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When we reach 21 Million Bitcoins, will their be no economic activity, and...


When we reach 21 Million Bitcoins, will their be no economic activity, and a deflation spiral? #bitcoin
I think an assumption here is

Fixed monetary quantity = deflation.

The increase or decrease in money value is not entirely based upon scarcity.

A major factor in inflation is monetary velocity (how much the money flows around). If all holders of bitcoin suddenly started using bitcoins for the majority of their transactions, we would face rapid inflation.

Also, whatever equation you use to quantify the value of money goes out the window once it hits perception. How people view a currency is more important to its value than anything else.

Yes, people might hold bitcoins for some time as the price goes up, but if it doesn't go up forever, and starts to flatline, people will want to start getting rid of it, and this will cause a feedback loop that might make it so people will jump ship as fast as they can.

In the end, without some large economic event, I think bitcoins are fairly stable, and will just get more stable over time. That means they will become a pretty piss poor investment, especially if they end up only deflating at <5% annually. Investing in revenue generating businesses would end up being more lucrative. Also, investing in things that would provide immediate happiness would be more valuable.

Only about 7200 per day are being produced right now, and I am sure speculators are already adjusting their valuations for output halving (it is not like it is a surprise). So we are looking at moving from $36000 per day to $18000 per day in "quantitate easing." With the number of people in bitcoin, I consider that to mean that for all purposes, we have practically reached the end of money production.

So here you are. The train has basically reached the $21M quantity. Look around you, because at this point, I think speculators are going to get bored soon, and move on to some other new beanie baby. We have some stuff you can buy and sell, and it makes a great currency for gambling and buying drugs. I see a super bright future in its use in games, and if the USD ever falls apart, bitcoin and precious metal holders will be laughing all the way to the bank (not to say they will be rich, but just that they have weathered a storm). Bitcoins will go up and down in value, but really I think it is pretty much in the right ballpark now. The economy will grow one storefront at a time, and hopefully it will be a boring useful part of the economy, and not a long dead fad.