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Given some weak assumptions, it can be proven that Bitcoin can't beat the performance of S&P 500 in a long enough time horizon. The gist of it is this: Bitcoin

Given some weak assumptions, it can be proven that Bitcoin can't beat the performance of S&P 500 in a long enough time horizon. The gist of it is this: Bitcoin can't perpetually grow faster than world wealth. If we assume, say, 3% inflation-adjusted growth in world wealth, it means that Bitcoin cannot perpetually make more than 3% annually. Stocks, bonds, real-estate don't have this constraint because they pay cash to investors. At some point in the future, Bitcoin will be down over the last decade while S&P 500 will be up significantly. Bitcoin holders will start to think - wait, why am I holding Bitcoin instead of S&P 500? Edit: Hacker News says I'm posting too fast so I can't reply to comments below.

robjan 3y ago
This doesn't really make sense. Bitcoin is deflationary but the market cap has no ceiling, it's just based on what people are currently willing to pay for a coin.
- RivieraKid 3y ago
  Bitcoin's market cap can't grow faster than world wealth perpetually. S&P 500 can and has consistently done so. Does it make sense now?
  - nwiswell 3y ago
    > perpetually Is this a fun thought experiment, or are you immortal? You may be shocked to learn that GDP growth can't continue perpetually either, under reasonable assumptions: https://arxiv.org/ftp/arxiv/papers/2005/2005.05244.pdf https://arxiv.org/ftp/arxiv/papers/2005/2005.05244.pdf
  - robjan 3y ago
    The market cap is just the last price multiplied by the number of the asset in existence. There is no restriction on last price for either SP500 or bitcoin.
    - RivieraKid 3y ago
      The restriction is that Bitcoin can't grow faster than total wealth forever. I.e. you can't grow total wealth by 3% and grow Bitcoin by 4% forever.
      - robjan 2y ago
        It can. The misconception that people generally have is believing that purchasing securities is a zero-sum game when in fact it's generally a positive sum game. When you buy a bitcoin (or security), the money you spent doesn't disappear so the amount of bitcoins and fiat in circulation do not change as a result of this trade. There's nothing stopping a bitcoin from being worth a million dollars or a dollar being worth a million bitcoins, it's just a function of supply and demand.
redox99 3y ago
Given false assumptions, anything can be proven.
chris_t 3y ago
I'm not sure that argument is rigorous enough to be called a proof. We have no guarantee that the S&P 500 will grow faster than world wealth. It's plausible it will, but one could reasonably purchase something like gold or BTC to hedge against scenarios where it doesn't.
kljlkjlkjfds 3y ago
Perhaps you should give an estimate of bitcoin's worth compared to world wealth. Because my guess is bitcoin is worth a lot less then world wealth, meaning btc growth could outpace average world wealth growth for some time.
- RivieraKid 3y ago
  Bitcoin is about 0.3% of world wealth, gold 3%. My estimate is that peak Bitcoin is anywhere between the current 0.3% and 1.5% (implied price $325k). After this peak is reached, and there's a chance it has already been reached, it won't recover for decades or forever. And my guess is that this peak Bitcoin will happen within a decade.
  - dalyons 3y ago
    Is there any particular reason we should assign any weight to this guess of yours? People have been calling “peak bitcoin from which it won’t recover” for at least 5 cycles now.
    - RivieraKid 3y ago
      You should make your own mind. My belief is that it would be shocking if Bitcoin's market cap got close to gold, because gold has substantial fundamental value (which prevents the price fron collapsing) and a long tradition. Another reason is that the narrative that Bitcoin's price will at least double or triple won't be believable if Bitcoin gets to 1.5% of world wealth. When hodlers realize that they will not double their money, the rationale for hodling disappears.
      - npoc 3y ago
        If you don't think bitcoin can even get close to gold, then you really don't understand bitcoin yet. Smashing golds market cap will happen in less than 6 years. And that's just the start.
        2y ago
zztop44 3y ago
Even if your argument were logical, “at some undetermined point in the future, this investment will underperform a different potential investment” is all you’d be proving.
rafaelero 3y ago
Isn't S&P 500 basically inflation + GDP growth at this point? I think BTC will follow similar pattern given enough adoption.
npoc 3y ago
You might want to think outside the box a little more. Bitcoin can consume the entire value that's stored in the dollar. Does your model hold if it does 80% of that over the next, say 50 years? The S&P will be priced in bitcoin for a start.

robjan 3y ago

This doesn't really make sense. Bitcoin is deflationary but the market cap has no ceiling, it's just based on what people are currently willing to pay for a coin.

