Bitcoin is designed to deflate over time, which I suppose is fine if it's a small and predictable amount. I understand the incentive this creates to adopt the currency, but it seems to be attracting a very large crowd of speculators that wish to use the currency as an investment vehicle instead of a liquid and stable medium of exchange, which causes the price of Bitcoins to rise VERY quickly, and then drop back down. But even without the drop, it still seems like a problem to me. Even if the recent price explosion had continued for years, wouldn't this amount of rapid value increase prevent people from effectively using Bitcoins as real money? It prevents people from:
- listing prices in Bitcoins
- agreeing to regular payments in Bitcoins
- effectively loaning or borrowing money in Bitcoins
- buying large purchases with Bitcoins, as they're strongly incentivized to keep the Bitcoins (Why buy a car when you could buy 2 next month?)
As an investment, volatile prices can make some smart individuals a lot of money. As a currency, volatile "prices" defeat one of the purposes of money, which is supposed to be a stable measure of value. So, what steps could be taken to minimize peoples' speculation of Bitcoins, and instead make people use them as actual money?
I've not seen any direct evidence of a true deflationary economic situation (please fill me in if you know of one).
In the instance you claim you can buy 2 cars next months is very unlikely to occur, unless you bought into BTC early, and are hence being payed off for your risk, you are more likely looking at "buy one car now or two in ten years time". I know which I would prefer.