Inflation and Deflation of Price and Money Supply

[nvthanh]

So when I lend money, what kind of interest should I get since I know after some time any it is gonna depreciate? Would that give rise to a scenario where I'm asked to pay interest for giving loans?

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[ausbit]

someone can give a predict me about the price of bitcoin? going up or down?

Yes sure I can help you with a prediction of Bitcoin price in near future we all know that this cryptocurrency is going to take over the international market in upcoming few days and hence it is not wrong to say that the Bitcoin price is going to increase with some great mark.

You must be aware of the present situation that this digital currency is most highly valued  therefore you must not sell them in  fear of getting  loss.

[Maragan13]

if Supply Currency Supply refers to reducing money due to the increase in money supply. Also, at present, an increase in Money Supply is exactly that, "when the total money supply increases". The former was an effect of the latter, and I did not refer to the latter.

so Now to deal with argument of demand ...

If any real economy, there is no guarantee that demand exists (maybe in the keynesian paradise, but that's about it). However, there is a guarantee to increase the Money Supply.

Inflation Money Supply (or inflation due to an increase in currency supply) does not exist regardless of demand, which contributes to reducing money. Demand only helps to stabilize or increase value and price. Sure, they can be recovered when they are equal, but this does not mean that inflation due to an increase in Money Supply does not exist.

So I would argue that the Supply Currency of Inflation means change in value.

[DrGuns4Hands]

Inflation is the rise or increase of the prices which have different types and that can usually occur when bitcoin is down. While deflation is the decrease or fall of prices which occurs when bitcoin is high or up.

[slashz9]

I think the price will continue to rise until the capacity reaches the maximum. we see now that the supply has reached 16.5 million the price continues to soar and one more thing bitcoin not affected by inflation.

[zombie6]

The market economy can work only when people spend money, and the more money is spent the better, it is built on inflation, if money becomes cheaper, then you will be more motivator to spend than to save! dude...

[johny1512]

Inflation has direct relation with money supply while deflation has inverse relation because when inflation occurs money supply increases and when deflation happens money supply automatically gets low this is the same for bitcoin when more bitcoin come in market price goes down when people hold them prices goes higher

[FLoving]

someone can give a predict me about the price of bitcoin? going up or down?

Yeah sure I can help in predicting the inflation or deflation of the money. As far as the world leading currency is considered, I think that bitcoins precise is going to increase as it has taken over the international market and has proven to be the easiest and most reliable Way of earning money and foreign exchanges also find it as a best suit for the import and export purposes. So in my opinion, bitcoin is going to get higher and higher in these days.

[tibne]

I would like to add one more point. The money supply of both fiat and crypto surely increases as many countries are printing money and new cryptocurrencies have been created. If we take something as a standard measure of price, such as a McDonalds' Big Mac, and its price will surely inflate after the burger could be purchased by cash and crypto. The real world inflation will have impact on crypto as well.

[bettor_earth]

It is all an illusion made by man. How much money, effort you willing to spend to have immortal life?
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[Nanot]

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!

The big factor on how a bitcoin had inflation and deflation is base on the demand and suply that able to transacts and the most factor affecting the flow of bitcoin is the economy of a one country compared to the other contry economy. It deal more when the supply and demand has increase and decrease the the levels in terms of money economy

[mOgliE]

In fact,

We can simply say that a price inflation is the opposite of money supply inflation if we consider traditional money.

Indeed, prices tend to rise when demand is above offer. If the money rises, then it means that each demander shall receive more. Thus, the price will decrease. On the contrary, if the price rises, then (traditionnallly) this means that the money supply has decreased.

Of course, in the real world, things are not so simple but it can be explained this way. Price inflation is the converse of money supply inflation

[leonora galvan]

when you think about how much they've stolen, yes ... pretty d@mn genius

alas, we are on the brink of providing the benefit without the theft

The only reason coin inflation is written in is to encourage miners to invest in more powerful nodes to get the network established quickly.

[pdavidp]

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.

[Izarok]

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.

[KrLos]

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

[daddypastes]

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!

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]

Is price-inflation always bad for the economy? Are BTC price and exchange rates in the country connected?

[Solmir]

That pretty simple. 21mil total amount - 7billions people. The more people in there, the more btc cost.

[RAmondragon]

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.