[2020-04-26] Global Deflation May Not Be Bad News for Bitcoin

Betwrong

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Quote from: bbc.reporter on May 25, 2020, 09:36:23 PM

@Betwrong. However, the small differences does not cancel figmentofmyass' reply and the % of correlation shown to you. 84.2 is very high, I reckon.

https://unicornbay.com/tools/asset-correlations

It is the data that matters.

Well, I accept that. I'm not in a position to have the right to question this tool, I don't have enough knowledge for that. I'm just trying to understand, being a newbie in this field, why there are such loose requirements for two graphs to be called having "very high correlation"? I mean, is it intrinsic to economy in particular? Because in other fields those two graphs, for DJI and BTC-USD, would be called having Low Positive Correlation, at best.

bbc.reporter

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@Betwrong. However, the small differences does not cancel figmentofmyass' reply and the % of correlation shown to you. 84.2 is very high, I reckon.

https://unicornbay.com/tools/asset-correlations

It is the data that matters.

Betwrong

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Quote from: bbc.reporter on May 18, 2020, 08:29:15 PM

@Betwrong. There is no some correlation between bitcoin and the Dow Jones. There is very high correlation between bitcoin and the Dow Jones. If you ask yourself why and be honest with yourself, you would accept the argument that bitcoin is indeed being used predominantly as a speculative asset. This implies pumping and dumping by whales on leverage, tether printing to manipulate price, clickbots on social media to create and control the storyboards.

Also many others that JK Rowling can write stories about hehehe.

But if there is a "very high correlation", what does it tell us about the Dow Jones then? Is there the same volatility among the largest companies' stocks performance?

Also, I thought we could call it a correlation if DJIA went deep down in the beginning of 2018, and never fully recovered the same year and the year after that. But that's not what were happening to DJIA:

Yes, that tool from above is saying that there is a high level of positive correlation, but why can't we see it comparing the charts?

bbc.reporter

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@Betwrong. There is no some correlation between bitcoin and the Dow Jones. There is very high correlation between bitcoin and the Dow Jones. If you ask yourself why and be honest with yourself, you would accept the argument that bitcoin is indeed being used predominantly as a speculative asset. This implies pumping and dumping by whales on leverage, tether printing to manipulate price, clickbots on social media to create and control the storyboards.

Also many others that JK Rowling can write stories about hehehe.

figmentofmyass

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Quote from: Betwrong on May 18, 2020, 08:14:32 AM

Thank you! To be honest, I had no idea about those tools.

So, there is some positive correlation between BTC's and some other top assets' performance.

But now I am a bit confused. Does it mean that people who want to diversify their investments won't be looking into Bitcoin's direction because they should rather be investing in asset classes that demonstrate little or no correlation to one another?

something to consider is that correlation =/= they have the same returns. bitcoin obviously has much higher upside potential because the supply is so scarce and the market is so illiquid.

the correlation won't hold forever either. who knows where all this money printing will lead? runaway inflation could cause a big separation of "soft assets" like stocks and "hard assets" like gold and bitcoins.

Betwrong

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Quote from: figmentofmyass on May 16, 2020, 07:52:06 PM

Quote from: Betwrong on May 16, 2020, 07:43:36 AM

To be honest, I see little to no correlation with the Bitcoin price here. But maybe I'm looking in the wrong places?

you really don't see it?

okay, let's try something else. asset correlations are measured on a scale of -1 to 1, with 0 indicating no correlation. 0.7-1 indicates a high level of positive correlation.

this is BTC-USD compared with the dow jones:

https://unicornbay.com/tools/asset-correlations

Thank you! To be honest, I had no idea about those tools.

So, there is some positive correlation between BTC's and some other top assets' performance.

