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> This misses the whole picture which is about both supply and demand, and mining is only one side of the equation. Of course, I just pointed out that price ac

> This misses the whole picture which is about both supply and demand, and mining is only one side of the equation. Of course, I just pointed out that price action has historically gone in four-years waves driven by halving cycles. This is clear in the charts. That's why the 200WMA is particularly meaningful in the Bitcoin world. > is debatable to say the least. Is there any legal niche group that would use it for at least 50% of their transactions? News articles about the experiment in El Salvador seem to indicate that people still prefer to use cash (USD). No question, I would be surprised if anyone is using Bitcoin for much of anything but remittences in El Salvador (right now). It will probably be a while yet before we shift into the medium of exchange phase. > Not sure how this is relevant I think it's relevant because network effects generally means money wants to be a monopoly good. Money is more useful if more people use it. Gold, guilder, pound, dollar; the world trends toward one monetary standard, one unit of account. Unlike the fiat reserve currencies since gold, Bitcoin has no counter party risk. Unless something BREAKS the network effects of Bitcoin somehow, I don't see anything stopping it from becoming the dominant monetary good at some point in the future. What do you think will break the network effects of Bitcoin? > If you look at the past 7 years, it doesn't look like it has gone down No, I will admit I'm operating on my gut here. Bitcoin is like the reserve asset of the cryptocurrency world. The crypto market is very much the Wild West still. Crypto trading happens on insane leverage, and is highly correlated with tech stocks and such. But small countries and institutions are just finally starting to get involved. They're not going to be degenerate traders, they're going to be holders. As the institutions and sovereign wealth funds start to pile into crypto, they're going to want to choose the most secure and stable good in the space to hold for the long term, which is Bitcoin. It only makes sense to me that volatility will decrease with time.

hiq 4y ago
> What do you think will break the network effects of Bitcoin? Which network effects are you referring to exactly? What does BTC have that the RMB or USD don't have? Or do you mean that having no counter party risk is a network effect in itself? I'm not sure I follow. Why would country A supplying country B with something it really wants accept a contract denominated in a currency other than the one of their choosing? Why would they choose a volatile currency they don't even control? I feel that the network effects are playing in favor of the dominant currencies. By definition, network effects only exist once there's an actual network, and it seems we agree that BTC doesn't have one comparable to e.g. USD yet. > It only makes sense to me that volatility will decrease with time. So you think it will start decreasing this year? 1. as I pointed out, numbers still don't show a decrease 2. lack of regulation means it's prone to market manipulation, with some parties playing simultaneous roles to an extent which would be forbidden in a regulated market. These manipulations tend to increase volatility (you don't make much money if the price remains the price, but you can make a lot if you have an idea of where you'll send the prices) In turn, that means that: > As the institutions and sovereign wealth funds start to pile into crypto, they're going to want to choose the most secure and stable good in the space to hold for the long term is not necessarily true. Elon Musk can send BTC either way with a simple tweet. Why would big players buy and hold when they can benefit from the volatility they themselves generate and make a quick buck instead? 3. BTC hasn't gone through a crisis yet. As you wrote, it seems to be correlated with tech (risky) stocks, with higher swings, either way. I'd be surprised if that changes during a crisis.
- rufusroflpunch 4y ago
  > Which network effects are you referring to exactly? The network effects of people owning and becoming more comfortable with it. This drives the value, which drives companies to build on it, which further drives value, etc. This will either: A) Level off at some point. B) Reverse and go to zero. C) Continue growing forever. Because there's no counter party risk, there's no company that can go out of business and take it out. There's no revenue projections that Bitcoin can miss. No founder to attack. No foundation to sanction. In order to reverse Bitcoin's progress, someone would need to somehow do something to break the network. It must be something really dramatic, like breaking SHA256, governments unanimously banning it, or creating some new monetary technology which is overwhelmingly superior to Bitcoin. I agree BTC is not USD yet. My view is that USD is eroding, however, and Bitcoin is growing, and I see nothing on the horizon that can reverse this. Many other currencies are eroding faster, though, and most will collapse into the USD in the meantime. > So you think it will start decreasing this year? I would be comfortable saying this year. Major nations are adopting formal regulatory frameworks for cryptocurrencies, including the United States. Fidelity just announced that they will start letting customers buy Bitcoin with their 401k. I would expect other asset managers will be following suit, shortly. I know pension funds (big bit money) are looking at buying in. We will be seeing a major sea change in Bitcoin this year and next year. By the way, I would expect Bitcoin to remain relatively volatile for quite a while, even if overall volatility decreases. Deleveraging the crypto markets will help a lot, but there's still much growth left to be done. > 3. BTC hasn't gone through a crisis yet. I think the network has gone through several crises. Do you mean internal crises, or major economic crises? If you mean the second thing, I would agree. We're about to see what Bitcoin is really made of in the next couple of years, since we're probably going to see huge global deleveraging event and a lot of economic/currency collapses.
  - hiq 4y ago
    > The network effects of people owning and becoming more comfortable with it. People already own fiat currencies, and are mostly comfortable with them, more than they will ever be with cryptocurrencies where losing a private key can mean losing your funds irremediably. And even then, at best you'd get the same network effect as the fiat currency, no more than that. So how would this effect lead to the cryptocurrency prevailing over fiat currencies? I guess I still don't understand your reasoning about Bitcoin's inevitable fate as a dominant currency, or even as a mainstream one. There's nothing stopping Bitcoin as a blockchain, but there's not much pushing for it either in terms of use. I still don't know anyone who actually uses cryptocurrencies as currencies rather than as speculative assets. Currencies are used because states want people and other countries (in the case of international currencies such as the USD) to use them, and they have the power to enforce this through various means. The same can't be said about BTC. There could be some advantages for countries adopting it as a legal tender that we're not seeing, but I somehow doubt it'll become apparent in CAR of all countries, and it doesn't seem to be going so well in El Salvador either.

