I'm currently going through a Bitcoin course for developers while studying for Summer of Bitcoin. Well I came across a pretty interesting scenario and I'm wondering what's going to happen if that were to be the case.
Since Bitcoin is by definition, deflationary, because it has a limited supply, it will supposedly have more purchasing power over time (assuming good adoption and acceptance of bitcoin). Bitcoin is limited to 21mil forever. I quote from the course,
Many economists argue that a deflationary economy is a disaster that should be avoided at all costs. That is because in a period of rapid deflation, people tend to hoard money instead of spending it, hoping that prices will fall. Such a phenomenon unfolded during Japan's "Lost Decade," when a complete collapse of demand pushed the currency into a deflationary spiral.
Deflation in bitcoin is not caused by a collapse in demand, but by a predictably constrained supply. Now what would happen if people did start suddenly hoarding? I mean HODL is just a huge meme at this point but what if EVERYONE actually did that? What would things look like then?