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bitplanet
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March 22, 2014, 04:43:15 PM
 #1

What could potentially happen to the value of Bitcoin if for the next several years if we go through a global deflationary cycle?

Based on:

a) The tech bubble bursts
b) The Chinese housing market and "subprime" bubble bursts
c) Spending of babyboomers declines
d) The Dollar goes through massive deflation
e) Deleveraging of public and private debt (banks)

Any thoughts?

(please folks, I would like to hear the raw truth, no Bitcoin-bashing or Bitcoin-cheerleading)

Thanks
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March 22, 2014, 06:10:07 PM
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If the apocalypse arrives in the very near future, then I think there's no way that bitcoin could be any kind of buffer in it's current state. So if all the bubbles pop tommorrow, bitcoin will go down with it.

If the bitcoin ecosystem has some time to get the foundations and basis framework up and running moderately well, it might offer some refuge for the survivors of the Zombie Apocalypse.

In short, as long as you need to exchange bitcoins and you still need to think in terms of the price of bitcoin, then we're all doomed!
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March 22, 2014, 07:24:16 PM
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First, a global deflationary cycle is extremely unlikely. Second, if it did happen, bitcoin is not yet in any kind of shape to have any effect on the overall situation. Third, deflation means that if you hold dollars, they gain value (in terms of goods/services) over time. Therefore, if we did have deflation, people would be likely to hold onto their fiat assets, rather than investing in risky ventures like bitcoin.
bitplanet
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March 22, 2014, 07:47:09 PM
 #4

How would the value of Bitcoin behave, given that it is a deflationary currency, in comparison to a deflating dollar?

Why would you believe that a deflationary cycle is unlikely?
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March 22, 2014, 07:54:29 PM
 #5

How would the value of Bitcoin behave, given that it is a deflationary currency, in comparison to a deflating dollar?

Why would you believe that a deflationary cycle is unlikely?

One of the "appeals" of bitcoin I think is that it is deflationary... buy a few bitcoins, and the assumptions among a lot of people is that they'll go up in value. Dollars are the opposite, a little bit of their value goes away every year. If dollars were also inflationary, that'd be one less reason to invest in bitcoins, hence one might think perhaps the value of bitcoins might drop. But that's just a very basic speculation... there would be so many things looking different in the case of a global deflationary cycle, that it's hard to predict what people might do.

Why would it be unlikely? Because central banks all around the world have a lot of power, and they all have the goal of maintaining a steady rate of inflation. Moreover inflation is pretty much built in to the kind of monetary system that we have, rather than deflation.
bitplanet
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March 23, 2014, 02:56:55 PM
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Why would it be unlikely? Because central banks all around the world have a lot of power, and they all have the goal of maintaining a steady rate of inflation. Moreover inflation is pretty much built in to the kind of monetary system that we have, rather than deflation.

But with trillions is unlevered debt sitting on the banks' book and unresolved public debt, a deflationary event is possible, especially if we get another black swan event like China's housing and banking system defaulting.  This kind of trigger to send the world into a vicious spiral.

Bitcoins could, obviously, establish a new system of stored value which would make it tougher in the future for debt bubbles to inflate.  But, if there is deflation in the dollar, would people hold onto fiat or would they seek stability in a new value store, like bitcoin?

How does the deflationary structure of Bitcoin behave in a fiat deflationary environment?
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March 25, 2014, 09:16:12 PM
 #7


Why would it be unlikely? Because central banks all around the world have a lot of power, and they all have the goal of maintaining a steady rate of inflation. Moreover inflation is pretty much built in to the kind of monetary system that we have, rather than deflation.

But with trillions is unlevered debt sitting on the banks' book and unresolved public debt, a deflationary event is possible, especially if we get another black swan event like China's housing and banking system defaulting.  This kind of trigger to send the world into a vicious spiral.

Bitcoins could, obviously, establish a new system of stored value which would make it tougher in the future for debt bubbles to inflate.  But, if there is deflation in the dollar, would people hold onto fiat or would they seek stability in a new value store, like bitcoin?

How does the deflationary structure of Bitcoin behave in a fiat deflationary environment?


I think bitcoin will survive, but maybe the adoption would slow down a bit. I think that fiat price deflation due to perceived increased credit risk is likely soon, but the issuers of fiat could create more credit to counter it. If also trust in deposits accounts would evaporate, I think the literal money presses will go hot, maybe we will have simplified, easier to produce notes. Maybe we will see the reintroduction of prudent savings banks, which keeps all the deposits in store, possibly with only prudent lending where the timeframe of the loans and the timeframe of the deposits corresponds. Anyway, it will shake things up.


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zzojar
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March 26, 2014, 11:46:26 PM
 #8

What could potentially happen to the value of Bitcoin if for the next several years if we go through a global deflationary cycle?

Based on:

a) The tech bubble bursts
b) The Chinese housing market and "subprime" bubble bursts
c) Spending of babyboomers declines
d) The Dollar goes through massive deflation
e) Deleveraging of public and private debt (banks)

Any thoughts?

(please folks, I would like to hear the raw truth, no Bitcoin-bashing or Bitcoin-cheerleading)

Thanks

It's comparing apples to oranges. All of the above mentioned economic catastrophe's are based on a single country, but bitcoin is international. Any lost value of any currency would only promote an increase in bitcoin.
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