I'll step in and just let you know that inflation and deflation are both terms that actually measure the quantity of money, not the value. Price changes are an effect of inflation. Inflation is actually the increase in the total amount of money, deflation being a contraction of the same.The result in inflation is rising prices because more digits exist to represent the same amount of goods. Supply and demand. Delfation is the opposite.Bitcoin is constantly "inflating" in that there are more coins generated into existence daily than the previous day. The offset to this is more and more merchants and customers using them to exchange goods. The value is so insane right now because it does not take that much capital to move the market in a huge way.Also, the most likely source of these huge swings is miners selling off their coins, which they have generated and weren't previously accounted for in the bitcoin economy. When they are sold they put downward pressure on the prices. What we really need is an exchange to work with a bitcoin float and start allowing short selling - this puts a strong bid on any significant declines and shorts cover. If you watch large financial markets, I always cringe when short-selling on a particular stock or commodity is outlawed to keep the price up (shows what the political class know about how markets work). Usually you see MAJOR drops right after, because nobody HAS to buy to cover and lock in profits. It's a falling knife at this point. Recent good example are Euro bank stocks - short selling was banned and they took another 20% haircut FAST.