This being the theory that "no one is going to spend Bitcoin if it keeps increasing in value, since they will sit on it instead, for the future gains. Therefore the currency is deflationary."
Amazing how this rationalization, given to slaves to justify their slavery, ends up being touted by the slaves themselves.
Technically the same is true of the U.S. dollar: If you put your dollar in a savings account, instead of spending it, you will earn interest. Therefore you will have more money in the future, from the interest earned, if you don't spend that dollar now. Therefore the dollar is also "deflationary."
That's not correct with regards to the dollar. It's inflationary because the purchasing power of those dollars in the bank decreases more rapidly than you accrue interest on them.
The current US inflation rate is around 2%, so unless you're making more than 2% interest on your money every year, your purchasing power is going down. For point of reference, yield on a 1yr treasury bill is around 0.14%.
Bitcoin is deflationary because, once the coin limit is hit, the number of available coins will decrease over time simply due to coins being lost. As the currency contracts, the purchasing power of a coin goes up over time.
In a world where BTC had an inflation rate of -2%, 1 BTC now would buy what 0.98BTC will buy in a year. Any investments you make now need to yield in excess of 2% per annum for you to be better off. In an inflationary world, an investment only needs to beat the T-Bill rate for you to gain (or least be less worse off), which allows for less risky investments.
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Re: "Built-in deflation"
This being the theory that "no one is going to spend Bitcoin if it keeps increasing in value, since they will sit on it instead, for the future gains. Therefore the currency is deflationary."
Amazing how this rationalization, given to slaves to justify their slavery, ends up being touted by the slaves themselves.
Technically the same is true of the U.S. dollar: If you put your dollar in a savings account, instead of spending it, you will earn interest. Therefore you will have more money in the future, from the interest earned, if you don't spend that dollar now. Therefore the dollar is also "deflationary."
That's not correct with regards to the dollar. It's inflationary because the purchasing power of those dollars in the bank decreases more rapidly than you accrue interest on them.
The current US inflation rate is around 2%, so unless you're making more than 2% interest on your money every year, your purchasing power is going down. For point of reference, yield on a 1yr treasury bill is around 0.14%.
Bitcoin is deflationary because, once the coin limit is hit, the number of available coins will decrease over time simply due to coins being lost. As the currency contracts, the purchasing power of a coin goes up over time.
In a world where BTC had an inflation rate of -2%, 1 BTC now would buy what 0.98BTC will buy in a year. Any investments you make now need to yield in excess of 2% per annum for you to be better off. In an inflationary world, an investment only needs to beat the T-Bill rate for you to gain (or least be less worse off), which allows for less risky investments.