A deflationary cryptocurrency is a cryptocurrency whose supply keeps on decreasing on its blockchain over time. Deflation can be done through buyback and hold, through buyback and burn, through burning some percentage of coins being minted and many more. some cryptocurrencies companies may decide to make their cryptocurrency to become a deflationary because of several reasons as follows;
To avoid circulating the unsold coins to the market
By doing so, this will make their coin not to be affected by market volatility condition thus it will not make it to depreciate in its price thus investors who will have taken part in its ICO will not be affected.
To maximize the profit of their company
In the event where a certain cryptocurrency is used to share the profit of the company made, if the company has noticed that it is holding less coins thus making it to receive less revenue when the profit is being shared amongst the cryptocurrency holders of that company, the company might decide to start buying their coin on several exchanges and hold them. This will enable them to increase their dividend from the profit made by the company thus easing their operation
To increase the valuation of the coin
In the event where the company wants to attract more investors to invest in their coin, they might decide to be buying back the coin using a certain percentage of profit made and burn them to an address whose private key can not be get accessed to. This will happen if all the coins have been released to its blockchain thus making the coin to be insufficient thus its demand increases thus resulting in an increase in its value. Also, in the event where the coin is mineable, the company can as well decide to be burning a certain percentage of the coin minted thus causing its price to be stable.
To avoid circulating the coins created through error made on its issuance on the smart contract address
Some company might decide not to use another smart contract address to create token of the same kind in order to economize on their resources. If a given company wanted to create 100 million coins then accidentally they create 110 million coins, they might decide to create a new address in which whose private key nobody can get accessed to it thus they burn the 10 million coins so they don't get supplied to the economy before they are being distributed. Now you know about deflationary in cryptocurrency.