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?
A great deal of the bitcoin is already being hoarded, so even if we were to assume this process still took place when the adoption of bitcoin was significantly higher, nothing will change because as we can see already right now there are always people willing to sell.
So in the case of an economic crisis bitcoin will reevaluate itself against the different goods and will simply buy more than what it could buy before, and again this is a process we see already so I do not expect such a dramatic scenario like economists forecast.