What happens to the price of a cryptocurrency when hyperinflation stops?
Steem, Bitcoin, and many other cryptocurrencies often experience a hyper-inflationary period. Usually shortly after they are launched.
Which, as you can imagine, might be quite a drag on the price.
If the supply is ever increasing, there must also be a corresponding increase in demand to offset the increasing supply.
If there is any dip in demand, prices go down.
A quick look at the long term chart of Steem is a perfect example of this:
As you can see the price shot way up when payouts first started taking place only to trend down over an extended period of time.
Part of the reason for this was that at that time the inflation rate of steem was very high.
Since that time, the inflation rate has been drastically reduced.
Later on, when we saw an increase in demand earlier this year, we can see on the chart what that did for the price.
The price rallied from a low of around $.07 to a high of just under $3 per coin.
Bitcoin has just passed the 80% total supply mark.
Meaning that at this point, 80% of the entire supply that will ever exist for Bitcoin is already out there.
Check out this chart to illustrate Bitcoin's supply:
This is very important information because it means every new Bitcoin will be harder and hard to obtain. Which means if demand stays relatively constant, prices will go many multiples of where we are today.
If demand were to increase, we are talking about a moon shot for the price.
Steem is not quite in the same position as 80% of its supply is not already outstanding, but roughly 50% of its supply already is outstanding and the same principles apply.
Both coins likely to increase in value?
With each year that goes by, it will get harder and harder to obtain steem, and that is if demand just stays constant. If demand were to increase it becomes that much harder.
Basically, the thought process is the same for both coins, with one (Bitcoin) being in a slightly more advanced stage of its cycle.
Keeping this information in mind, it makes sense to accumulate as many coins of each as you can now, and enjoy the higher prices years later when it gets harder and harder to obtain both coins.
That is my plan at least.
Stay informed my friends.
Sources:
https://www.cryptocoinsnews.com/will-disinflation-bitcoin-lead-long-term-price-surge/
Image Sources:
https://coinmarketcap.com/currencies/steem/
https://www.cryptocoinsnews.com/will-disinflation-bitcoin-lead-long-term-price-surge/
Follow me: @jrcornel
That was extremely well explained! Thank you, even I got it.
Thank you. Seeing that chart of Bitcoin and how much the supply curve flattens out was pretty neat to see laid out like that. I can't wait till the supply curve of steem looks similar to that. :)
Steem supply chart
The supply curve looks already a bit similar...
Source: https://steemdata.com/charts
That's why I'm holding on to all I can!
I tots Agree! Great explanation!
Ask for your help @richq11 and @jrcorner like my post hh
The most misused terms in crypto are "bubble", "inflation" and "hyper-inflation".
Bitcoin has a set distribution scheme. This is not "hyperfinflation", which implies it is an uncontrolled runaway force. It isn't. Even arguing its "inflation" isn't close to the mark, since the supply is limited to a set amount.
This will become more apparent when the next reward-halving occurs, which is some time around June of 2020.
That bitcoin graph puts it into some serious perspective... Although I'm not sure what you mean when you say "about 50% of its supply is outstanding" - steem is a inflationary currency, so while the amount issued wil go down to about 1% inflation per year, theoretically speaking the future supply is infinite. Am I wrong here?
Nope you are right. For some reason I had thought the supply spigot got turned off after 20 years. It does look like that .9% number though may go on forever?
This the good news the post! I personally look forward to the next article!
Well explained. Grandma would understand!
@scandinavianlife agreed! Upvoted your comment. @gold84
Hey @jrcornel holding might work in the short term. But be sure to sell your holdings at the right time. Many new cryptos will replace the old ones, eventually. Not in a day or a week, but it will happen. The speculation that BTC will be harder and harder to come by hence increasing it's value FOREVER is not a realistic assumption.
I put in a lot of time in my recent post. Please have a read if you're interested. I'm a crypto trader, I'm new to the steemit community and I will bring in original content from my own experience to this platform. And educate people about smart trades, risk management and how to always stay on top. Any help from the veterans like yourself will be much appreciated.
Cheers,
@amratesh
Thank you for sharing dear it is amazing and information for every one.really helpful post for us.
Amazing post dear........
keep it up.
and please friends follow me.
@mahmoodhassan
And please upvote my post i also upwote your all post friends..
Interesting statistics, we have to follow the evolution of bitcoin day by day
"but roughly 50% of its supply already is outstanding and the same principles apply."
No. Steem's ultimate supply is infinity, much unlike Bitcoin's 21 million.
Inflation rate set at 10% this year, reduced by .5% down to 9.5% the following year etc etc. Set to drop .5% each year all the way down to zero in 20 years. Check the white/blue paper.
The white paper is obsolete.
The last time I saw something similar to what you described here, it was down to a .5% and never to 0%.
If you were correct there will be no author, curation and witness rewards in the future.
Also, even if you were correct, now there is still less than 40% the "final" supply according to your assumptions.
Good question thanks for this! I hope you have a wonderful weekend! Resteemed! But I don't understand how Steem can have a "supply" like BTC.
The total supply of Steem that can ever exist has been coded into the blockchain. That's how blockchains work.
OK cool, but then where does the steem come from that you earn on posts and upvotes? Thanks for being an inspiring Steemian and connecting on here! 🤡 🤠 😏 😒 😞 I hope you have a wonderful day!
The whole supply of the steem doesn't exist yet. It is still being mined. Think of us like miners, we make posts and create engagement to mine coins. Hence generating more steam.
When almost all steem will be mined. It will be super difficult to mine the last few steem. And in practicality all of steem will never be mined. It will just keep switching back decimals. Like 0.00000000.....0001.
Read my blog (@amratesh) I made a post intuitively explaining ICOs. I'm planning to do one about Blockchain next. It will be more technical but I will do my best to explain it intuitively.
Cheers
Thanks yeah I'm trying to imagine how that will impact day to day steeming. 😀 😃 😄