Deflation (Deflation) is the process of a decline in the general level of prices in an economy over time. It is the opposite of inflation and usually arises when the volume of goods and services grows faster than the amount of money in circulation, or when the money supply contracts. As a result, over time the same monetary unit can buy more goods.

In the traditional economy, sustained deflation is often assessed as a negative phenomenon: expecting a further fall in prices, consumers and companies tend to postpone purchases and investments, which can slow economic activity. That said, a moderate decline in prices caused by productivity growth is not always interpreted unambiguously.

Deflation and cryptocurrencies

Some cryptocurrencies are designed with deflationary logic. For example, Bitcoin has a limited maximum issuance, and the release of new coins is strictly regulated over time and is periodically reduced. Additionally, some networks use coin-burning mechanisms that reduce the number of coins in circulation. Such a limited issuance makes an asset deflationary by design; however, its market value depends on many factors — demand, liquidity, and overall market sentiment — and is not guaranteed.