Bitcoin inflation = 15707854302953800000000000000000000%

So I may need to revisit my prediction about Bitcoin irrelevance. While they’re still an awful idea as a currency, they’ve had more attention this year than last.

To reiterate the point about how awful they are as a currency, let’s take the price movement over the last few days.

From the peak (yes, I am taking the worst case scenario to illustrate the point) of $236 closing 6 days ago to a recent trade today of $57, taking that as 7 days of change in price, that means the prices of everything measured in Bitcoins has increased by an annualised 15707854302953800000000000000000000%

So yes, not great for a currency. Although the real risk is of a currency destined to be ongoing deflation. Deflation will encourage hoarding, which will encourage price spikes (massive deflation) then profit-taking (crashg implying hyperinflation).  So it looks like not only is ongoing deflation a problem, but massive intrinsic instability.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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