South Koreas central bank has published a new working paper analyzing a dual-currency regime by pitting cryptocurrencies against traditional fiat currencies. Fiat currencies have been historically known to decrease continuously, the authors confirm, due to inflation and the factor of new money pumped in to the supply by the central bank, also known as quantitative easing. Bitcoin, in stark contrast, has a fixed supply which would imply a deflationary bias, the authors note. However, security or trust issues the decentralization of digital currency and the absence of insurance provided by governmental authorities may prevent digital currency from being used as a store of value. Instead, digital currency may be used as a medium of exchange dominantly.
Do you agree with this research result?
These results are pretty much what we already know but it's good that they agree that bitcoin is deflationary because that is something that most of us think is a good thing.