Topic: An interesting case of a widespread misconception (Read 663 times)

Then stop talking about the purchasing power of the dollar altogether

Since the purchasing power of the dollar is not some abstract concept but what you can actually buy with it. If you take 100 years (as this is the period which typically emerges in such discussions), the manufacturing of virtually everything has changed so dramatically that it is almost impossible to make meaningful comparisons (let alone 90% of today's things didn't even exist 100 years ago)


I was almost certain that you would come up with inflation rates. Now you can easily compare these figures against wages to see if people actually lost any purchasing power

I'm always up for a conversation, if you think it's meaningless we can stop. No harm done if you ask me.

Usually people don't describe it by comparing the old technology with the modern one. You cannot compare the power of the dollar in the 80s with today by trying to compare the cost of a computer hard drive because the manufacturing has changed so drastically. For the same reason you cannot compare the cost of automobiles in 1920 and 1960, it's pointless.
These statistics usually come from the basic items of need like a loaf of bread or a pack of sugar. A good example is the good old big mac index, although it's rather used to compare individual countries.

You can google it, the same charts can be found all over the Internet.
https://wolfstreet.com/2018/06/12/dollars-purchasing-power-drops-2-9-in-may-from-year-ago/
https://www.in2013dollars.com/us/inflation/1970?amount=1

So the value of an asset, in this case bitcoin, get determined by the last matched order in an exhange. In his case it is multiple orders on mutliple excchanges. In the ccase all od bitcoin would have been sold once this consequently leads to big price dump

I'm not sure I'm able to decipher the meaning here


It doesn't matter as far as "betting against Bitcoin" is concerned

Whether you are forced to buy or buy of your own accord only, you are betting in favor of Bitcoin. When you sell, either your own coins or borrowed ones, you are betting against Bitcoin. If you want to say that the same amount can produce a different effect, once sold on margin and then bought back, that may well be the case. But in general you don't know its direction and scale in advance, and thus can't say beforehand whether the net effect of short sells followed by buybacks is against or in favor of Bitcoin growth. All in all, it is a moot point, and can thus be safely discarded

And to hammer the final nail into the coffin of this logic, let me remind you that you can not only sell bitcoins on margin but also buy them with borrowed dollars, and then still end up forced to sell back when the price goes against you. So no matter how obscure and convoluted your reasons might be, they are instantly mirrored and negated by the same reasoning applied to the opposite pair of trades. And while we are at it, long squeezes seem to wreak more chaos in the markets, and instill greater fear in traders. I have yet to see a short squeeze of 50% with Bitcoin, given the current price levels

that's only true in a vacuum, regarding each individual position. your point is irrelevant when you consider underlying supply and demand, since net shorts depend on existing sell liquidity to buy back.

there is a big difference between 20k BTC worth of shorts trapped in a losing position and zero shorts trapped in a losing position. in the former case, shorts will be forced to close (whether due to pain or margin requirements) into thin ask liquidity, strongly driving prices up. in the latter case, there is no effect on price.

this is why the term "short squeeze" exists at all. it doesn't matter if the net amount a shorter sells/buys back is the same. what matters is the existing market depth when they buy back.

I've actually given at least two different explanations

First, you should specify what goods and services make up "the purchasing power of the dollar". For example, I could easily prove that the dollar purchasing power rose a few hundred times during the last 30 years if we gauge it in, say, processing power or storage capacity of modern computers

Then, you should necessarily examine the change in the dollar value in terms of wages and their dynamic. Without setting an appropriate frame of reference (wages), all this whining about dollar losing its purchasing power is meaningless. But if you don't understand it and don't want to, I can’t force it unto you


Do you have any stats to prove this claim?

I seeyou've only explained one, so you must've been using those many levels figuratively.


What I meant when I said that it used to be worth more was the purchasing power of the dollar. It wendt down by about 50% in the last 20 years.

Shorts don't appear out of nowhere

As a shorter, you have to buy back absolutely the same amount that you have sold earlier. So it is essentially a "zero-sum game" as far as the net effect is concerned. However, you make it look like there is only side of the coin or one side to the equation. Put differently, marginal positions are as bearish as they are bullish, while effectively they are net neutral in and by themselves. It is a simple accounting identity that anyone familiar with margin trading will instantly point at. If anything, margin trading, on its own, adds to volatility

that's the point---shorters represent latent buying pressure, not selling pressure. a short squeeze is just a vivid example that illustrates that dynamic.




it makes a world of difference.

when the market is majorly short then moves up (causing would be sellers to pull asks) shorts are a powerful bullish force---big demand meets small supply. on the other hand when it moves down, technical selling pressure (outside of leveraged markets) dampens that effect.

long squeezes and short squeezes are just the easiest way to show the counter-intuitive reality that high levels of margin longs can be bearish, and high levels of margin shorts can be bullish.

