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Author Topic: Inflation and Deflation of Price and Money Supply  (Read 509363 times)
pdavidp
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November 16, 2017, 07:39:47 PM
 #861

The value of bitcoin is oscilating based on total number of bitcoin transactions and its users. The thing that fascinates me is that when one place is taken that doesn't mean that there's no place for someone else, as a matter of fact it gives another user space to mine in between if i am informed correctly. That being said i truly believe that bitcoin price will raise to even bigger sizes and that it will crush all other currencies.
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November 16, 2017, 08:44:32 PM
 #862

The pricing of bitcoin does derive from transactions of it users. As the community or demand increase so is the price. Right now, what we are experience is on the peak of a new era wherein bitcoin might be adopted in some country as a mode of payment.

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November 17, 2017, 04:47:42 AM
 #863

Good explanation about bitcoin in terms of inflation and deflation.
If the money supply expands, we get inflation, if it contracts, we get deflation. Everything is simple





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daddypastes
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November 17, 2017, 10:47:00 AM
 #864

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! Wink
having an inflation and deflation in terms btc or any kind of bussiness is nirmal when it comes in term of economical state.It will be able that currency may increases or decreases,but btc can assure that btc currency price can increase nowadays to future.
barefield22
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November 17, 2017, 11:47:32 AM
 #865

Is price-inflation always bad for the economy? Are BTC price and exchange rates in the country connected?
Solmir
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November 17, 2017, 02:21:51 PM
 #866

That pretty simple. 21mil total amount - 7billions people. The more people in there, the more btc cost.
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November 17, 2017, 10:10:14 PM
 #867

It's important to hold back for time later on bitcoin will even more sneak in and also the profit accordingly could be more. Consequently, this is actually the correct choice to hold back, since the long term is behind bitcoin.
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November 18, 2017, 11:21:32 AM
 #868

I like how the others are very detailed on explaining the defiation and inflation and how it is relative to bitcoin. I have more to learn so these information really helps.

elash
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November 18, 2017, 02:04:29 PM
 #869

An excellent post that I'll sticky so people can learn from.
In my own understanding about inflation and deflation of market supply, the inflation is a broad chage in price products or derease the value of money because the market supply increases and in deflation is also a broad change in price of products or increase the value of money because the market supply decrease.

B0IdStyIe
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November 18, 2017, 07:26:54 PM
 #870

Would be the cash for the airdrop distributed on a certain date, or inside a certain time-frame after handing over the shape. Because, I posted the form a few days ago and also have not recieved the airdrop. It is possible I stuffed it improperly I suppose.
brettgauthier4421
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November 18, 2017, 07:38:44 PM
 #871

Not utilizing escrow for a big buy *facepalm* noobiestoopidness ><
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November 18, 2017, 08:51:47 PM
 #872

Occasionally long-term opportunities are profitable.Indeed ofcourse it's but the chance of taking a loss in investing  higher than buying and selling doesis
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November 19, 2017, 05:41:39 PM
 #873

Are You Dissatisfied In Buying and selling? don realise why to be disappointed in trading. Simply because, i believe industry is all about supply and demand. Reduction and revenue will we take turns, key about it is money management.It
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November 19, 2017, 06:00:55 PM
 #874

Strong support and resistance for $btc but its enough, it will dump if it break first 6200- 6000 then go down 5600-5400. It seems like money flowing out of $BTC isn't going into Bcash anymore. Now it's $ETH's and other $ALT's turn.

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November 19, 2017, 11:27:05 PM
 #875

Very interesting post, may be one of the most important for newbie here latelty... Bu to be honest i have seen few posts like your and found them quite  similar. But it doesn't matter the clue and the whole meanning was approved. I really hope to see much more posts like yours.
The Bitcoin deflation lately is very strong, and getting much more power. It is good for investors but not for shopping, fees etc.

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November 20, 2017, 12:50:11 PM
 #876

Big question is, where this deflation will end - many don't see an end and don't WANT to have an end because it will harm their "going to the moon and buy a lambo" goals.. We - at some time - have to get out of this game..
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November 20, 2017, 01:27:26 PM
 #877

Perhaps with outstanding rivalry, the appraisal of altcoin contending so altcoin's confidence must surpass the Bitcoin and needs to maneuver the position of Bitcoin which has been the principal gold coin ever however that won't the simple on the grounds that altcoin esteems change quickly in confidence compared with Bitcoin.
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November 20, 2017, 01:46:56 PM
 #878

Yes , money supply and demand is determined inflation or deflation, ok. But I think short term jump and dump will feed money rising like stairs. For example  Bitcoin cash fork and then Bitcoin increased more..
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November 21, 2017, 08:31:18 AM
 #879

Thank you for this information. Now I know when will the value of bitcoinBTC will rise up and when it will go down..
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November 22, 2017, 05:01:50 PM
 #880

Also, if we are talking about currency - the world rates of any currency (aswell crypto) may depend on authoritative news and reviews of this or that currency. If there is a discussion of currency on authoritative sources and this news becomes loud - it can affect the actions of many people, so the rate may fall or rise.
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