But now I am a bit confused. Does it mean that people who want to diversify their investments won't be looking into Bitcoin's direction because they should rather be investing in asset classes that demonstrate little or no correlation to one another?

figmentofmyass

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Quote from: Betwrong on May 16, 2020, 07:43:36 AM

To be honest, I see little to no correlation with the Bitcoin price here. But maybe I'm looking in the wrong places?

you really don't see it?

okay, let's try something else. asset correlations are measured on a scale of -1 to 1, with 0 indicating no correlation. 0.7-1 indicates a high level of positive correlation.

this is BTC-USD compared with the dow jones:

https://unicornbay.com/tools/asset-correlations

Betwrong

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Quote from: figmentofmyass on May 11, 2020, 09:40:02 PM

Quote from: Betwrong on May 11, 2020, 07:29:36 AM

Quote from: figmentofmyass on May 10, 2020, 04:34:14 PM

there are a few possibilities that stick out in my mind:

1. too much uncertainty in the markets. the market isn't sure if we're recovering or entering a depression, or somewhere in between.
2. deflation = prices down, but many believe the money supply inflation (printing) will outweigh the effects of deflation.
3. markets are not always efficient, meaning they can be very irrational. smith and keynes were big believers in the idea that irrational behavior has a significant impact on markets. even if the above theory is correct, it may take the market a while to realize it.

enjoy the roller coaster ride. Wink

Bitcoin has always been a roller coaster ride.

But from what I remember its price was never dependent on what was happening in the world of stock markets.

that's arguable. bitcoin and stocks rose together in a decade-long bull market. they crashed together this year. ever since then, they have become correlated assets.
~

I tried to find a correlation between Bitcoin and stocks, but I failed.

Here's 10 years price chart

for AAPL:

Quote from: https://www.netcials.com/stock-10-year-history/AAPL-Apple-Inc/

for GOOGL

Quote from: https://www.netcials.com/stock-10-year-history/GOOGL-Alphabet-Inc/

Dow Jones - 10 Year Daily Chart:

Quote from: https://www.macrotrends.net/1358/dow-jones-industrial-average-last-10-years

To be honest, I see little to no correlation with the Bitcoin price here. But maybe I'm looking in the wrong places?

figmentofmyass

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Quote from: Betwrong on May 11, 2020, 07:29:36 AM

Quote from: figmentofmyass on May 10, 2020, 04:34:14 PM

there are a few possibilities that stick out in my mind:

1. too much uncertainty in the markets. the market isn't sure if we're recovering or entering a depression, or somewhere in between.
2. deflation = prices down, but many believe the money supply inflation (printing) will outweigh the effects of deflation.
3. markets are not always efficient, meaning they can be very irrational. smith and keynes were big believers in the idea that irrational behavior has a significant impact on markets. even if the above theory is correct, it may take the market a while to realize it.

enjoy the roller coaster ride. Wink

Bitcoin has always been a roller coaster ride.

But from what I remember its price was never dependent on what was happening in the world of stock markets.

that's arguable. bitcoin and stocks rose together in a decade-long bull market. they crashed together this year. ever since then, they have become correlated assets.

it's not necessarily that bitcoin follows stocks. they are both viewed as risk assets, and investors are probably reacting to the same macro fundamentals. an economic crash and recession means institutions switching towards risk-off investments/cash and retail investors losing jobs, making them more likely to sell and less likely to invest.

i don't think they'll keep moving together forever, but it might keep up for a while as long as there is so much economic uncertainty ahead.

bbc.reporter

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@Betwrong. It will considering that bitcoin is used substantially as a speculative investment by many than a type of currency for daily purchases. Observe how the price pumps and dumps on the exchanges.

Betwrong

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Quote from: figmentofmyass on May 10, 2020, 04:34:14 PM

Quote from: Betwrong on May 09, 2020, 02:50:35 AM

So, according to you, Bitcoin price should stagnate when the overall economic activity is slow? Aren't we seeing a different picture on the crypto markets today? Or is it because the economic activity isn't slow enough still, and the times described in the article are yet to come?

there are a few possibilities that stick out in my mind:

1. too much uncertainty in the markets. the market isn't sure if we're recovering or entering a depression, or somewhere in between.
2. deflation = prices down, but many believe the money supply inflation (printing) will outweigh the effects of deflation.
3. markets are not always efficient, meaning they can be very irrational. smith and keynes were big believers in the idea that irrational behavior has a significant impact on markets. even if the above theory is correct, it may take the market a while to realize it.

enjoy the roller coaster ride. Wink

Bitcoin has always been a roller coaster ride.

