Bitcoin Deflation and Its' problems

[maxreish]

Often times, new system is some kind of change that is hard to adopt. It is true that when new and especial system were about to introduced in our economy widely.

[shinharu10282016]

It really sounds bad when I hear/read the word deflation especially if it's referring to Bitcoin's price. Most of the time, the people who were most affected by the deflation Bitcoin is going thru are those altcoin holders. You see it isn't much good when they mention this kind of issues but it ensues Fear Doubt and Uncertainty to everyone. And here we are facing the Mt. Gox settling case. Will we be seeing another dip then a bull run or a very bad ending for this year?

[gambitcoin53]

since bitcoin can be mined, the limitlessness of the supplies are the main factors that proves that bitcoin has boundless opportunities awaits for us, even bitcoin's supplies are endless we can see that the demand for bitcoin is not affected, that is why it is highly volatile, it is hard to predict and unstable, i think deflation is out of the question here, neither inflation, the supplies are not finite even though there is a higher demand for it, if in the future, bitcoin will become the universal currency, where there is a higher demand, and mining is regulated, then there will be a problem. but i am sure the system will adapt to it and they will come up with the proper solution.

[el kaka22]

very good and helpful article. it is true that bitcoin fans like the limited supply of 21 million, and when it is thinning it will make the price even higher and they are ready to sell it for profit. but on the other hand, it's very bad for the economy. I also think that bitcoin supply should not be limited and remain in the market without paying attention to the limited supply circulation.

In one of the article I read recently, some economists believed that deflation will be quite bad for economy considering that investors and businesses would rather be saving money rather than investing in businesses and creating jobs.

I certainly understand that the deflation and the value it would bring in the case of a huge adoption would make even the limited supply less available for anyone who may want to end up utilizing the space for the currency purpose, but one thing I feel is that as time goes on, this will in a way sort itself out when mentality about hoarding changes.

[andriw]

Even now, Bitcoin has raised a serious problem as a payment medium, namely the time of transaction confirmation is too long and high transaction costs. Therefore, there are emerging new cryptocurencies that claim to be better and superior to bitcoin. So, if we see the problem above, using bitcoin as a new local currency is the wrong choice.

[shesheboy]

since bitcoin can be mined, the limitlessness of the supplies are the main factors that proves that bitcoin has boundless opportunities awaits for us, even bitcoin's supplies are endless we can see that the demand for bitcoin is not affected, that is why it is highly volatile, it is hard to predict and unstable, i think deflation is out of the question here, neither inflation, the supplies are not finite even though there is a higher demand for it, if in the future, bitcoin will become the universal currency, where there is a higher demand, and mining is regulated, then there will be a problem. but i am sure the system will adapt to it and they will come up with the proper solution.

bitcoin supply is not endless or limitless because bitcoin supply is only set to 21 million .  bitcoin deflation is not really a problem to me because i heard that when bitcoin is all mined out , the value of btc's will also increased .

 bitcoin will still circulate even if we cannot mine it anymore , so every people can still experience to try and use bitcoin .  and if mining wont be available , there are still other activities that we can do to be able to accquire a bitcoin like doing faucets or working thru campaigns , etc ...

[NeeNts]

I think this is not a "deflation" , it is just correction from that 20k movement. Bitcoin of course worths more than what it was before all of this, it was 2-3 thousand dollars per bitcoin back than and than of course it went up to 20k but 20 was too much for bitcoin and I do not believe it was ready for going that high, of course in retalation when people started leaving the market went down like crazy and we have been in a "bear market" for couple months but in reality I think if you take out that 20k from the middle we went from 3k or so to 6k or so this year which is really good if you look at it that way. So I disagree with the notion that bitcoin is in a deflation.

[robbietobby]

For me, I think America as a whole should prepare for deflation. There are a lot of signs to suggest that it may happen. But even if it does not, there is nothing wrong with always preparing for the worse and hoping the best. I do think that it is not going to happen though. Deflation is the price dropping for consumer good because inflation drops below 0%. I do not believe there is a reason to prepare for deflation because I feel it is unlikely to happen. Even if it did happen its not something the consumer should bother to prepare for because it simply means they'll have more buying power.

