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Comment by andrewla | Hacker News Reader

> "inherently deflationary"

I keep hearing this, and it doesn't get any more intelligible. Saying that bitcoin is inherently deflationary is as absurd as saying that the price of bitcoin can only go up, because those two statements are exactly the same.

Bitcoin, in the steady state, will go up or down as demand requires and as credit markets adjust to account for the future value of money.

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The inherent deflationary is the same relation that we had with the gold standard.

The issue is that in a deflationary environment (such as recessions), the need for a central bank to prop up the currency for debtors is essential.

For an example: https://www.theatlantic.com/business/archive/2012/08/why-the...

Certainly bitcoin is immune (mostly) to central bank manipulation for better or for worse - I think that’s a given. But any currency can enter deflationary regimes, as witnessed by central bankers’ desire to intervene during recessions. It’s not clear that the properties of bitcoin make it any more or less vulnerable to this.

As an aside I’d say the factual evidence of the efficacy of central banking is controversial; many would put as much blame for historic and recent recessions on central banks as would credit them for the recovery. Certainly bitcoin by its philosophy and design is pretty skeptical about central bankers and their motivations.

I think what the poster is trying to say is this:

Bitcoin has a finite supply. If demand remains at its current rate, inherently the value will also continue going up.

Silly question perhaps, but does Bitcoin have a finite supply after all? I understand that mathematically they'll run out of hashes starting with zeros or whatever, but if they fork it once every X years, is that considered finite?

That’s a big “if” to hang “inherently” on. Bitcoin has no credit market yet; until that exists we don’t really have “money” in the sense that a Keynesian or monetarist would use. Once it does, if it does, then demand for specie will coincide with demand for credit, which will be priced independently but whose pricing data will feed into valuations of the underlying. At that point all bets are off - demand is not a simple thing when we talk about demand for money right now as opposed to demand right now for money in a year. The supply of credit is unconstrained except by the risk preferences of creditors, especially in the absence of a substitute for a risk-free rate of return.

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