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Wikipedia lists Deflation as a bad thing, but I'm assuming that the article makes the assumption that the currency is a fiat currency (as opposed to cryptocurrency). I understand the general principle of deflation being a bad thing, especially if the government in question is actually printing more money as governments are want to do...

The Wikipedia article does make a good point about debt, as most newly printed money (as I understand it) is loaned out for interest to local business etc to allow for proper growth of the economy, and during deflation, debt increases in value, which is the opposite of what is usually happening in modern society.

But my question is regarding cryptocurrencies that are not issued or controlled by governments. Do the same factors (or others) mean that once, for example, all bitcoins have been 'mined' that the supply will be fixed and deflation will begin... how would that be a bad thing?

This question is not a duplicate of "Is any aspect of the cryptocurrency adoption violating a widely held economic tenet?" because this is a focused question asking about a specific part of how cryptocurrencies work and whether or not "deflation" is still bad given the context in which cryptocurrencies are created and used.

Are upper limits to the amount of circulating 'units' bad, and should cryptocurrencies change their monetary policies to avoid the pitfalls of defaltion?

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  • $\begingroup$ It depend whether bitcon will be used as actual currency or not. If it's only going stay a speculative investment asset, it's deflation/appreciation will be irrelevant except to investors in it. $\endgroup$ – Fizz Mar 22 at 20:51
  • $\begingroup$ And given flimsiness of the system, approximately 13-18% of that theoretical total of 21m have been lost forever, it seems. So in this sense you could have "deflation" as more coins are lost. Not that it really matters in terms of its price, which seems entirely driven by the greater fool theory. $\endgroup$ – Fizz Mar 22 at 21:04
  • $\begingroup$ @Fizz it IS being used as currency by many, I personally don't hold much bitcoin because of all the things that I want that only bitcoin or another cryptocurrency can buy right now, Venezuela and Japan both recognise crypto as official money now. $\endgroup$ – Ninjanoel Mar 25 at 9:47
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    $\begingroup$ Possible duplicate of Is any aspect of the cryptocurrency adoption violating a widely held economic tenet? $\endgroup$ – Fizz Mar 25 at 9:58
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Found an article highlighting how inflation "impoverishes wealth generators"...

https://mises.org/wire/central-banks-shouldnt-fight-deflation

which is not written with cryptocurrencies in mind, but does talk about "creating money out of nothing", which is kinda how most cryptocurrencies begin, but just like how physics equations break down at t=0 (start of the universe), once established and being used as a currencies, the deflationary monetary policies of cryptocurrencies appear to generally be a good thing.

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