The difference between inflation and deflation illustrated for Bitcoin and US Dollars

When we go out and buy groceries with US dollars we know our money is most valuable being spent now rather than later because of the time value of money and inflation principles. A dollar today is worth more than a dollar next year, so you'd rather exchange it for goods and services as soon as possible. Dollars you save need to make you a return at least equal to inflation to even consider saving it.

On the other side, we don't go out and buy groceries with Bitcoin because we hope our Bitcoin will be more valuable in the future. A Bitcoin next year could be worth more than a Bitcoin today, so you'd rather only buy exactly what you really need so that you can hold onto as many bitcoins as possible.

There are pros and cons to each.

People instinctively want to spend money because they have needs, wants, and it does not take much convincing for people to spend money on convenience items. Saving money however takes more convincing because people need to wait, and deny themselves things in the present for a hopeful future gain. Bitcoin and other coins with deflationary attributes help convince people to save what they can.