# Deflationary
A deflationary asset is one in which the supply of the asset is decreasing.

A deflationary spiral is a situation in [market](market.md) where decreases in the price level of an asset lead to lower production, which consequently leads to lower demand, which leads to further decreases in the price level. These cycles can be extraordinarily destructive to economies. See the historical notes on [gold standard](gold-standard.md) and [sound money](sound-money.md) for examples of systems which give rise to deflationary spirals.

[Bitcoin](bitcoin.md) is an example of a deflationary asset due to its total fixed supply and increasing loss of funds due to lost [wallet](wallet.md) or loss of funds associated with [illicit-financing](illicit-financing.md).

See also [inflationary asset](inflationary.md).

## References
1. Hanley, Brian P. 2018. ‘The False Premises and Promises of Bitcoin’. ArXiv:1312.2048 [Cs, q-Fin], July. http://arxiv.org/abs/1312.2048.
1. Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204.