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?
Besides, the fact that bitcoin always increases in price each year will make people illusion and they always want to hold bitcoins in their pockets to buy more goods next year. But if Bitcoin is a common currency, who keeps bitcoin in the pocket, how does the economy grow?
This is exactly what people need to know about bitcoin and how the economy works. So now you understand bitcoin is good or bad.