But from what I remember its price was never dependent on what was happening in the world of stock markets. Many people predict its price will rise amid the overall economic depression, but I think it can either rise or fall independently. Events that are happening in the world of crypto are much bigger factors than anything else in this regard.

Quote from: bbc.reporter on May 10, 2020, 09:19:44 PM

~

Yes of course. Cryptocoin markets and others like the stock market and the real estate market should stagnate during a period of high unemployment, low GDP and recession.

Also, yes, the present situation might not be the worst yet. However, we might be in this situation similar to the 2 years before the 2008 housing debt crisis in America. Those 2 years before were pumping the markets of no strong economic fundamentals. This is not sustainable.

Right, but will Bitcoin price be influenced by all of that is a big question.

bbc.reporter

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Quote from: Betwrong on May 09, 2020, 02:50:35 AM

Quote from: bbc.reporter on April 29, 2020, 10:31:20 PM

Quote from: Betwrong on April 29, 2020, 04:34:09 AM

~

I understand this, but why should we imply that Bitcoin price would stagnate during this time? We all know that Bitcoin price doesn't depend on the events in the physical world, and that's why it's so unpredictable. The purchasing power of 1 BTC can rise 100% in a matter of weeks, or drop 50% in the same time-frame. The effect of fiat deflation/inflation on the Bitcoin purchasing power is so negligible that we can safely ignore it.

It might be because the writer of that article also understands and accepts that bitcoin is usually only used as a speculative investment today. In a condition of economic deflation, the velocitiy of money is down, the amount of money every that human being owns is low and economic activity is also very slow.

So, according to you, Bitcoin price should stagnate when the overall economic activity is slow? Aren't we seeing a different picture on the crypto markets today? Or is it because the economic activity isn't slow enough still, and the times described in the article are yet to come?

Yes of course. Cryptocoin markets and others like the stock market and the real estate market should stagnate during a period of high unemployment, low GDP and recession.

Also, yes, the present situation might not be the worst yet. However, we might be in this situation similar to the 2 years before the 2008 housing debt crisis in America. Those 2 years before were pumping the markets of no strong economic fundamentals. This is not sustainable.

figmentofmyass

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Quote from: Betwrong on May 09, 2020, 02:50:35 AM

So, according to you, Bitcoin price should stagnate when the overall economic activity is slow? Aren't we seeing a different picture on the crypto markets today? Or is it because the economic activity isn't slow enough still, and the times described in the article are yet to come?

there are a few possibilities that stick out in my mind:

1. too much uncertainty in the markets. the market isn't sure if we're recovering or entering a depression, or somewhere in between.
2. deflation = prices down, but many believe the money supply inflation (printing) will outweigh the effects of deflation.
3. markets are not always efficient, meaning they can be very irrational. smith and keynes were big believers in the idea that irrational behavior has a significant impact on markets. even if the above theory is correct, it may take the market a while to realize it.

enjoy the roller coaster ride. Wink

Betwrong

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I stand with Ukraine.

Quote from: bbc.reporter on April 29, 2020, 10:31:20 PM

Quote from: Betwrong on April 29, 2020, 04:34:09 AM

~

I understand this, but why should we imply that Bitcoin price would stagnate during this time? We all know that Bitcoin price doesn't depend on the events in the physical world, and that's why it's so unpredictable. The purchasing power of 1 BTC can rise 100% in a matter of weeks, or drop 50% in the same time-frame. The effect of fiat deflation/inflation on the Bitcoin purchasing power is so negligible that we can safely ignore it.

It might be because the writer of that article also understands and accepts that bitcoin is usually only used as a speculative investment today. In a condition of economic deflation, the velocitiy of money is down, the amount of money every that human being owns is low and economic activity is also very slow.

