Bitcoin, FWIW, currently (it will slow down and eventually supposedly stop) prints money every block to pay for mining. It does this to fund a public good, which is network security, under the assumption that people who store large amounts of money would be willing to pay more to protect that money than people who store small amounts of money, and in the early years (which we apparently are still a part of) it is considered that fees for transfers aren't where most of the payment could be derived. (Personally, it isn't clear to me that the network makes sense to be paid for entirely by fees. Ironically, AFAIK on Ethereum the percentage of the block reward paid for by fees is much higher than Bitcoin and their minted block reward will continue on forever.)
This, to me, seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure. It certainly isn't "deflation". Bitcoin does describe it not as printing money but as unlocking money that was already set aside, but what matters today (as opposed to whenever the rewards stop in the future... I don't remember off-hand when that will be) is the circulating money supply, not the theoretically existing / allocated supply (which is why if you lose money forever it is the same as destroying it; and which can also be seen because, if the US Fed merely had pre-printed giant fat stacks of cash that they've been dipping into for all these years, you wouldn't know the difference between that and it printing bills).
> seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure
It's a money-supply increase. Depending on whether one Bitcoin buys more or fewer goods, it's inflating or deflating. (Currently, deflating, since Bitcoin is going up relative to the dollar and goods are priced in dollars.)
What's really curious is that Bitcoin's advocates claim it's the ultimate inflation hedge, "sound money" that will hold its value while "fiat money" is debased.
Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%.
Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows.
Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
>Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%.
>Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows.
Because a devaluation of the dollar is not what's actually causing the price of BTC to appreciate as much as speculation about the future monetary policy that could come as a result of lower inflation numbers (i.e less hawkish Fed). Which is funny because the way the CPI is calculated has been very controversial and subject to change. One common narrative is that the Fed will be forced to pivot to avoid a major recession.
It's not just BTC but the stock market in general behaving this way.
> Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
You're not wrong, but this also is a reminder that BLS inflation statistics are not exactly 'inflation'. They actually are more reliable as a harbinger of Federal Reserve policy in coming months, and so have the opposite impact on current asset prices one might expect.
If not the statistic, what is 'inflation'? Well, it's way simpler than the BLS would have you think. When 1BTC goes from $500 to $50,000, that's inflation. Maybe the BLS didn't notice, but you did, it was pretty obvious. This lesson teaches that the issue actually is inflation rolling from one class of goods to another and in this case it's obvious-- where BTC inflated first, a leak of that value out to general goods will result in or reflect a decline in BTC prices, especially where this catches the BLS' attention and signals that the Federal Reserve will do something about it.
It might be the ultimate risk asset. Seriously. There are entire classes of financial models we discarded for involving magic variables which quantified the state of the market's animal spirits. Crypto my let us estimate those.
OK, you "win" (I think), though at that point I feel like the term isn't going to mean anything useful anymore as applied to a commodity... like, on a moment to moment basis we don't describe the US dollar as inflating and deflating despite it constantly having small adjustments with respect to its value: we track the large-scale movements specifically caused by economic policy that changes the circulating money supply (whether by the Fed or by individual banks or even by things like relative wages).
Yes. As (I tihnk it was you) said in a sibling comment, supply expansion/contraction has a very significant meaning for a commodity though and that's really what happens with crypto. It's a bit frustrating to me the way in which the crypto community reuses various "tradfi" concepts but with slightly incorrect terminology etc.
I was referring to something like ATOM. BTC has a limited supply so it won't inflate past a certain period, but ATOMs inflate each year and if you're not staking them, you are effectively becoming poorer year to year.
