Why is deflation different in crypto rather than the economy?

The distinction between deflation and inflation in an economy is substantial. Deflation signifies an economic downturn, characterized by job losses and housing market instability. When a country experiences reduced employment opportunities, the resulting decline in salaries often leads to a drop in property values, as individuals struggle to meet mortgage payments. The surplus of homes due to foreclosures amplifies this effect, while potential buyers adopt a cautious approach towards their purchases.

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On the other hand, inflation in an economy erodes purchasing power over time.

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Switching to the context of commodities, deflation in commodity assets can drive price appreciation. To illustrate, consider the scenario of owning a "Spider-man" number 1 comic issue: if there were either 1 million copies or just 1,000, which holds more value? This analogy extends to the first-generation Charizard Pokémon card as well. In both cases, scarcity enhances the desirability and worth of the item. It's worth noting that comics and Pokémon cards have faced deflation over time due to factors like card loss, damage, and kids throwing away their cards.

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This principle is applicable to Ethereum (ETH) and cryptocurrencies in general, which fall within the commodity category and exhibit similar dynamics.

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Just as a decrease in the supply of corn, wheat, or sugar from one year to the next would lead to an increase in their respective prices, the same principle applies to ETH over the long term. ETH is also a commodity exactly the same as food, gas or lumber. As scarcity arises, the value of these assets tends to appreciate.

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To sum this up, deflation in the economy means people are losing their jobs. Deflation / scarcity in a commodity or a collectible usually means prices are going up. Deflation in ETH is a good thing.