So, according to you, Bitcoin price should stagnate when the overall economic activity is slow? Aren't we seeing a different picture on the crypto markets today? Or is it because the economic activity isn't slow enough still, and the times described in the article are yet to come?

bbc.reporter

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@capn. It might affect it if bitcoin will continue to be used only as a speculative investment. The cryptospace would be lucky to be supported similar to the fiat printing bailouts hehehe.

However, how long would this be sustainable without a healthy economy?

According to data from Finanso.se, the market cap of the five banks combined fell from $407.44 billion at the end of December 2019 to $240 billion at the end of March 2020.

The largest bank in Europe, HSBC, alone fell by $47 billion in this time frame, to $114.08 billion. French bank BNP Paribas also lost 40% of its market cap; it fell from $74.03 billion to $42.62 billion.

Banco Santander, the third largest, lost 44% of its market cap in the first quarter of 2020. It fell from a market cap of $66.96 billion at the end of December to $37.55 billion at the end of March. Its net profit fell by 82%.

And Lloyds Banking and ING Group, the fourth and fifth largest banks in Europe, lost over 50% of their market caps. Lloyds fell from $57.97 billion to $26.59 billion, and the Dutch bank, ING Group, fell from $46.96 billion to $20.07 billion.

This is all down to the coronavirus pandemic, which toward the end of the first quarter of 2020 strongly affected Europe. Spain, Italy, the UK, France and Germany are among the worst affected countries in the world, surpassed in infections and deaths only by the US.

Source https://decrypt.co/27698/banks-face-huge-losses-due-to-coronavirus

bbc.reporter

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Quote from: Betwrong on April 29, 2020, 04:34:09 AM

Quote from: bbc.reporter on April 28, 2020, 09:22:56 PM

Quote from: Betwrong on April 28, 2020, 06:38:42 AM

I don't get the logic behind the statement below:

Quote from: https://www.coindesk.com/why-global-deflation-may-not-be-bad-news-for-bitcoin

“While the price per coin may stagnate during a period of aggressive economic deflation, the inherent buying power of the currency will actually rise, possibly quite significantly,”

What are the reasons for Bitcoin price to stagnate, in the first place? If cash is getting more value, then some of Bitcoin holders, even some whales maybe, can start exchanging their BTC for cash, and the BTC price can start dropping because of that. (Not saying that this is what going to happen, though. With trillions of newly printed USD, hardly it will start getting more value/purchasing power).

That statement is speculating that despite the economy might contract, the purchasing power will rise because it is the price of items sold that are going down.

I understand this, but why should we imply that Bitcoin price would stagnate during this time? We all know that Bitcoin price doesn't depend on the events in the physical world, and that's why it's so unpredictable. The purchasing power of 1 BTC can rise 100% in a matter of weeks, or drop 50% in the same time-frame. The effect of fiat deflation/inflation on the Bitcoin purchasing power is so negligible that we can safely ignore it.

It might be because the writer of that article also understands and accepts that bitcoin is usually only used as a speculative investment today. In a condition of economic deflation, the velocitiy of money is down, the amount of money every that human being owns is low and economic activity is also very slow.

figmentofmyass

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Quote from: cr1776 on April 29, 2020, 05:43:40 AM

This is a good point: what would you want a stable coin to be stable against?

Why though, would you want something that is stable with fiat which is inherently unstable over any longer period of time? Why would you take one of crypto's strongest selling points - protection against the instability of fiat due to the whims of people/politicians - and neuter it?

for short term hedging against crypto market volatility. that's why there is $3 billion in stablecoins sitting on exchanges. https://twitter.com/twobitidiot/status/1250979847536590849

those stablecoin holders obviously don't want dollars in their bank account. it's mostly dry powder waiting to buy back into bitcoin or other cryptocurrencies.

one of the narratives explaining quickly growing stablecoin supplies is their rising popularity for cross-border remittance, especially in china. bitcoin bear markets and general market uncertainty have made stablecoins attractive for some. https://www.coindesk.com/tether-usdt-russia-china-importers

Quote

Chinese grey-market importers used to rely on bitcoin before the 2018 bear market, another OTC dealer, Roman Dobrynin, told CoinDesk. As the price was ever-growing, merchants and the intermediaries helping them buy crypto could make some extra money along the way.

