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I'm interested in this take, as I'm hearing it a lot lately and it seems quite plausible. Is there evidence that the price increase of bitcoin is causally rela

by jMyles 6y ago

I'm interested in this take, as I'm hearing it a lot lately and it seems quite plausible. Is there evidence that the price increase of bitcoin is causally related, in any reliable way, to inflationary activity at The Fed? If so, why isn't this the headline of the past month?

adflux 6y ago
Basic economics, btc is denominated in $, if the dollar becomes worth less (increased supply), you will need more $ per coin. But that doesnt explain the 10, 20x of bitcoin by itself.
- grumple 6y ago
  The biggest problem with the way we list the last price of assets is that the price listed is only the price of one unit. In reality, if all bitcoins were sold, the money recouped would be considerably less than last price * num coins. Perhaps this is already a solved problem via some metrics that I'm not familiar with. Because we only use last price to evaluate assets, small changes in demand and last price can have considerable effects on overall valuations, even though (I think) the total value of the asset is not much different. A simple example of the idea is this: I have 100 ecoins and I want to sell them. They are the only ecoins in the world. I sell the first for 100; the next, I have fewer buyers, so I settle for 99... etc all the way to 1 for the last. The initial valuation, based on last price, would have been 100*100 = 10,000. The actual cash recouped was 5,050. Obviously volume has an impact, and in reality prices are generally more stable and the whole process is much more complicated but you get the idea. But if bitcoin / gme / tesla have taught us anything, it's that price can remain irrationally high indefinitely because of the way wealth and money can be moved around and there's no urgency to use it (due to lack of taxation). Artificial inflation/manipulation of assets seems like a great argument for wealth taxation. It would discourage tying up liquidity in bad assets and encourage better investment.
- UncleMeat 6y ago
  If this argument made sense then we’d see other currencies exploding too. The 10x growth is the thing to be explained, not modest growth due to devaluing the dollar.
snicksnak 6y ago
i believe the comment was an reference to coinbase $100B valuation, most of the money printed ends up in the stock market, because institutions can't do anything else with it which pumps up the prices. Global economy is tanking, stock market is up.
- wtf_is_up 6y ago
  Stock market is forward looking. It priced in vaccines last spring. Now it is pricing in a complete economic rebound and return to normal this year. Look at commodities, yield curve steepening, flight to airlines, cruise lines, etc and away from WFH tech that got overbought post-Covid.
  - ramblerman 6y ago
    Well I guess it's forward looking ... until it isn't.
    - wtf_is_up 6y ago
      Right. It's forward looking, based on data available and projections. Doesn't mean it's always correct.
wtf_is_up 6y ago
It's a theory for why many non-CPI assets are inflating in price and it has been discussed ad nauseum since March. One group (including the Fed) points at CPI and PCE and says there is no inflation, in fact they want some inflation but can't get it. The other group says there is inflation but it is 'asset inflation' causing things like real estate, healthcare, education, trading cards, classic cars, crypto, etc to sky rocket. And then you have gold bugs and contrarians like Mike Burry talking about Weimar 2.0 hyperinflation coming. You have to go to St Louis FRED data and decide for yourself. Look at M1 and M2 supply, velocity etc. Commodities have been on a tear for 6 months after a 12 year bear run. That could just be supply shock for a quickly recovering economy. And now we have an incoming 1.9T stimulus, with a lot of it going directly to consumers instead of sitting on bank balance sheets like QE. Who knows?
3np 6y ago
I'm convinced this is part of what's driving corporates allocating parts of their treasury in BTC, as brought into mainstream consciousness by Microstrategy/Saylor and Tesla/Musk. They have certainly brought this into the consciousness of CEOs, CFOs and board as "something you can do". Debt is cheap, there is a growing concern on the ability of the USD (and others for that matter) to retain its long-term value and BTC can be used as collateral for fiat loans to gain liquidity while still being exposed to BTC. In case anyone missed it: https://www.microstrategy.com/en/resources/events/world-2021/bitcoin-summit https://www.microstrategy.com/en/resources/events/world-2021...
retube 6y ago
Have a Google on this. Its broadly accepted that stimulus measures are driving the inflation we've seen in risk asset prices over the last 12 months. This extends to retail as well. E.g there was even some research on RobinHood which showed a sharp uptick in trading the day after the stimulus checks landed.

