In case of deflationary currency such as Bitcoin, as we are giving our aggregate demand at current price levels. Or in layman terms we are buying at certain price level. Say for example( a completely hypothetical situation), Wheat . You can buy 1kg of wheat for 1 bitcoin today. Now imagine that we grow in our economy and it leads to better production of wheat due to increased efficiency in production. Now we would have more wheat to sell. However, the supply would increase and demand will not because people still have the same 21 million bitcoin in circulation. So now we will have more wheat and the prices would go down and down. But in such case people will begin to hoard money. The will not spend their bitcoin in anticipation of it prices declining tomorrow. This would lead to even more deflation as demand would decrease even further. Thus creating a spiral which we often call the deflationary Spiral. I think this is why thinking bitcoin as a mainstream currency could pose a lot of problems for all of us.
PS: Supply of goods( Aggregate Supply) and supply of money are separate things
Demand of money and demand of goods( Aggregate Demand) are two separate things
Do you agree or refute?
i don't expect to see a future where bitcoin is a
national currency. at most, it would be part of a basket of assets (along with gold, silver, etc) that back a fiat currency. so it's probably unnecessary to view bitcoin in a vacuum, as if the whole of economic growth would be restricted to its supply.
your arguments also lead to the age old debate between keynesians and austrians. i'm not sure i feel like injecting myself into that debate!
Bitcoin to be a national currency takes time, because it needs to go mainstream first. To reach such a level it is not simple, because when countries start using bitcoin it will affect their own currency go low in value. Maybe when more countries move to the digital trend bitcoin might get importance as a currency. Until then it is much preferred to be assets similar to gold, silver and other valuables.