[Ucy]

According to the article:

One of the most common critiques of Bitcoin and related crypto-coin systems, is the supply cap (in the case of Bitcoin 21 million) and the associated deflationary nature of the system, could be damaging to the economy. Critics have argued that history has taught us that a finite monetary supply can be a poor economic policy, resulting in or exacerbating, economic crashes. Either because people are unwilling to spend appreciating money

Was the fear of Bitcoin causing economic crash rational or was it just based on the narrow-minded claim that Bitcoin was dollars/fiat Blackhole? Those who spread this claims ignored the fact that people also sell their Bitcoin for fiat when they need to.

By the way, there is no proof that the deflation of Bitcoin discourages people from spending their coins. It pure speculation.

My advice to people who do not like the deflationary feature of Bitcoin is to focus more on the printing of fiat out of thin air. It is much more dangerous to the economy.

[Cripinggedang]

I think the problem of bitcoin now is that bitcoin has not been accepted by all countries around the world. because many opinions of bitcoin can be used as a tool of financial crime

[redsun114]

I like the blogs published by Bitmex. One of the awesome sources to gather knowledge around cryptocurrency.

In this blog they discuss problem and benefits of deflationary economics. https://blog.bitmex.com/bitcoin-economics-part-3/

To quote from this:

However, even if Bitcoin has solved this economic problem, perhaps it’s naive to think Bitcoin would result in a more prosperous economic system. Bitcoin is a new and unique system, which is likely to cause more economic problems, perhaps unexpected or new ones. After all there is no perfect money. It just may not be correct to apply the traditional economic problems of the past, to this new type of money. Although it may be more difficult, identifying Bitcoin’s potential economic problems may require more analysis and a stronger understanding of the underlying technology.

I agree that it's a new kind of monetary system and it would have it's own problem when it becomes well adapted. but economically speaking do we need this system adding to the complexity already existing financial system.

If bitcoin was to just be an alternative currency in the future to existing world fiat currencies, then there is really no problem with it being deflationary whatsoever, or having a stagnant currency supply for that matter.

Prices would theoretically simply continue rising, as bitcoin would represent essentially approximately the same underlying real value, but with fiat depreciation, would increase in nominal value. This has nothing wrong, in my opinion.

If bitcoin was to become the single dominant global currency, then it's probably a different story. We don't know what's going to happen, since there simply has been no precedents before with a controlled disinflationary currency. However, what we do have is the advantage of such currency, as it's not based on debt, and has a stable supply - meaning that depreciation would not occur like it does on fiat currencies.

That is something I so much believe would really be the case eventually. A lot of people complain about deflation but have failed to realize that the currency aspect of it is not being utilized very well and there is just so much the market can go in the case of it just being a speculative asset which is what would subject it to more manipulations in the long run.

As far as I am concerned, as long as this currency aspect becomes utilized fully in the long run, it would even be more appealing than fiat and would make the idea of mainstream adoption as currency even more interesting.

[Bumblecoin]

I like the blogs published by Bitmex. One of the awesome sources to gather knowledge around cryptocurrency.

In this blog they discuss problem and benefits of deflationary economics. https://blog.bitmex.com/bitcoin-economics-part-3/

To quote from this:

However, even if Bitcoin has solved this economic problem, perhaps it’s naive to think Bitcoin would result in a more prosperous economic system. Bitcoin is a new and unique system, which is likely to cause more economic problems, perhaps unexpected or new ones. After all there is no perfect money. It just may not be correct to apply the traditional economic problems of the past, to this new type of money. Although it may be more difficult, identifying Bitcoin’s potential economic problems may require more analysis and a stronger understanding of the underlying technology.

I agree that it's a new kind of monetary system and it would have it's own problem when it becomes well adapted. but economically speaking do we need this system adding to the complexity already existing financial system.

Yes, the world is continually changing so thus the technology. And to adapt to the new world we need crypto currency. Today, technology is fast evolving and almost everything can be made instantly and easily, like for instance communication, traveling and many more.

