For the past couple of months, we have seen a huge amount of deflationary crypto being released. What is the point of these and can they survive? And if they survive, how big are they going to become?
(Disclaimer: I am not a financial advisor, everything stated in this article is my pure thoughts and nobody should make any decisions based on my view. Do your own research and invest only what you can afford to lose)
Most of the deflationary cryptocurrencies come out as pure “experiment” and you should only invest at your own risk. Of course. So what is the point of these new deflating cryptos?
We all know the first cryptocurrency was Bitcoin. It attracted the greatest attention from all other cryptos, it is and will always be the first cryptocurrency people will love. Do we know why? Well, my personal opinion is that they see it as a store of value. NOT as a payment system, unfortunately. 90% of investors buy Bitcoin because they believe its price will go up. Why? Because it has limited supply and fixed inflation (or some say deflation, not sure here lol). The beauty of Bitcoin’s store of value is a limited supply of 21 million that will ever be created. And so we know how much the supply is, now demand determines the price. Demand and speculation, that is the only factors that drive the price up.
If we take the limited supply as the best reason for being the most attractive store of value, then deflationary currencies are ahead of Bitcoin. Why? Very simple answer — because the supply is DECREASING. The more demand there is, the less supply there is. That creates a huge scarcity and makes deflationary currencies more and more rare. Will they attract investors over time, though? Will they be attractive when they deflate 80% of their total supply or will they die out? One thing is for sure. If the demand will grow, supply will decrease and deflationary cryptocurrencies will become a better store of value than Bitcoin.
Time will tell.