If the dollar collapsed under it's debt bubble and the world used bitcoin as it's only currency, because of the 21M hard capped supply, would things just stop getting more expensive

If the dollar were to collapse and Bitcoin became the world's only currency with its hard cap of 21 million coins, the economics of inflation and deflation would indeed become more complex than simply stopping price increases. Here's a breakdown of some key points:

• Hard Cap on Supply: With Bitcoin's supply strictly limited to 21 million coins, once all are mined (which is projected to happen around the year 2140 with current halving rates), no more Bitcoin can be created. This fixed supply is in contrast to fiat currencies where central banks can increase money supply to combat deflation or fund government spending, which often leads to inflation.

• Value Increase: If demand for Bitcoin increases while the supply remains constant, the value of each Bitcoin would likely rise, leading to a deflationary scenario where goods and services become cheaper in terms of Bitcoin over time. This could theoretically mean prices would not just stop increasing but might actually decrease, incentivizing people to save rather than spend, potentially slowing down economic activity.

• Hoarding vs. Spending: In a deflationary environment, people might hoard Bitcoin rather than spend it, expecting its value to increase. This could lead to a decrease in liquidity, where goods and services might be produced but not purchased, potentially causing economic stagnation or even depression.

• Price Stability: However, even with a hard cap, price stability doesn't automatically follow. Factors like:

• Velocity of Money: How fast money changes hands can affect prices. If Bitcoin's velocity increases significantly, it could counteract some deflationary pressures.

• Economic Output: If productivity and economic output grow, this might still push prices up, even with a fixed money supply, due to increased demand for goods and services.

• Adjustments in Economic Behavior: Businesses might adjust by offering services or products in smaller Bitcoin increments (microtransactions), or by using payment systems that allow for fractions of Bitcoin, making it more practical for daily transactions.

• Bitcoin's Volatility: Bitcoin has historically been very volatile, which could complicate its role as a stable global currency. This volatility might decrease over time with widespread adoption, but it's a significant factor in the short to medium term.

• Global Economic Shifts: The transition to Bitcoin as the sole currency would involve massive economic shifts, including how debts are managed, how international trade is conducted, and how wealth is distributed, all of which could lead to new economic paradigms or crises.

• Technological and Infrastructure Needs: Widespread Bitcoin use would necessitate significant advancements in blockchain technology, security, and transaction speed to handle global trade.

In summary, while the hard cap on Bitcoin's supply might suggest a stop to inflation, the real-world scenario would involve complex economic behaviors, adjustments, and possibly new forms of economic activity or crises. The interaction between limited supply, demand, economic growth, and technological adaptability would determine whether prices stabilize, increase, or decrease, but it's undoubtedly more complicated than a simple cessation of price rises.

• Bitcoin's Volatility: Bitcoin has historically been very volatile, which could complicate its role as a stable global currency. This volatility might decrease over time with widespread adoption, but it's a significant factor in the short to medium term.

Apologies for the oversight in my previous response regarding the assumption of Bitcoin's volatility in your specific scenario where the dollar has collapsed and Bitcoin is the sole currency. Here's a rethought perspective:

• Elimination of Volatility Relative to Fiat: In your scenario where the dollar has collapsed and Bitcoin is the only currency, volatility would indeed be irrelevant in terms of comparing Bitcoin to other currencies since there are no other currencies to compare it against. The value of Bitcoin would be stabilized by the fact that it is both the measure and the medium of exchange.

• Intrinsic Value of Bitcoin: With no other currency for comparison, Bitcoin's value would be determined by its utility, scarcity, and the collective economic activity it facilitates. However, this doesn't necessarily mean there would be no volatility:

• Supply and Demand: Even within this Bitcoin-only economy, demand for Bitcoin could fluctuate based on economic activities, leading to changes in purchasing power. For instance, if there's a sudden increase in the production of goods or services, or a significant event that alters consumer behavior, the perceived value of Bitcoin might still change.

• Economic Cycles: Economic booms and recessions could still occur, potentially affecting how much Bitcoin is needed for transactions, thereby influencing its perceived value or utility.

• Deflationary Nature: With a fixed supply, the long-term trend might lean towards deflation unless there's a consistent increase in productivity or new ways of subdividing Bitcoin to match smaller transaction needs. This could mean that over time, goods and services might become cheaper in Bitcoin terms, but this doesn't preclude short-term price fluctuations due to various economic factors.

• Behavioral Economics: Human behavior in spending, saving, and investing would play a significant role. If people expect Bitcoin to increase in value (due to its scarcity), they might hoard it, leading to a decrease in circulation and potentially causing economic slowdowns or increased competition for goods with less money in circulation.

• Micro-economics: Even without volatility in currency value, there would still be price changes due to supply and demand for individual goods and services, influenced by factors like resource availability, technological advancements, or changes in consumer preferences.

In conclusion, while the volatility against other currencies would be eliminated in your scenario, economic stability would not necessarily follow due to the inherent dynamics of supply, demand, and human economic behavior within a Bitcoin-only economy. The complexity lies in how these factors interact without the backdrop of multiple currencies.