We know that bitcoin is a hedge against inflation due to its fixed supply which determines its value to never diminish over time since its supply will continue to decrease as demand keeps increasing. But in recent time, this may not be the only reason why bitcoin is deflationary. According to
Adam Livingston,
miners currently produce around 450 BTC per day or approximately 13,500 BTC per month, but Strategy acquired 379,800 BTC in the last six months. This translates to the firm purchasing roughly 2,087 BTC per day. The half a million bitcoins that Strategy owns will be held with no intent of selling any time soon. This almost guarantees around a
-2% annual deflation rate.
Of course, there is still a risk because institutions like microstrategy can always decide to sell their bitcoins any time soon but as of now and if assuming that they don't, bitcoin's deflationary nature should not be questioned. With more and more governments being more open to crypto, we might see more institutions buying bitcoin and doing the same thing as microstrategy which is hodling.
Why are some people so hung up about MS and the fact that they can choose at
any time to sell their Bitcoin? So many people welcome the fact that they are buying
so much on a regular basis.
This has nothing to do with Bitcoin being deflationary. The amount of Bitcoin
being bought and sold on an hourly basis fluctuates depending on market sentiment.
If you define deflation by people's acquisition of bitcoin like MS then you're absolutely nothing close to understanding bitcoin deflation as no institution or whale holding determines how much scarce bitcoin is, imaging 6 years ago bitcoin was deflationary asset, when micro strategy hasn't acquired any bitcoin. Yet bitcoin was doing absolutely well.
Bitcoin is not deflationary, in 2009, 6 years ago like your example or now and in future years till 2140. We also can not say many bitcoins lost and some reports say it is about 3 or 4 million bitcoins, but those lost bitcoins don't make Bitcoin deflationary.
We don't say fiat currencies are deflationary because people lost their fiat currency by any reason, so we can not say it with Bitcoin because there are lost bitcoins.
Bitcoin is better than fiat currencies because Bitcoin has a cap for its total supply while fiat currencies don't have any cap and this makes Bitcoin very attractive with people who want to find an asset that can help them to save their money against fiat currency inflation.
Erm . . . 2 things:
1. we know as you state yourself, Bitcoin supply is capped at 21,000,000
2. we know that there is a mechanism in place to half Bitcoins mining reward
every 4 years, thats guaranteed.
So when we say FIAT is inflationary we base this on the fact the governments can
and do pring any amount of currency which essentially increases supply and there
is no cap. . . so Bitcoin
IS deflationary.
Also it is inevitable that a certain amount of Satoshis and Bitcoin will be lost
forever either through transaction errors, wallet issues or wallets containing
dust amounts for example.