In traditional economics, deflation is considered a very positive concept. The value of fiat money increases, while consumer prices decrease. Of course, deflation carries some risks for the economy, but competent government actions can mitigate the consequences of deflation.

Deflation and Cryptocurrencies

The cryptocurrency community views cryptocurrency deflation with undisguised positivity. Deflation leads to an increase in the value of crypto assets. Real money has infinite issuance, while the number of cryptocurrency coins is predetermined, and this information is available to all users.

Causes of Cryptocurrency Deflation

Deflation mechanisms are triggered for the following reasons:

Cryptocurrency is a unique tool. Developers have initially embedded a range of features that allow manipulating the price of crypto assets. The presence of such mechanisms makes it almost guaranteed to increase the value of a desired coin. It is worth noting that cryptocurrencies carry significant risks for investors.

Disadvantages of Deflation

There are more than 10,000 tokens available for purchase. Bitcoin and other cryptocurrencies have long had forks, so the finiteness of coins is quite conditional. Users can easily use a fork or another equivalent. Deflation is considered almost inevitable; however, one should not place high hopes on the accelerated appreciation of coins.