hiq 4y ago

> What do you think will break the network effects of Bitcoin? Which network effects are you referring to exactly? What does BTC have that the RMB or USD don't have? Or do you mean that having no counter party risk is a network effect in itself? I'm not sure I follow. Why would country A supplying country B with something it really wants accept a contract denominated in a currency other than the one of their choosing? Why would they choose a volatile currency they don't even control? I feel that the network effects are playing in favor of the dominant currencies. By definition, network effects only exist once there's an actual network, and it seems we agree that BTC doesn't have one comparable to e.g. USD yet. > It only makes sense to me that volatility will decrease with time. So you think it will start decreasing this year? 1. as I pointed out, numbers still don't show a decrease 2. lack of regulation means it's prone to market manipulation, with some parties playing simultaneous roles to an extent which would be forbidden in a regulated market. These manipulations tend to increase volatility (you don't make much money if the price remains the price, but you can make a lot if you have an idea of where you'll send the prices) In turn, that means that: > As the institutions and sovereign wealth funds start to pile into crypto, they're going to want to choose the most secure and stable good in the space to hold for the long term is not necessarily true. Elon Musk can send BTC either way with a simple tweet. Why would big players buy and hold when they can benefit from the volatility they themselves generate and make a quick buck instead? 3. BTC hasn't gone through a crisis yet. As you wrote, it seems to be correlated with tech (risky) stocks, with higher swings, either way. I'd be surprised if that changes during a crisis.

rufusroflpunch 4y ago
> Which network effects are you referring to exactly? The network effects of people owning and becoming more comfortable with it. This drives the value, which drives companies to build on it, which further drives value, etc. This will either: A) Level off at some point. B) Reverse and go to zero. C) Continue growing forever. Because there's no counter party risk, there's no company that can go out of business and take it out. There's no revenue projections that Bitcoin can miss. No founder to attack. No foundation to sanction. In order to reverse Bitcoin's progress, someone would need to somehow do something to break the network. It must be something really dramatic, like breaking SHA256, governments unanimously banning it, or creating some new monetary technology which is overwhelmingly superior to Bitcoin. I agree BTC is not USD yet. My view is that USD is eroding, however, and Bitcoin is growing, and I see nothing on the horizon that can reverse this. Many other currencies are eroding faster, though, and most will collapse into the USD in the meantime. > So you think it will start decreasing this year? I would be comfortable saying this year. Major nations are adopting formal regulatory frameworks for cryptocurrencies, including the United States. Fidelity just announced that they will start letting customers buy Bitcoin with their 401k. I would expect other asset managers will be following suit, shortly. I know pension funds (big bit money) are looking at buying in. We will be seeing a major sea change in Bitcoin this year and next year. By the way, I would expect Bitcoin to remain relatively volatile for quite a while, even if overall volatility decreases. Deleveraging the crypto markets will help a lot, but there's still much growth left to be done. > 3. BTC hasn't gone through a crisis yet. I think the network has gone through several crises. Do you mean internal crises, or major economic crises? If you mean the second thing, I would agree. We're about to see what Bitcoin is really made of in the next couple of years, since we're probably going to see huge global deleveraging event and a lot of economic/currency collapses.
- hiq 4y ago
  > The network effects of people owning and becoming more comfortable with it. People already own fiat currencies, and are mostly comfortable with them, more than they will ever be with cryptocurrencies where losing a private key can mean losing your funds irremediably. And even then, at best you'd get the same network effect as the fiat currency, no more than that. So how would this effect lead to the cryptocurrency prevailing over fiat currencies? I guess I still don't understand your reasoning about Bitcoin's inevitable fate as a dominant currency, or even as a mainstream one. There's nothing stopping Bitcoin as a blockchain, but there's not much pushing for it either in terms of use. I still don't know anyone who actually uses cryptocurrencies as currencies rather than as speculative assets. Currencies are used because states want people and other countries (in the case of international currencies such as the USD) to use them, and they have the power to enforce this through various means. The same can't be said about BTC. There could be some advantages for countries adopting it as a legal tender that we're not seeing, but I somehow doubt it'll become apparent in CAR of all countries, and it doesn't seem to be going so well in El Salvador either.