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?
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.
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
