Tuesday, July 12, 2011

Deflation, not so much.

My "Deflation" post predicted certain numbers which are not even close to what actually occurred.  I am not too concerned- those numbers were sort of a dream best-case scenario.  I do still believe that BTC value will increase in time on a longer scale, but I have come to realize an error in my previous assumptions.

Currently, bitcoins are not truly deflationary.  The simple fact that 50 new bitcoins are generated every 10 minutes or so causes some inflationary pressure.  The influx of new blood into the BTC market provides deflationary pressure.  For a time, the new blood overwhelmed the mining of coins and we had deflation, but in the last few weeks things have been mostly in equilibrium- value has hovered around $14-$15 for the last week.

I still hold my opinion that BTC are deflationary, but that aspect depends on future production reduction of BTC.  For now, there may be no deflation.

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