Does halving really create deflation?

[ecnalubma]

We can’t really assure that the next halving will deflate the Bitcoins price however the market will still dictate its price. Though its scarce but if the demand is low what can we expect, I think no matter how many halving will occur high demand and adoption is still best factors we depend on.

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[barabarian1]

deflation is the opposite of inflation. inflation is caused by the amount of currency circulating too much while deflation of the money supply is reduced. in my opinion when bitcoin is reduced by half, bitcoin will also experience deflation. and because of this deflation the reason might increase. and if we look at the history of bitcoin. bitcoin always increases after being reduced by half.

[Karmakid]

It really does. Halving creates deflation because it makes mining even harder because the difficulty after halving will become higher and the reward will be half. If the demand will increase after the halving then it will drive the price higher because the demand will become higher than the supply which results for investors and traders to buy at a more expensive price.

[crossabdd]

not certain, halving can't be a reference for bitcoin deflation. because bitcoin runs according to supply and demand. but that can also happen, when mining becomes more difficult and bitcoin is increasingly scarce because there is too much holding. and waiting for prices to go up high. it should theoretically be possible. deflation can be made by halving.

[TastyChillySauce00]

Not really, there are many factors that could cause deflation and halving is just one of them. You see all those coin that have burning every few months aren't really increasing their price. People are hyped with the halving but it's actually just the halvening of mining rewards and in my opinion will not do significant change. But, if people are hyped up with the halving it can for sure create deflation because people believe that bitcoin will become scarce and people will raise their price standart once halvening commence.

[cosmofly]

I think this is because most people lack economic knowledge. they usually only talk about deflation but really don't understand what it is. For me, there was no deflation in bitcoin. The Halving event only shows that the supply of bitcoin is getting lower and lower and forcing more people to buy bitcoin. Since then, the price of bitcoin has been rising, it is due to the effects of supply and demand and deflation is unreasonable.

[dragon695]

not certain, halving can't be a reference for bitcoin deflation. because bitcoin runs according to supply and demand. but that can also happen, when mining becomes more difficult and bitcoin is increasingly scarce because there is too much holding. and waiting for prices to go up high. it should theoretically be possible. deflation can be made by halving.

I greatly appreciate your comments. This is one of those ideas that is quite easy to understand and it really impresses. I have long thought that there is no deflation mechanism in bitcoin, only supply and demand creating higher and higher prices.
So let's try to think the opposite, until one day people don't see the value of bitcoin anymore, is the bitcoin halving event still important?

[k@suy]

As such there should not be a problem of deflation with Bitcoin, because the supply is increasing and not decreasing. Deflation can only happen if there is a decline in the total supply. That is theoretically possible, given the large number of lost coins (i.e coins that can't be spent, because no one is having the private key to access them). People are more careful with the private keys, but even now a lot of coins are getting unusable every month, either due to deaths (such as the case of Gerald Cotton) or due to carelessness.

I didnt think that halving affects the bitcoin nor market value, years ago as we can observe, the effect of halving makes the price of bitcoin increase, so when it happens, we can see that bitcoin can make ATH or atlease the price will goes up, we can possibly think that by next year it could be a good year in bitcoin.

[Vishnu.Reang]

I didnt think that halving affects the bitcoin nor market value, years ago as we can observe, the effect of halving makes the price of bitcoin increase, so when it happens, we can see that bitcoin can make ATH or atlease the price will goes up, we can possibly think that by next year it could be a good year in bitcoin.

Halving can have some impact, but I am afraid that this time the impact will be more limited when compared to the previous two events. The first thing to consider is that the prices have already jumped by almost 200% so far this year, probably in anticipation for the upcoming halving event. And secondly, the ratio of annual mining output to the total circulating supply will be much lower this time.

[Webetcoins]

Deflation is not caused by halving (I mean maybe it is but that is not the topic) deflation is created because in reality bitcoin gets higher in value since there is less of it all the time.

