[clin_]

Why are people replying to this post like OP is some kind of authority? It doesn't sound like he "studied economics" so much as he took a course.

Of course you can have a deflationary currency. The problem is that people won't spend it. The dollar is not naturally inflationary. Instead, the fed allows for a controlled amount of inflation every year to encourage spending. Automatically managed currencies like you discuss still suffer from inflexibility—as our understanding of monetary economics adjusts, or qualities of the economy change (as with the change in velocity of money during the 80's-90's), it would be difficult to adjust the algorithm to better stabilize the money supply.

More importantly, cryptocurrencies are region agnostic. I take it you learned about optimal currency area in your studies? Any arbitrary threshold would risk having inconsistent effects in different places. Expansion may be just the thing to encourage additional transactions in a recessionary region, but may encourage rapid inflation elsewhere. The result is always high volatility, making it unfit as a store of value.