But since the beginning of 2018, hoping that your bitcoin will still be worth the same or more at the end of the transfer became too risky.

“As the price was going down, tether became much more convenient to use,” said Dobrynin. “China is totally reliant on USDT, they trust in it a lot, plus it’s very liquid.” His own clients are mostly Chinese, and they usually find him by word of mouth, connecting via Telegram.

cr1776

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Quote from: stmar on April 28, 2020, 02:27:34 PM

...
I think, now, it would be nice to find a solution to a true stable coin.
Many projects try to tie a stable coin to a specific currency. And this is a wrong decision.
A stable coin must be a certain constant or similar to π (3,14).
Perhaps this should be the arithmetic average of several known currencies(usd, euro, jpy, cny, rub, indian rupee ....).
And then cryptoeconomics will take its next step.

This is a good point: what would you want a stable coin to be stable against?

Why though, would you want something that is stable with fiat which is inherently unstable over any longer period of time? Why would you take one of crypto's strongest selling points - protection against the instability of fiat due to the whims of people/politicians - and neuter it? Why duplicate the weakness of fiat in crypt when you can just purchase a basket of fiat currencies without the overhead of crypto?

To me it sounds like the illogic of having a centralized crypto, which is pointless, one might as well just use a database.

Betwrong

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I stand with Ukraine.

Quote from: bbc.reporter on April 28, 2020, 09:22:56 PM

Quote from: Betwrong on April 28, 2020, 06:38:42 AM

I don't get the logic behind the statement below:

Quote from: https://www.coindesk.com/why-global-deflation-may-not-be-bad-news-for-bitcoin

“While the price per coin may stagnate during a period of aggressive economic deflation, the inherent buying power of the currency will actually rise, possibly quite significantly,”

What are the reasons for Bitcoin price to stagnate, in the first place? If cash is getting more value, then some of Bitcoin holders, even some whales maybe, can start exchanging their BTC for cash, and the BTC price can start dropping because of that. (Not saying that this is what going to happen, though. With trillions of newly printed USD, hardly it will start getting more value/purchasing power).

That statement is speculating that despite the economy might contract, the purchasing power will rise because it is the price of items sold that are going down.

I understand this, but why should we imply that Bitcoin price would stagnate during this time? We all know that Bitcoin price doesn't depend on the events in the physical world, and that's why it's so unpredictable. The purchasing power of 1 BTC can rise 100% in a matter of weeks, or drop 50% in the same time-frame. The effect of fiat deflation/inflation on the Bitcoin purchasing power is so negligible that we can safely ignore it.

bbc.reporter

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Quote from: Betwrong on April 28, 2020, 06:38:42 AM

I don't get the logic behind the statement below:

Quote from: https://www.coindesk.com/why-global-deflation-may-not-be-bad-news-for-bitcoin

“While the price per coin may stagnate during a period of aggressive economic deflation, the inherent buying power of the currency will actually rise, possibly quite significantly,”

What are the reasons for Bitcoin price to stagnate, in the first place? If cash is getting more value, then some of Bitcoin holders, even some whales maybe, can start exchanging their BTC for cash, and the BTC price can start dropping because of that. (Not saying that this is what going to happen, though. With trillions of newly printed USD, hardly it will start getting more value/purchasing power).

That statement is speculating that despite the economy might contract, the purchasing power will rise because it is the price of items sold that are going down.

However, this would also imply that there might be less people holding the coin and less people spending their coins. This will also end in low adoption, more business closures and failures.

Topic: [2020-04-26] Global Deflation May Not Be Bad News for Bitcoin (Read 387 times)