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1 sat \ 3 replies \ @ugmug 29 Nov 2021 \ on: Would buying bitcoin make the dollar deflationary? bitcoin
Buying bitcoin is a trade. The other side of that trade, someone is willing to accept USD for their BTC. It's not "burned" when you buy. The only way the USD can become deflationary is if the Fed stops printing money and banks are required to have 100% capital reserves for loans. Never happening, ever.
yea, not deflationary necessarily but the inflation rate will go down as more people buy bitcoin than sell it.
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No, it's actually the opposite. As more people acquire hard assets, fleeing fiat, there's more supply of dollars (because those dollars still exist) and less demand (because everyone is fleeing fiat) and this causes inflation. This is part of the inflation spiral.
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Think in pools. Prices are just exchange rates between pools (equilibrium). And mostly units in the pools are not destroyed.
In the nonstatic fiat pool more units are added (inflation), so exchange rate from fiat to other pools is going up.
You can define inflation as the amount of units increasing. You can also look at it from the exchange rate point of view. If goods and services increase faster than the inflation of fiat, one would experience decreasing prices.
It's all relative. And all based on supply/demand mechanics.