If I had 50BTC and thought that it would deflate incredibly, I'd be waiting until 0.00005BTC would pay my rent before I'd use it, I'd have a million "units" to play with.
Obviously we can't tell if this is true, but you should now that it is an amazing claim. suppose rent is about $1000. You would have about a billion dollars in value. But in order to get you you would have had to refuse to spend a single coin when you had merely $100M dollars. Can you really do that? Can you turn down a brand new sports car or a house 10x better than your current house because it will cost 5% of your wealth? You won't want to give anything to people you know you need help? Or less happily, need an expensive medical treatment or pay ransom for your kidnapped daughter.
When people have more wealth they are more likely to spend some. There is no deflationary spiral, and equilibrium emerges.
The reason there can be a spiral in the inflationary direction is because all that is happening is small pieces of stained paper are going back to it's non manipulated price, roughly zero.