Deflationary spiral occurs when the value of currency is relatively decreasing and people have an incentive to hoard the currency because they hope the value will increase further in the future. As a result, the amount of currency available in the market decreases and as people continue to hoard the currency, it can lead to economic depression.
Many critics believe that bitcoin would fail. The increase in value of bitcoin will be seen as lower prices on goods and services in the customer's eyes. They would likely continue to hoard bitcoin until no one will use bitcoin at all. However, This is unlikely to happen because value of bitcoin is increasing overtime along with the size of the economy which is opposite to the theory.
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