A lot of people think that Bitcoin is inflationary just because new coins are still being mined. But here’s the thing: when we call Bitcoin deflationary, we’re really talking about how the number of new bitcoins being created is actually going down over time. It’s not about the overall supply going up.
Another way to look at deflation is by watching the future prices of goods and services in Bitcoin. I honestly believe that as Bitcoin’s price goes up, the cost of stuff priced in Bitcoin will keep dropping. Like, if a sheep costs 0.0015 BTC now (which is around $100), and in a couple of years Bitcoin doubles in dollar value, that sheep could be worth only 0.00075 BTC if it stays at $100. Even if the price of the sheep goes up to $150, it would still be cheaper in Bitcoin compared to what it was a year or two ago.
So yeah, it’s pretty likely that we’ll see products and services getting cheaper as the price of Bitcoin rises. This is just one more way to understand Bitcoin's deflationary trend.
This is correct, but the main reason bitcoin is deflationary are two things and they are bitcoin having a supply of just 21 million BTC which is limited and the second reason is because bitcoin has value/demand. People see bitcoin to be a store of value and they are demanding for it which helps in its adoption.
I will say that another reason why people do see bitcoin as deflationary is because it's supply growth is becoming smaller by the day. Even though new coins is still adding to supply, the rate in which they're coming out is not as the same as before. However, whether goods becomes cheaper bitcoin terms still on adoption and demand. If alot of people begins to hold and value bitcoin, it can increase the purchase power with time, but the market demands still do plays a bigger role in that outcome or process.
According to Glassnode data, approximately 3 million bitcoins are held on exchanges. To prevent the Bitcoin price from dropping by 50%, only a few million coins would need to be bought up from the exchanges. If you run the numbers, the amount required to trigger a liquidity crisis on the exchanges isn't actually that large.
It's not inflationary (people call it disinflationary) if the 21M supply is reached, but now, yeah, we can say it is inflationary since new coins are being mined.
But it's deflationary as well if we assume some coins will be lost and unrecoverable. However, this effect is no longer as big as people learn to secure their assets, so cases of lost private keys are rarer nowadays. However, the dust or very little BTC on many addresses is unrecoverable, and this still happens from time to time. So, we don't need to look at the price to know that Bitcoin is theoretically disinflationary and practically deflationary.