Are bitcoins really immune to inflation? I see people everywhere saying that bitcoins are immune to inflation but nobody has explained it adequately to me. I understand why bitcoins would be more or less immune to inflation cause in increased money supply - because there's a fixed money supply forever. But what about hyper-inflation caused by confidence crisis?

Any currency have worth if people are willing to accept it. And how much would a bitcoin be worth is exactly how much goods would people accept to trade for one unit of bitcoin. If for any reason people start to think that bitcoins are worthless, its buying power will diminish and you will have inflation! I don't see how this can be avoided.

Is there something I'm not seeing? Where's the catch? Why are bitcoins  immune to inflation?
Specifically, bitcoins are immune to M0/MB inflation, meaning that the money supply itself does not inflate, except at the very beginning (which we're still in) while the original 21 million BTC get distributed via the mining process. Once 21 million coins exist, they become deflationary since no new coins are issued and, as naturally occurs, money falls out of circulation as wallets are lost.

Bitcoin could still suffer the kinds of inflation most currencies see in M1/M2/M3/MZM such as fractional-reserve banking, but the idea of a publicly published block chain is that at any moment it should be trivial to audit a bank and ensure their deposits are correctly recorded. Essentially, any institution practicing fractional reserve banking should be much easier to spot and those who dislike such practices can more easily walk away from them. There are complications to this model, but that's the ideal anyway.