12 Apr '13, 12am

Bitcoin Doesn't Have a Deflation Problem

A number of smart people have made arguments like this one from Matt Yglesias: If over time more and more people want to use Bitcoins to conduct transactions of various kinds, then the price of bitcoins is going to have to rise and rise. The problem is that if the price of a bitcoin is on a steady upward trajectory, then nobody’s actually going to want to spend a Bitcoin on anything. And if everyone’s hoarding their Bitcoins, then the network is actually useless. Then, since it turns out to be useless, you get a crash. I criticized a version of this argument last week, but it doesn’t seem to have persuaded people. So here’s another way of thinking about it. Suppose God came down from heaven and declared that the price of Bitcoin on April 11, 2018 would be $1000. And since God is omniscient, everyone believed him. As I understand Matt’s argument, this would be a disaster fo...

Full article: http://www.forbes.com/sites/timothylee/2013/04/11/bitcoin...

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