do you think the value of bitcoin will do for the the first couple of months? I feel like it will start to drop rather rapidly as people are trying to get their hands on more USD to compensate for their expenses. Then they would start to keep the BTC and the difficulty would rise so it would go back up?

[fluctuations]

Inflation is an increase in the general level of prices, accompanied by a corresponding decrease in the purchasing power of money (depreciation of money) and leading to the redistribution of national income. Deflation is a reduction in the overall price level. Inflation is the main destabilizing factor of the market economy.
Inflation has a strong impact on economic agents, someone wins, someone loses, but most consider inflation to be a major problem.

Your rating is correct, I think so. The fact is that inflation is a big problem for the whole society at anytime, everywhere also have  inflation. I hope soon to find a solution to curb inflation so that the market economy is stable.

[Seundavid]

inflation simply means increase in price while deflation means opposite of the inflation that's decrease in price.

[ecnesa101]

Thanks for info. Excellent posting sir. Great job!

[Onews1990]

Supposing that quantum computing has the ability to break crypto and the hash functions that are used in the blockchain.

[Seunbabatunde]

Inflation simply means increase in prices while the deflation is decrease in prices.

[Stephen1989]

Inflation means increase in price while deflation is opposite of inflation.