Quote from: carrigan on August 14, 2021, 01:30:06 PM

The reason why some types of cryptocurrencies can act as a hedge against inflation is for the same reason as gold: supply is limited. This is something that many people, even crypto players themselves, forget, but keep in mind that many cryptocurrencies and especially, Bitcoin are built with inherent limitations. All in all, it is not really clear whether Bitcoin is, in fact, a deflationary assets. Or at least, not yet a deflationary asset. While it is technically true that the supply of this cryptocurrency is limited, we are not close to that limit yet. One of the main drivers behind Bitcoin's shine is the combination of stability and flexibility it offers. In this context, it is encouraging that today investors not only see crypto as a stable hedge against US dollar inflation, but if they only see crypto as a substitute for gold, then they are missing the point: cryptocurrencies are more than just a hedge against inflation.

Yes, you make sense. If only from the point of constant quantity, Bitcoin is deflationary, which is not rigorous. Because altcoins can also do this.

A constant total means that there is deflationary expectations. Simply, is gold deflationary or inflationary? Since mankind has regarded gold as a general equivalent until now, the production of gold has not been interrupted, and the amount of gold has been steadily increasing. Even if industrial consumption is not considered, gold will be depleted and storage accidents may occur (such as various sunken ships and treasures). So this gives deflationary expectations, but it does not mean that deflation is bound to be. Bitcoin also has this problem. Because Bitcoin holders have strong anonymity, it is difficult to count how many Bitcoins have been lost. There is a saying that 300W bitcoins are actually in an uncirculated state (the private key is forgotten, there is no backup, the hard drive is broken, etc.). This kind of Bitcoin is equivalent to the gold sunk in the Mariana Trench, so the constant amount of Bitcoin has this deflationary expectation. Suppose, every year 1% of Bitcoins are "lost" for various reasons, that is, about 16-17W BTC cannot be circulated. The current block reward is 12.5 BTC/block, which means that 65.7W BTC will be dug out every year. This number will be halved every four years, which means that the next time it will be halved, only 16.4W BTC will be produced every year. It's basically the same as the amount of "lost". At this time, the total amount of bitcoins that can actually be circulated began to decline, and deflation expectations were inevitable.