There are always some people who send bitcoin to some unknown wallet or somewhere wrong and it is gone forever, people always say the max bitcoin there will be is 21 million but there must be at least a million bitcoin that is gone already to places that is no longer in use, sure if those people ever comeback they will be able to use it but more often than not there are not that many people that come back to it. So long story short deflation does exist but it is not because halving, halving only excels it and that's it, there is a deflation because instead of printing dollars like deal, we lose bitcoins instead.

From the start, bitcoin was present in a limited amount that is 21 million and out of which few coins also suffer loss due to blunders of holders. This limited amount automatically makes bitcoin deflationary in nature as we cannot increase its amount like governments do by printing more currency. Halving has nothing to do with deflationary. It is just a process where rewards get halved when 210,000 blocks are hit.

[Dart18]

Make your salary as an example.
This year you are gaining $100 then next year you are just gaining $50 for every payroll.
You will ask yourself why?
Is our economy getting better or is it just that the prices of necessities is getting cheaper.
It could be the same.

Now, the halving is coming and miners will have problems also with economy. They are paying electric bills in high amounts while the ROI is not being  reached.
Same as your salary. It needs to be proportioned with how much you will receive.

[andycarrol]

I didnt think that halving affects the bitcoin nor market value, years ago as we can observe, the effect of halving makes the price of bitcoin increase, so when it happens, we can see that bitcoin can make ATH or atlease the price will goes up, we can possibly think that by next year it could be a good year in bitcoin.

Halving can have some impact, but I am afraid that this time the impact will be more limited when compared to the previous two events. The first thing to consider is that the prices have already jumped by almost 200% so far this year, probably in anticipation for the upcoming halving event. And secondly, the ratio of annual mining output to the total circulating supply will be much lower this time.

but so far the movements are almost similar to the two previous halving cases, some of which seem to have declined before halving, news of the hack that just happened.
I didn't expect it to make a new ATH, but at least it could again touch $20k, that's really good.

[JeffBrad12]

As such there should not be a problem of deflation with Bitcoin, because the supply is increasing and not decreasing. Deflation can only happen if there is a decline in the total supply. That is theoretically possible, given the large number of lost coins (i.e coins that can't be spent, because no one is having the private key to access them). People are more careful with the private keys, but even now a lot of coins are getting unusable every month, either due to deaths (such as the case of Gerald Cotton) or due to carelessness.

I didnt think that halving affects the bitcoin nor market value, years ago as we can observe, the effect of halving makes the price of bitcoin increase, so when it happens, we can see that bitcoin can make ATH or atlease the price will goes up, we can possibly think that by next year it could be a good year in bitcoin.

I don't think we will hit new ATH but probably it could go closed to the latest ATH because halving usually make bitcoin's worth increase and will affect how the miners will sell their BTC at considering it become a lot rarer and hard to get.
But what I afraid is that if the reward is not worth it anymore some miners will just give up with the mining and therefore we will lose some hash power. Hopefully the price of bitcoin could keep up with the halving so that it still profitable.

[GideonGono]

Deflation is the opposite of inflation. Inflation is directed upward while deflation is downward. The fiat currency is deflating because it is losing value over time, while the prices of goods and services are inflating, and as a result the purchasing power of the fiat currency is getting weak over time. Bitcoin is inflating because its value is increasing over time, the exact opposite of fiat. The rewards of miners, however, are deflating due to halving which happens every 4 years.

I think everyone knows that but the thing is that the halving exist in order to keep up with the rising price of Bitcoin as well as to extend the reward that the miners receives because if there is no halving then all or almost the supply of Bitcoin are mined. Also, with Bitcoin the prices are deflating and I think this is a good thing since we don't get to lose the value of our assets unlike in fiat where you need to spend it rather than saving it especially when we talk about long term since the value gradually declines.

[alexsandria]

Deflation is a decrease of price of services and goods. In economics deflation usually occurs when the supply is too high that it cannot fulfill the demand. Deflation is a wrong context in halving, bitcoin has its own limited supply. It was designed by Satoshi to keep bitcoin inflation in check. Imagine if bitcoin is infinite and it is regularly created it would make definitely bitcoin to decrease its value since there are too many bitcoin in circulation. Halving was designed to keep bitcoin inflation under control. Since the supply decreases the demand increases, and so the inflation exist.