RivieraKid 3y ago
Bitcoin's market cap can't grow faster than world wealth perpetually. S&P 500 can and has consistently done so. Does it make sense now?
- nwiswell 3y ago
  > perpetually Is this a fun thought experiment, or are you immortal? You may be shocked to learn that GDP growth can't continue perpetually either, under reasonable assumptions: https://arxiv.org/ftp/arxiv/papers/2005/2005.05244.pdf https://arxiv.org/ftp/arxiv/papers/2005/2005.05244.pdf
- robjan 3y ago
  The market cap is just the last price multiplied by the number of the asset in existence. There is no restriction on last price for either SP500 or bitcoin.
  - RivieraKid 3y ago
    The restriction is that Bitcoin can't grow faster than total wealth forever. I.e. you can't grow total wealth by 3% and grow Bitcoin by 4% forever.
    - robjan 2y ago
      It can. The misconception that people generally have is believing that purchasing securities is a zero-sum game when in fact it's generally a positive sum game. When you buy a bitcoin (or security), the money you spent doesn't disappear so the amount of bitcoins and fiat in circulation do not change as a result of this trade. There's nothing stopping a bitcoin from being worth a million dollars or a dollar being worth a million bitcoins, it's just a function of supply and demand.

redox99 3y ago

Given false assumptions, anything can be proven.

chris_t 3y ago

I'm not sure that argument is rigorous enough to be called a proof. We have no guarantee that the S&P 500 will grow faster than world wealth. It's plausible it will, but one could reasonably purchase something like gold or BTC to hedge against scenarios where it doesn't.

kljlkjlkjfds 3y ago

Perhaps you should give an estimate of bitcoin's worth compared to world wealth. Because my guess is bitcoin is worth a lot less then world wealth, meaning btc growth could outpace average world wealth growth for some time.

RivieraKid 3y ago
Bitcoin is about 0.3% of world wealth, gold 3%. My estimate is that peak Bitcoin is anywhere between the current 0.3% and 1.5% (implied price $325k). After this peak is reached, and there's a chance it has already been reached, it won't recover for decades or forever. And my guess is that this peak Bitcoin will happen within a decade.
- dalyons 3y ago
  Is there any particular reason we should assign any weight to this guess of yours? People have been calling “peak bitcoin from which it won’t recover” for at least 5 cycles now.
  - RivieraKid 3y ago
    You should make your own mind. My belief is that it would be shocking if Bitcoin's market cap got close to gold, because gold has substantial fundamental value (which prevents the price fron collapsing) and a long tradition. Another reason is that the narrative that Bitcoin's price will at least double or triple won't be believable if Bitcoin gets to 1.5% of world wealth. When hodlers realize that they will not double their money, the rationale for hodling disappears.
    - npoc 3y ago
      If you don't think bitcoin can even get close to gold, then you really don't understand bitcoin yet. Smashing golds market cap will happen in less than 6 years. And that's just the start.
      - 2y ago

zztop44 3y ago

Even if your argument were logical, “at some undetermined point in the future, this investment will underperform a different potential investment” is all you’d be proving.

rafaelero 3y ago

Isn't S&P 500 basically inflation + GDP growth at this point? I think BTC will follow similar pattern given enough adoption.

npoc 3y ago

You might want to think outside the box a little more. Bitcoin can consume the entire value that's stored in the dollar. Does your model hold if it does 80% of that over the next, say 50 years? The S&P will be priced in bitcoin for a start.