by jMyles 6y ago

adflux 6y ago

Basic economics, btc is denominated in $, if the dollar becomes worth less (increased supply), you will need more $ per coin. But that doesnt explain the 10, 20x of bitcoin by itself.

grumple 6y ago
The biggest problem with the way we list the last price of assets is that the price listed is only the price of one unit. In reality, if all bitcoins were sold, the money recouped would be considerably less than last price * num coins. Perhaps this is already a solved problem via some metrics that I'm not familiar with. Because we only use last price to evaluate assets, small changes in demand and last price can have considerable effects on overall valuations, even though (I think) the total value of the asset is not much different. A simple example of the idea is this: I have 100 ecoins and I want to sell them. They are the only ecoins in the world. I sell the first for 100; the next, I have fewer buyers, so I settle for 99... etc all the way to 1 for the last. The initial valuation, based on last price, would have been 100*100 = 10,000. The actual cash recouped was 5,050. Obviously volume has an impact, and in reality prices are generally more stable and the whole process is much more complicated but you get the idea. But if bitcoin / gme / tesla have taught us anything, it's that price can remain irrationally high indefinitely because of the way wealth and money can be moved around and there's no urgency to use it (due to lack of taxation). Artificial inflation/manipulation of assets seems like a great argument for wealth taxation. It would discourage tying up liquidity in bad assets and encourage better investment.
UncleMeat 6y ago
If this argument made sense then we’d see other currencies exploding too. The 10x growth is the thing to be explained, not modest growth due to devaluing the dollar.

snicksnak 6y ago

i believe the comment was an reference to coinbase $100B valuation, most of the money printed ends up in the stock market, because institutions can't do anything else with it which pumps up the prices. Global economy is tanking, stock market is up.

wtf_is_up 6y ago
Stock market is forward looking. It priced in vaccines last spring. Now it is pricing in a complete economic rebound and return to normal this year. Look at commodities, yield curve steepening, flight to airlines, cruise lines, etc and away from WFH tech that got overbought post-Covid.
- ramblerman 6y ago
  Well I guess it's forward looking ... until it isn't.
  - wtf_is_up 6y ago
    Right. It's forward looking, based on data available and projections. Doesn't mean it's always correct.

wtf_is_up 6y ago

It's a theory for why many non-CPI assets are inflating in price and it has been discussed ad nauseum since March. One group (including the Fed) points at CPI and PCE and says there is no inflation, in fact they want some inflation but can't get it. The other group says there is inflation but it is 'asset inflation' causing things like real estate, healthcare, education, trading cards, classic cars, crypto, etc to sky rocket. And then you have gold bugs and contrarians like Mike Burry talking about Weimar 2.0 hyperinflation coming. You have to go to St Louis FRED data and decide for yourself. Look at M1 and M2 supply, velocity etc. Commodities have been on a tear for 6 months after a 12 year bear run. That could just be supply shock for a quickly recovering economy. And now we have an incoming 1.9T stimulus, with a lot of it going directly to consumers instead of sitting on bank balance sheets like QE. Who knows?

3np 6y ago

I'm convinced this is part of what's driving corporates allocating parts of their treasury in BTC, as brought into mainstream consciousness by Microstrategy/Saylor and Tesla/Musk. They have certainly brought this into the consciousness of CEOs, CFOs and board as "something you can do". Debt is cheap, there is a growing concern on the ability of the USD (and others for that matter) to retain its long-term value and BTC can be used as collateral for fiat loans to gain liquidity while still being exposed to BTC. In case anyone missed it: https://www.microstrategy.com/en/resources/events/world-2021/bitcoin-summit https://www.microstrategy.com/en/resources/events/world-2021...

retube 6y ago

Have a Google on this. Its broadly accepted that stimulus measures are driving the inflation we've seen in risk asset prices over the last 12 months. This extends to retail as well. E.g there was even some research on RobinHood which showed a sharp uptick in trading the day after the stimulus checks landed.