Deflationary
A deflationary asset is one in which the supply of the asset is decreasing.
A deflationary spiral is a situation in market where decreases in the price level of an asset lead to lower production, which consequently leads to lower demand, which leads to further decreases in the price level. These cycles can be extraordinarily destructive to economies. See the historical notes on gold standard and sound money for examples of systems which give rise to deflationary spirals.
Bitcoin is an example of a deflationary asset due to its total fixed supply and increasing loss of funds due to lost wallet or loss of funds associated with illicit-financing.
See also inflationary asset.
References
- Frisch, Helmut. 1983. Theories of Inflation. Cambridge University Press.
- Hanley, Brian P. 2018. ‘The False Premises and Promises of Bitcoin’. ArXiv:1312.2048 [Cs, q-Fin], July. http://arxiv.org/abs/1312.2048.
- Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204.