Inflation and Deflation of Price and Money Supply

[slashz9]

Good post.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.

[1714233087]

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[dzshi]

I'm wondering how alt-coins with unlimited token issuance mechanisms factor into the overall macroeconomic equation. Wouldn't they be essentially the same as central banks, controlling the inflation rates and issuance of the currency?

[PizzaBTC]

The rate at which bitcoin rises and falls is one of a kind and that has been bothering me for sometime. Bitcoin could lose up to $300 of its value in just a day and it can also gain more than that in a day.

[jijuevyiyn63011]

A coin with 0% inflation generates a problem: the total amount of product in the society is increasing, but there are no enough coins to "match" them. As currency gets more valuable, people will hoard it instead of investing, things will get problematic.

[marcbitcoins]

Good post.
Rising prices and price reductions, yes that is what happens when the sale value of a good thing rises or falls, but it will always happen when the price of an item decreases then the price of other goods will rise, it happens not without reason because from time to time trend Everyone is different, whether it is economic factors, clothing, vehicles, electronics and others.
Therefore inflation and deflation will continue to occur from year to year.
So that determines the bitcoin price, may be true as you say because of the increase and decrease in the price of goods.

This rise up and go down are already a traditional process. In trading when the supply is low then in demand the price of that supply will rise up but if the supply are very high then in low demand the price will going down naturally. These supply and demand system chain are mostly common in trading in which hoarding technique is commonly applied to all goods in the market and now is being applied to bitcoin. Thats the fact in trading

[Canday]

Oooh Yay!  Let us all be like Plato and fake that words and phrases have objective meanings so we can argue about them without having ever acquiring anywhere!There are lots of people brainwashed or dishonest ample to misuse conditions in a way that makes it hard to comprehend issues.  An argument of what the terms indicate only implies that you are a slave to an utterance employing these words, and so you should get others to use them the way you comprehend them.  That looks variety of foolish and pointless (and cultish and spiritual and educational).  What they mean is crucial if you want to comprehend a claim created making use of them, but whoever manufactured the assert can just substitute them with other phrases that are simpler (and often far more numerous).

[badger88]

Which is potentially the most profitable altcoin in your opinion? Could be that investing in them is a more profitable strategy than mining? Sure, owning mining rigs, you can switch to mining another alts if one of them fails, but the difficulty rises quite fast on all of them, and hardware becomes obsolete in a matter of months. On other hand, investing in a basket of alts, rather than in mining equipment can prove more profitable and trouble free (as there won't be no hassle with installing and setting it).

EMD looks like it will run out fast, only 31 mil coins
 

Other coins are easier to pump and dump when they are mined..
You can mine other coins and change it to EMD .... peak EMD - peak inflation 

[EGH.IO]

Дa пpocтo cкopocть pocтa биткa cлeгкa пyгaeт
И чтo бы тaм кeйcиaнцы нe гoвopили зoлoтo этo дeньги a битoк вpoдe кaк нeт

[ikhwan88]

An area dedicated to discussing the differences of these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.

Pulled from a discussion in Wall Observer


Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.


Now that we've gone over PRICE Inflation and Deflation (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), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.


What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.


Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.


We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading!

nice seem to be right and meaningful also helpful for me as a newbie to cryptocurrency :-)

[TheGreatPython]

An area dedicated to discussing the differences of these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.

Pulled from a discussion in Wall Observer


Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.


Now that we've gone over PRICE Inflation and Deflation (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), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.


What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.


Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.


We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading!

Involving
commodities in the same sense in economics as inflation is near the impossible.
Right now digital currencies are considered Commodities that's the easiest way
to consider it from now until at least another year from now. It's just going
to get really confusing if you try to manipulate that as a cash flow versus
inflation index.

[fanou1988]

If said "In inflationary system like we have today it's suggested that 2% inflation is "healthy" for the economy."

[zwiggel]

If said "In inflationary system like we have today it's suggested that 2% inflation is "healthy" for the economy."

I agree on this. The economy around the world has inflation. Inflation also depends on the structure of the economy. The price of low-level tradeoffs in unemployment is rising, so a 2% inflation rate is justified.

[rupeeteam]

Can governments opt for deflation? Is that good or bad for economy?

[Babita2810]

Price inflation- It is defined as the value of the goods is decreased if the price of bitcoin increases. The annulised inflation rate in India was 3.8% till august 2015. Most of the people used WPI i.e wholesale price index for all the commodities. But now-a-days people use CPI i.e consumer price index to measure the rate in India.

Price deflation-It is defined as the value of goods when increased if the price of bitcoin decreases. It is the decrease in the price of goods and services. Deflation occurs when real value of inflation decreases to 0% that is negative. Therefore deflation increases the real value of money and regional economy. This allows one to buy more goods and services more with same amount of money.

[BitcoinMarketer39]

yes its always happening in the market..inflation and deflation of price and money supply..maybe of lack of goods some manufacturers companies are not able to produce the volume of the product supply..

[Aayushi]

Inflation- Price inflation refers to the decrease in the price of goods if bitcoin price increases. It is now a days measured in CPI i.e. Customer price index . Earlier people used WPI i.e. Wholesale price index to measure the commodities. It was 3.8% in august 2015. Inflation represents the structure of economy.

Deflation-Price deflation refers to the increase in the price of goofs if bitcoin price decreases. It occurs when the real value of inflation decreases to 0%. Therefore deflation increases the real value of money and even the regional economy. This allows a person to buy more goods in same amount of money.
There is jnverse relation in price and value of the product.

[PequenaGeovana]

Bitcoin is very volatile do not you think? Sorry, I'm a newbie.

[Tahir Khan]

Can governments opt for deflation? Is that good or bad for economy?

I Think This Is Singh OF Good Economy

[Kumic]

Bitcoin is very volatile do not you think? Sorry, I'm a newbie.

Yes, it is, but if you look at the altcoins they are much more volatile compared to Bitcoin. 

[MANNYKURSH]

Very Useful info.

Thanks for the information posted, I feel the value of BTC will continue increasing, but not sow fast as we expect. There is always a pick and from there it might go down.