As Bitcoin limits the money supply and the total amount of coins in circulation, whereas central banks have a degree of freedom to influence the money supply, I came to wonder what perspectives and constraints exist to determine the right amount of money supply.

Could one definition be "The right amount of money supply incentivizes economic activity without causing excessive inflation"?

  • $\begingroup$ Welcome to Economics:SE. Thank you for your question; please consider revising it to be more in line with our community expectations. Like many other stacks, we expect questions to provide evidence of prior research. That helps us to understand the question, and avoids our repeating work you've already done. Our help center, and other stacks provide additional resources to assist with revisions. $\endgroup$ – 1muflon1 Mar 26 at 10:15
  • $\begingroup$ In addition, this seems to be too broad. Per rules in our help center questions should not be too broad, please consider narrowing it down to one topic, or break it down into multiple economics.se questions (but also please keep in mind the reminder in the previous comment) $\endgroup$ – 1muflon1 Mar 26 at 10:17
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    $\begingroup$ The right amount is typically thought to be that which keeps average prices under control (many central banks use a target of about 2% inflation) or which keep exchange rates stable (consider Sweden or Hong Kong) or which lead to full employment (but not overfull). But the connection between money supply and these other indicators seems weaker than it was previously thought to be or at least more indirect, so instead it is more usual today to use interest rates for these purposes. Some might say Bitcoin has empirically failed to provide stability of price or exchange value. $\endgroup$ – Henry Mar 26 at 16:16