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Bitcoin Price Hits Fresh Record High Above $2,200 (cnbc.com)
An anonymous reader writes: Monday marks the seven-year anniversary of Bitcoin Pizza Day -- the moment a programmer named Laszlo Hanyecz spent 10,000 bitcoin on two Papa John's pizzas. More important than the episode being widely recognized as the first transaction using the cryptocurrency is what it tells us about the bitcoin rally that saw it break through the $2,100 mark on Monday. Bitcoin was trading as high as $2,185.89 in the early hours of Monday morning, hitting a fresh record high, after first powering through the $2,000 barrier over the weekend, according to CoinDesk data. Throughout the weekend, the value of cryptocurrency was looming around $2,000.
10,000 Bitcoins * USD$2,185.89 = USD$21,858,900.
I don't know how you ended up with 11 million dollars.
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The flip side (which BTC proponents don't want to talk about) is that fees are currently running around $2 USD per transaction if you don't want your transaction to sit around unconfirmed for hours if not days. The Chinese mining pools are loving it.
You want to buy a $20 item with BTC? Someone has to pay that ~10% transaction fee on top of sales tax. Credit card fees are a bargain by comparison. So what has happened is that Bitcoin has become useless for what its supporters intended it to be - as money (unless the transaction is large enough to make the transaction fee negligible). Bitcoin has devolved almost exclusively into an instrument for speculation, blackmail, and transactions in illegal goods.
Even the big names in BTC processing (e.g. BitPay) are calling for an increase in the block size, which of course is being ignored by the mining pools. Why would they change a system that is funneling money into their pockets with each transaction? The alternative is a hard fork in the blockchain, but that may result in a crash in BTC prices.
The next few months will be interesting for Bitcoin.
You messed the terms, inflation actually causes more spending while deflation causes people to stack money for later spending "when money is worth more". It is deflation that reduces spending and consumption.
Both terms matter when the currency is used as a primary currency in a country. For a virtual currency, meant only as means of exchange, inflation or deflation - it doesn't really matter.
Deflation and Inflation are not a bad thing on their own.
Sorry, but wrong. Deflation is indeed a bad thing. Deflation means that currency gets more valuable with time. This means that is to everybody's advantage to hoard currency, since it gets more valuable the longer you hold onto it. That means less currency in circulation, which means it gets even more valuable with time, which means people hoard it more. This is a bad vicious cycle.
Deflation is a bad feedback cycle.
If their rate is in balanced with the rest of the economy it isn't that big of a deal.
Deflation can be "balanced" with the rest of the economy if the rest of the economy is crashing. I suppose in that case you could say that the "not good" part should be attributed to some other part of the economy, not to the deflation itself, but, no, it's not good. In more general terms, tas currency increasing in value with respect to the things that can be purchased, there really isn't any time at which it is good.
Inflation punishes people who keep money under their mattress.
Deflation rewards people who keep money under their mattress.
Keeping money under the mattress, instead of investing it, is generally bad for the economy, which is (in part) why we generally have inflation.
Bitcoin is smaller than a bit player in the general economy. If a major currency like the US dollar were to deflate 1000x in 7 years, it would upset the economic apple cart too much, and the people with the most apples in that cart would do whatever they could politically to pressure the system into keeping their apples safe, secure, and most importantly: more numerous than everyone else's.
When central banks manage a fiat currency, their supposed goal is to avoid flation of either kind by continually adjusting the money supply to match the aggregate value of everything that is exchangeable for it.
The explicit goal of the Federal Treasury is a 2% inflation rate in the U.S.. They estimate inflation based on a core set of goods, and ignore everything else, which is why inflation seems so off. Inflation the way most people think about it isn't really a thing: money doesn't have blanket buying power in terms of goods.
Think of it like this: we have a range of wages, with a median income. Those wages are dollars per labor hour. If we double them all, immediately, and just print up twice the money, we get 100% inflation and no change in the relative cost of goods; all the prices must go up to match (get to that next). That's what people think of when you talk about inflation: everything is priced higher, we adjust the number of dollars upward.
The thing is that's not how it works. Money isn't that kind of magic. You've seen hard drives get cheaper (from thousands of dollars for any unit--at a few megabytes--to today's pennies-per-gigabyte and $80 full units), displays get cheaper (again: thousands of dollars to $100 or so, and the screens are bigger), phones get cheaper ($4,000 for a cell phone in 1983; $350 for a OnePlus 3t in 2016), and so forth. Food, clothing, housing, medical care, these things rise in price or even in proportion of spending; yet people eat out more (food + servants), spend a smaller percentage of their income on these things (food and clothing), or spend a bigger percentage of their income while buying more than the difference (e.g. 4% of median income spending today would buy more and better healthcare than 4% of the median income bought in 1950, and instead people spend 6% of their income and buy even more).
It's not just that some things price up and others price down anyway; it's that they price up and down at different rates. Food and clothing prices both grow more-slowly than wages, and so the inflation rate of food is different than the inflation rate of clothing. Even then, different foods and different clothes change differently.
So what actually happens?
Well, the minimum viable cost of a product has a hard-bound at the wages to supply it. Imagine all wages involved in making a shirt are $10/hr, including the cotton farming, the dying, the shipping, the retail, business management to get all this organized, and everything else. If it takes a total of 14 labor hours to get that shirt into your hands, then either that shirt costs no less than $140 or somebody doesn't get paid. Get that cut down to 3 labor-hours per shirt and the shirt has to cost more than $30--at a 40% profit, it would cost $42!
That's why prices come down: the costs come down. Each business in the supply chain has some profit, which bumps those prices above the wage-labor cost; lower the wage-labor costs and the price coming out of that business is still lower with the same profit margins. The profit margins are as high as the market will bear, and reducing the minimum price possible allows another manufacturer to target consumers who can't afford your product at its current price; because existing buyers would rather spend $50 than $100, you lose business to the new guy unless you cut your prices, so the broader market forces a narrowing of profit margins by increasing the pressure from competition (either actual competitors or potential competitors by way of making it less-risky for someone to try to break into your market). Without that particular beating stick, prices would just stay high.
Importantly, people still have the same labor to trade.
Recall above I said that prices must go up if you double the amount of wages and money? Here's why.
Population can expand until it reaches carry capacity. Carry capacity happens when you hit scarcity. Th
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