[ctbeiser]

"As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid."

The rest of it makes perfect sense, but why would we think this, rather than that market forces will drive prices up, and people will sell as a result, fulfilling demand?

[surrealize]

If you see it going up, why would you sell? In the deflationary spiral scenario, it'll just keep on going up, so it's in your interest to hold on.

[wmf]

We see people selling at $100 and $200; would we expect people to not sell at $10,000?

[surrealize]

Sure, some people will sell, the question is whether or not the amount of selling is large enough to keep the price from spiraling upward. If you predict that there will be lots of selling, then you're assuming that people aren't (on average) responding to the incentive to hold.

[rhizome]

market forces will drive prices up, and people will sell as a result, fulfilling demand?

I'm no economist, but I'm pretty sure this state of affairs is not guaranteed.

[el_senor_duerpo]

I am an economist, and I have no idea what that means. Sounds to me like confusion over two things: (i) the difference between "supply and demand" and the "quantity supplied" or "quantity demanded" and (ii) equilibrium. The circular logic is a tell tale sign. Price goes up, so people demand less, so price goes down, so people demand more... That's the whole point of equilibrium. Where does all of that net out.

[rhizome]

I think they are trying to say that demand forces supply.

[el_senor_duerpo]

Exactly, that's a huge mistake. Shifts in demand cause shifts in supply? That's not obvious at all. The whole point is that supply and demand have different determinants, but they mutually determine quantities and prices.