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It makes sense because very few investors actually sell their Bitcoin. The market might be worth 20T but that does not mean 20T of value actually was exchanged.

by tinco 6y ago

It makes sense because very few investors actually sell their Bitcoin. The market might be worth 20T but that does not mean 20T of value actually was exchanged. At risk of sounding a bit tinfoil, this is the same system of a weird pyramid scheme rich people are doing with art, wine, relics, real estate, etc. As long as everyone does not sell at the same time, and supply is (artificially) constrained, there is a huge amount of wealth locked up, no longer participating. If you want to compare BTC to hold, you need to compare how much of the gold market is actually being traded, vs how much of the crypto market. I bet there's actually a factor 10 difference there, if not more.

cyphertruck 6y ago
That ratio of total gold yo gold that is trading (or mined each year) is called the “stock to flow”. It’s quite a fascinating metric. For instance, it dhows that silver is a commodity rather than a precious metal. Bitcoins stock to flow now exceeds golds.
- tinco 6y ago
  What does the amount of gold that is traded have to do with the amount that is mined? For both BTC and gold the mining rate is so small it is basically irrelevant.
octoberfranklin 6y ago
> same system of a weird pyramid scheme rich people are doing with art, wine, relics, real estate All of those are non-fungible; that's why rich people like those. Bitcoin is pretty damn fungible.
- tinco 6y ago
  I'm pretty sure those items are fungible from a collectors point of view. Sure if you look at one painting, you can't compare or replace a picasso with a rembrandt. But if you look at only the value of two collections of hundreds of paintings, they might very well be replaced with each other.
  - octoberfranklin 6y ago
    Maybe so, but that isn't why rich people like them either. Non-fungible assets are far more useful for tax evasion. Watch _Tenet_.
    - tinco 6y ago
      Ah alright thanks I hadn't considered that angle.
Empact 6y ago
> At the risk of sounding a big tinfoil... What you describe is how assets acquire monetary value: people start buying them not because they want them but because other people will want them. Then they don’t sell them because they know other people will want them in the future. Thus they develop a “monetary premium” from that additional demand, and become “stores of value” from the general market behavior. The theory inside Bitcoin circles is that rich people have been buying up art, unproductive real estate, etc., not because they are good money but because they do not have access to good money, i.e. long-term deflationary, fungible, divisible, portable stores of value, because of our current regime of inflationary fiat money. In seeking to preserve their wealth, they acquire collectibles, which then become monetary due to scarcity and expectation of future demand. It may be the very same impulse and process that led to the emergence of money in the first place, in the form of shells. https://nakamotoinstitute.org/shelling-out/ https://nakamotoinstitute.org/shelling-out/ If Bitcoin demonstrates itself to be “better money,” it should absorb some of the monetary premium of these other goods, as people will have less need to allocate their resources into paintings no one will see and houses no one will live in.
- tinco 6y ago
  > Then they don’t sell them because they know other people will want them in the future. This artificially inflating demand for the item, with a very long delay or even obfuscated feedback. I agree that the value store is a (the only) viable use case for BTC. Although commodities in general check the same boxes without the awkwardness of Bitcoin. BTW when you say "better money" you mean for this specific use case right? Obviously BTC and cryptocurrency in general are not as good as regular money in general.
  - Empact 6y ago
    > commodities in general check the same boxes without the awkwardness of Bitcoin To name a few properties, commodities can not be transferred anywhere in the world quickly and at low cost in a censor-less fashion, can not be transported in an immaterial form (e.g. a "brain wallet"). > when you say "better money" you mean for this specific use case right? I mean better at exhibiting the properties of money (originally articulated by Aristotle): durability, divisibility, portability, etc. Fiat fails at durability, through ongoing inflation. Art fails at: divisibility, etc. https://hangthebankers.com/aristotle-and-the-definition-of-money/ https://hangthebankers.com/aristotle-and-the-definition-of-m... https://omniequivalence.com/monetary-properties/ https://omniequivalence.com/monetary-properties/ https://www.economicsdiscussion.net/money/top-8-qualities-of-an-ideal-money-material/609 https://www.economicsdiscussion.net/money/top-8-qualities-of...

by tinco 6y ago

cyphertruck 6y ago

That ratio of total gold yo gold that is trading (or mined each year) is called the “stock to flow”. It’s quite a fascinating metric. For instance, it dhows that silver is a commodity rather than a precious metal. Bitcoins stock to flow now exceeds golds.

tinco 6y ago
What does the amount of gold that is traded have to do with the amount that is mined? For both BTC and gold the mining rate is so small it is basically irrelevant.

octoberfranklin 6y ago

> same system of a weird pyramid scheme rich people are doing with art, wine, relics, real estate All of those are non-fungible; that's why rich people like those. Bitcoin is pretty damn fungible.

tinco 6y ago
I'm pretty sure those items are fungible from a collectors point of view. Sure if you look at one painting, you can't compare or replace a picasso with a rembrandt. But if you look at only the value of two collections of hundreds of paintings, they might very well be replaced with each other.
- octoberfranklin 6y ago
  Maybe so, but that isn't why rich people like them either. Non-fungible assets are far more useful for tax evasion. Watch _Tenet_.
  - tinco 6y ago
    Ah alright thanks I hadn't considered that angle.

Empact 6y ago

> At the risk of sounding a big tinfoil... What you describe is how assets acquire monetary value: people start buying them not because they want them but because other people will want them. Then they don’t sell them because they know other people will want them in the future. Thus they develop a “monetary premium” from that additional demand, and become “stores of value” from the general market behavior. The theory inside Bitcoin circles is that rich people have been buying up art, unproductive real estate, etc., not because they are good money but because they do not have access to good money, i.e. long-term deflationary, fungible, divisible, portable stores of value, because of our current regime of inflationary fiat money. In seeking to preserve their wealth, they acquire collectibles, which then become monetary due to scarcity and expectation of future demand. It may be the very same impulse and process that led to the emergence of money in the first place, in the form of shells. https://nakamotoinstitute.org/shelling-out/ https://nakamotoinstitute.org/shelling-out/ If Bitcoin demonstrates itself to be “better money,” it should absorb some of the monetary premium of these other goods, as people will have less need to allocate their resources into paintings no one will see and houses no one will live in.

tinco 6y ago
> Then they don’t sell them because they know other people will want them in the future. This artificially inflating demand for the item, with a very long delay or even obfuscated feedback. I agree that the value store is a (the only) viable use case for BTC. Although commodities in general check the same boxes without the awkwardness of Bitcoin. BTW when you say "better money" you mean for this specific use case right? Obviously BTC and cryptocurrency in general are not as good as regular money in general.
- Empact 6y ago
  > commodities in general check the same boxes without the awkwardness of Bitcoin To name a few properties, commodities can not be transferred anywhere in the world quickly and at low cost in a censor-less fashion, can not be transported in an immaterial form (e.g. a "brain wallet"). > when you say "better money" you mean for this specific use case right? I mean better at exhibiting the properties of money (originally articulated by Aristotle): durability, divisibility, portability, etc. Fiat fails at durability, through ongoing inflation. Art fails at: divisibility, etc. https://hangthebankers.com/aristotle-and-the-definition-of-money/ https://hangthebankers.com/aristotle-and-the-definition-of-m... https://omniequivalence.com/monetary-properties/ https://omniequivalence.com/monetary-properties/ https://www.economicsdiscussion.net/money/top-8-qualities-of-an-ideal-money-material/609 https://www.economicsdiscussion.net/money/top-8-qualities-of...