suggests that the inflation rate of Bitcoins is around 4 percent. Considering the fact that Bitcoins lost almost 80% of their value in under a year, the 4 percent inflation doesn't sound right.

So how is the inflation of Bitcoins measured and shouldn't it be a lot more than 4%?

  • 1
    $\begingroup$ The meaning of the word "inflation" has changed over the years. Nowadays it always refers to the change in the price level. How much currency is needed to buy one basket of goods today compared to a year ago. In the late 19th century or early 20th century "inflation" sometimes meant the increase in the money supply compared to a year ago. Some people, like the author of the article, who learned monetary economics on their own from old books sometimes still use "inflation" in this sense, confusing everyone they talk to... He is saying there is 4% more bitcoins in circulation than a year ago. $\endgroup$ – Alex C Feb 9 at 2:13
  • $\begingroup$ Ah, that explains it. So going by the modern definition, the inflation rate should be a lot higher right? $\endgroup$ – Pradyoth Shandilya Feb 9 at 2:19
  • $\begingroup$ Yes, I believe so. Even though the quantity of bitcoins increased only modestly, thevalue of each bitcoin plummeted (and the amount of btc to buy a good increased greatly), partially contradicting the Pure Quantity Theory of money. $\endgroup$ – Alex C Feb 9 at 2:30

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