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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, 20

by 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.

by 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.