1
$\begingroup$

So, right now, 1 BTC (bitcoin) is worth ≈ 578.25 USD. But, with the inflation of the USD, how can 1 BTC still hold its value at 578.25? Why doesn't it decrease?

Let's set this example:

1 BTC = 1 USD.

Then, the USD loses half of its value; 1 USD is now actually worth 0.50.

Why won't the BTC lose half of its value?

I guess this principle applies to any currency and I can't seem to grasp the idea.

So, any help will be appreciate.

I also hope that you can understand my question and if you need clarification, please ask!

$\endgroup$
  • 1
    $\begingroup$ hmmz, you're talking about purchasing power I think, let's take your example: 1 BTC = 1USD If 1 USD loses half of it's value it's worth 0.5 'old' USD. If at the same time 1 BTC still equals 1 USD then indeed 1 BTC wil half lost half of it's purchasing power and will be worth 0.5 old USD.... maybe a more practical example: 1 BTC = 1 USD --> and 1 USD buys 1 bread. If 1 USD loses half of its value, then 1 USD = half a bread If 1 USD still equals 1 BTC, then also 1 BTC = half a bread so both USD and BTC lost purchasing power. If BTC didn't lose purchasing power then 1 BTC = 2 USD $\endgroup$ – tibo Jun 10 '16 at 17:20
  • $\begingroup$ maybe you'll find more info over here: en.wikipedia.org/wiki/Purchasing_power $\endgroup$ – tibo Jun 10 '16 at 17:24
2
$\begingroup$

I'll try to fit this in an answer. I think you are confusing nominal and relative value. Inflation means that the 'value' of your money depreciates relative to other things. For example, in the year 2000 I could buy a bread for 1 USD. In the year 2015 I can buy a bread for 2 USD. This means that the dollar lost half of it's value relative to bread. But nominal 1 USD is still 1 USD and 1 bread is still 1 bread.

So in your example: today 1 BTC = 578.25 USD. If there is inflation of the USD (the value depreciates), then all else being equal BTC should appreciate against the USD (go up in nominal USD-value). So to work further with the bread-example. If in the year 2000 1 BTC would buy 500 USD then in 2015 1 BTC should buy 1000 USD. So the USD went down in value relative to BTC.

for more information: https://en.wikipedia.org/wiki/Purchasing_power http://www.investopedia.com/terms/c/currency-depreciation.asp

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.