[Kusnechik]

The financial system of course needs to be updated. The predominance of a single currency has a negative impact on the economy of most countries.

[el kaka22]

Often times, new system is some kind of change that is hard to adopt. It is true that when new and especial system were about to introduced in our economy widely.

It is normal to always see adoption pretty fast.
Internet, Artificial Intelligence and so many other technologies have been in existence for quite a while now but the technology is still being adopted gradually after so many years and nothing rapid.

Infact, I am surprised that bitcoin has been able to attain this stage at this early period which I still believe is just starting anyway, but as time goes on, we will get to see if deflation ends up becoming a problem or not, but for now, except for the fact that it would encourage HODLing than it being utilized as a currency, I really do not see much problem with it.

[florianuhlemann]

every next step in development will face new challenges, this is the basis of philosophy. in the case of cryptocurrencies, this root lies in the trust between people, because transactions can not be withdrawn

[Ewinsane]

The value of Bitcoin will only increase until it plateaus and the last Bitcoin is mined (issued). It might jerk up and down but it’s the oldest cryptocurrency and we’re seeing it stabilize today, right before our very eyes.

Even after the last bitcoin is mined, it would still not stop the value to keep increasing if there is still a huge demand for it and though there is no need trying to assume what a whole lot of years from now will be like when virtually most of us here would have been long gone by then and who knows bitcoin could actually have reached a state of equilibrium. One thing with bitcoin is the fact that it has limited supply and that makes it deflationary and whatever future holds, the future will tell eventually.

[liliano]

The economic system will continue to grow and create many problems and anomalies, if later bitcoin can provide more benefits than fiat it can certainly be adopted to solve the problem at that time, the most important thing is the discovery of new solutions to current problems, even though the problem will continue to exist global economy

[Burogh]

I like the blogs published by Bitmex. One of the awesome sources to gather knowledge around cryptocurrency.

In this blog they discuss problem and benefits of deflationary economics. https://blog.bitmex.com/bitcoin-economics-part-3/

To quote from this:

However, even if Bitcoin has solved this economic problem, perhaps it’s naive to think Bitcoin would result in a more prosperous economic system. Bitcoin is a new and unique system, which is likely to cause more economic problems, perhaps unexpected or new ones. After all there is no perfect money. It just may not be correct to apply the traditional economic problems of the past, to this new type of money. Although it may be more difficult, identifying Bitcoin’s potential economic problems may require more analysis and a stronger understanding of the underlying technology.

I agree that it's a new kind of monetary system and it would have it's own problem when it becomes well adapted. but economically speaking do we need this system adding to the complexity already existing financial system.

If mass adoption come, i am believe bitcoin value always increasing because more people need bitcoin to store their asset. Indeed bitcoin is new monetary system but central banks must be wont lose control on money supply

[pokang13]

I believe bitcoin deflation is normal because it is decentralized.Meaning,it's not controlled by government.People should not worry about bitcoin deflation because, surely there will also be an inflation.

[wahyu wida]

I like the blogs published by Bitmex. One of the awesome sources to gather knowledge around cryptocurrency.

In this blog they discuss problem and benefits of deflationary economics. https://blog.bitmex.com/bitcoin-economics-part-3/

To quote from this:

However, even if Bitcoin has solved this economic problem, perhaps it’s naive to think Bitcoin would result in a more prosperous economic system. Bitcoin is a new and unique system, which is likely to cause more economic problems, perhaps unexpected or new ones. After all there is no perfect money. It just may not be correct to apply the traditional economic problems of the past, to this new type of money. Although it may be more difficult, identifying Bitcoin’s potential economic problems may require more analysis and a stronger understanding of the underlying technology.

I agree that it's a new kind of monetary system and it would have it's own problem when it becomes well adapted. but economically speaking do we need this system adding to the complexity already existing financial system.

If mass adoption come, i am believe bitcoin value always increasing because more people need bitcoin to store their asset. Indeed bitcoin is new monetary system but central banks must be wont lose control on money supply

i think that too, but not for now. there are still many waiting to buy bitcoin and save it. besides, i think many are waiting for good news from bitcoin, so they will be calmer if floating positive