Not the right term for what’s happening. Deflationary spiral refers to low demand reducing prices, which reduces production, which reduces the employment rate/average wage, which reduces demand. The bitcoin economy is not large enough for this to be the case. Rather, it appears to be a speculative bubble, where people predict the price will go up, so more people buy it, and so the price goes up, etc. Then enough people at once go “this is as far as the train’s going” and everybody panics and tries to sell and the price crashes.
Since bitcoin is a currency experiencing deflation due to a cyclic process, “deflationary spiral” would sort of make sense if it didn’t already refer to another specific phenomenon.
Not the right term for what’s happening. Deflationary spiral refers to low demand reducing prices, which reduces production, which reduces the employment rate/average wage, which reduces demand. The bitcoin economy is not large enough for this to be the case. Rather, it appears to be a speculative bubble, where people predict the price will go up, so more people buy it, and so the price goes up, etc. Then enough people at once go “this is as far as the train’s going” and everybody panics and tries to sell and the price crashes.
Since bitcoin is a currency experiencing deflation due to a cyclic process, “deflationary spiral” would sort of make sense if it didn’t already refer to another specific phenomenon.