I've been looking up stuff about bitcoins for some time now and i have two question stuck in my mind:
How is the value of bitcoins so unstable?
And can there be bitcoin inflation?
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The value is unstable because it's a small and speculative market.
People don't really understand what bitcoin is and they can be lead to believe many things.
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Conventional currencies are usually backed by gold that determines their value but bitcoin is different. It doesn't have any intrinsic worth, just like the paper a dollar is made of, its value depends on how much people are willing to pay to get them and how much merchants value them as a payment. Inflation is usually caused by putting too much money on the market and thus lowering its price. Bitcoins are put in the market in a regulated way and have a cap of 21 millions, so the only way to cause inflation is a drop in demand of bitcoins.
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1Conventional currencies are usually backed by gold that determines their value: if by "conventional" here you mean "prior to the 1970s". The world went off the gold standard around that time. – Nate Eldredge Aug 21 '17 at 13:45
