Most money expands: central banks and commercial banks create more of it every year. Bitcoin's supply follows a schedule known in advance, shrinking new issuance every four years and stopping near 21 million. Demand can change; supply cannot respond.
Consequences
- Volatility: with a fixed supply, every change in demand moves the price. Large swings, up and down, have marked every cycle.
- Saving: people who expect their money to hold its value tend to think in longer horizons, an idea often called low time preference.
- Unit of account: prices in bitcoin are still rare, mostly because of volatility; most people still measure bitcoin in their local currency.
The debates
Supporters see a neutral, scarce money that no one can debase. Critics argue that a currency with no elastic supply cannot respond to economic crises, and that holding rather than spending slows trade. Economists still disagree about how a fixed supply money would behave at scale.
▶ SEE IT IN THE MACHINESUPPLY shows the reservoir of coins with its graduated rule and the live cursor of what has been issued so far.