[exstasie]

Deflation will occur when the number of new coins being minted < the number of coins being lost. That point in time technically can't be known since nobody knows for sure when coins have been lost. However, it's likely to take place many decades before the supply is fully distributed.

By 2070, there will only be ~80 new coins minted per year. It's likely Bitcoin will be deflationary by this point, and perhaps a good deal sooner.

I think many of the bitcoins lost was from its first decade, when people still don't take it seriously. I know someone who got gifted a paper wallet which he promptly lost because he wasn't thinking much about it. Then he saw bitcoin in the news around 2016 and realized he used to have some.

These days with people being more careful about handling them, simple errors like forgetting the password to an email/exchange would probably be fewer and there is less and less bitcoin getting "lost".

I'm trying to account for that. Based on most estimates for lost coins, about 500K BTC were lost per year over the first 8 years of Bitcoin's existence.

My estimate for the year 2070 reduces that number by 625,000%. People will no doubt be more careful with private key storage, but humans are not infallible. There will definitely be coins still being lost 50 years from now. We just don't know exactly how many.

[AndySt]

Deflation is a decrease of price of services and goods. In economics deflation usually occurs when the supply is too high that it cannot fulfill the demand. Deflation is a wrong context in halving, bitcoin has its own limited supply. It was designed by Satoshi to keep bitcoin inflation in check. Imagine if bitcoin is infinite and it is regularly created it would make definitely bitcoin to decrease its value since there are too many bitcoin in circulation. Halving was designed to keep bitcoin inflation under control. Since the supply decreases the demand increases, and so the inflation exist.

I absolutely agree because while new coins are being created it is more correct to talk about inflation. The actual deflation will be possible to speak at the termination of creation of new coins and their receipt on the market. Therefore, halving by itself does not automatically mean deflation.

[Mometaskers]

Deflation will occur when the number of new coins being minted < the number of coins being lost. That point in time technically can't be known since nobody knows for sure when coins have been lost. However, it's likely to take place many decades before the supply is fully distributed.

By 2070, there will only be ~80 new coins minted per year. It's likely Bitcoin will be deflationary by this point, and perhaps a good deal sooner.

I think many of the bitcoins lost was from its first decade, when people still don't take it seriously. I know someone who got gifted a paper wallet which he promptly lost because he wasn't thinking much about it. Then he saw bitcoin in the news around 2016 and realized he used to have some.

These days with people being more careful about handling them, simple errors like forgetting the password to an email/exchange would probably be fewer and there is less and less bitcoin getting "lost".

I'm trying to account for that. Based on most estimates for lost coins, about 500K BTC were lost per year over the first 8 years of Bitcoin's existence.

My estimate for the year 2070 reduces that number by 625,000%. People will no doubt be more careful with private key storage, but humans are not infallible. There will definitely be coins still being lost 50 years from now. We just don't know exactly how many.

BTC500k, imagine the worth of all those during the ATH.  Would suck to be one of those that lost them. I'd just like to think that those lost bitcoins will be doing us a favor in the future by making the supply much smaller than it possibly can.

Yes, hard to get an accurate amount on those being lost but I just assumed it'll get smaller. We still are prone to errors.

[Sithara007]

but so far the movements are almost similar to the two previous halving cases, some of which seem to have declined before halving, news of the hack that just happened.
I didn't expect it to make a new ATH, but at least it could again touch $20k, that's really good.

You should be careful before making such assumptions, because this time the prices have already increased a lot, in part due to the hype surrounding the block reward halving. And another thing is that the investors may be a bit reluctant, after the 85% decline we had in 2018. Many of those who purchased Bitcoin at ATH prices are still stuck with their investment and they are looking for a way out. If the prices reach 10K or 12K again, then we may see a lot of sell-off from this group.

[Iyanjr]

If the prices reach 10K or 12K again, then we may see a lot of sell-off from this group.

Never thought about that. Next year could possibly start with unseen sequence of events - btc halving, price growths, sell-off from mentioned group of people, price falls.
And only god knows what will happen afterwards