[yyqux]

I found this remarkably unconvincing: none of the arguments really seem to address the actual concerns with deflationary currencies, but seem to be directed at some (vaguely implied) strawman. I mean, why is the fact that there is a liquid market for bitcoins relevant at all? I don't think that has any bearing on whether a deflationary currency is bad or not. One failure mode for a currency is that it's completely illiquid, but that's not the most likely problem. E.g. there was always a liquid market for gold but it's probably the main example of a deflationary currency in practice.

[lingben]

Agreed. The author is beset by muddled thinking. None of the arguments he brings forward are relevant to the question at hand.

The most important consequence of bitcoin is watching programmers and other tech oriented people play armchair economist. They certainly seem to be having lots of fun but they are playing a game no economist recognizes.

[bdr]

> None of the arguments he brings forward are relevant to the question at hand.

That's an unfair criticism, since the arguments I address are exactly those raised by everyone else who has written on the subject.

[stevesaldana]

Your third point is good and one that I personally think is the most impactful. At the end of the day, everyone has their "price". You can't take BTC to the grave with you, so at some exchange rate, you are a seller. For some people this amount is $130, or $500, or $5000. But at every new BTCUSD high, it introduces a new group of sellers and eventually all hoarders will get shaken out.

I'm not sold on your second point "someone who sells a Bitcoin for X would have been equally happy to spend it on something they value at X." Using daily volume on Gox as an example, just because $2M changed hands yesterday, it doesn't necessarily imply that these folks would have happily exchange their coins for a good or service. A lot of this volume could represent traders getting in and out of a position, not someone ready to empty their account. However, your general point is that liquidity is a positive reinforcing signal, and I can agree with that. If liquidity is increasing because more merchants need to swap out, this is a direct indication that spenders are willing to transact.

[thecage411]

I have to agree with the posters above. What is the question at hand? I'd assume from the title you would be explaining why bitcoin is deflationary and why that is okay. (What is okay?)

What you actually seem to be addressing is whether the statement "Bitcoin cannot work as a medium of exchange" is true.

[bdr]

> directed at some (vaguely implied) strawman

The Felix Salmon piece linked at the top, and every other article on the subject. If there's a good one, I haven't seen it.

> I don't think that has any bearing on whether a deflationary currency is bad or not.

Of course it does. Read the "supposedly relevant" link.