A sell is a sell, no matter how you look at it

Whether its effect is short-lived or otherwise doesn't take anything from the essence of it. When you are actively selling, i.e. you are being the agent, you fill someone's buy order and that drives the price down by eating away at the support wall or outright bringing it down


If you think about it, there's no contradiction

You don't even need to bring up the example of a short squeeze. When the price just goes down, the shorters start closing their positions by buying back what they sold on margin at a higher price, and that props up the price. So how is this different from someone first selling high and then buying back low? No difference, other than shorters having to close their positions. To sum it up, when people sell they are betting against Bitcoin, when they buy, they are betting in favor of it, and the order of these transactions, i.e. what comes first, a buy or a sell, is irrelevant

whether they drag the price down is actually dependent on underlying supply and demand. a simple example is that of a "short squeeze":


let's apply this to bitcoin. let's say that $9k is being majorly shorted right now---and has been for the last month. then let's say there is a major technical breakout above $10k. all those shorters will have their stop losses triggered (buying back), get margin called (buying back), or otherwise will get "squeezed" into buying back because of the mounting losses.

you see how all those shorters at $9k are actually dragging the price up now? when the market moves against them, they act as fuel for further increases in price.

It depends on what the market does after a seller/buyer comes in. (edit: and on a LOT of things)

As a seller, you could sell it to a weak hand. If you do so, maybe after your sale the price will drop even more and the weak hand you sold to will sell to someone else too. In that case, it's a negative influence over the price.

On the other hand, you could sell it to a holder so your very short negative influence will only have a short term impact. In this case, you're helping Bitcoin's price grow as the coins are moving from a trader willing to sale to a holder willing to buy, but this again depends on what the buyer does with his coin as in if he is truly going to hold for long term.

In the second case of you selling to a holder, your action of selling might not even impact the markets by much if at all.

I sometimes sold after a long time of holding in order to buy even lower and hold. I've also sold and bought through face-to-face transactions. There are probably way too many factors and possible outcomes to decide how everyone's actions influence the market overall.

None; the more individuals hold coins, the more decentralized & distributed the existing supply is, obviously.

But isn't that what we are basically doing when we buy too? In order not to help with that, you should stop accumulating any satoshi and constantly keep it into circulation. Every time the market declines and you buy to hold, you will most likely accumulate from different sellers. Keep in mind that even the money you get from signature campaigns comes from multiple people, so it's the same thing: you're helping with the accumulation of coins from more people's wallets into yours. In order not to help with it, we'd all have to continuously circulate BTC around.

Now to do that and also profit off BTC's price rise is probably an impossible thing because you'd have to convince first the richlist to start circulating their BTC too - just you doing that will not help, especially as as we speak there are whales accumulating more Bitcoin than we both probably ever had in a wallet so our little change does nothing really. And then you'd have a negative sentiment because dormant (or "lost") wallets are waking up.


Well, assuming there are a lot of weak traders out there, that may or may not be the case.

If a market has a total of 100 BTC trading under 24h, let's say 2 BTC go into wallets of holders. That means 98 BTC will continue trading. Over the next 30 days, out of the 98 BTC, how many will go inside wallets of holders or move again at all? And then how many other BTC will come in? And how many of the dormant wallets wake up and start circulating?


This is a very very complex, constantly changing situation and there are so many possibilities it's actually quite impossible to determine a proper and 100% accurate answer..

This logic is flawed on so many levels. First and foremost, you should evaluate things as they relate to other things and circumstances, not on their own. So, unless you mean a particular asset, and assess the value of the dollar against it, all in all the dollar was not worth twice as much some 20 years ago. Okay, you are going to say that it was 50 years ago

And then, that's where you make the same mistake as all other people coming up with this reasoning. They don't account for how much wages rose during exactly that time. If they rose faster, then the dollar inflation in this frame of reference (the only one making sense as far as real increase in wealth is concerned) may turn out negative, i.e. effectively deflation

And while we are at it, Bitcoin was worth 2 times more some 3 years ago

This is the thing, I don't.
I buy Bitcoin for 2 reasons. One of them is safekeeping. I don't trust my local fiat currency enough to bet all my savings on it. Being in Bitcoin seems more logical.
The second reson is spending it. I don't want the whole world to know what I bought and how much money I have, so I'm planning to at some point turn my Bitcoins into real world goods, skipping the exchanges and fiat money completely.
Somebody will of course have to buy my Bitcoin at some point. This is how money circulate, but they don't have to pay much more than it is worth today. It depends on the situation.
What's important is here and now. If the price is 10k USD and you buy for 10k, will you feel bad knowing the seller bought it for 9k? Will you feel good knowing the seller bought it in 2017 for 19k? Does it really matter? Remember that there's still a lot of coins in circulation that at some point in time were bought for much more than toiday's price.
Most people don't think about it.

Some of the Dollars you trade your Bitcoins for used to be worth 2x more than they are today 20 years ago.

I even created a topic around this idea in the past

But now you go beyond what was stated in the OP as you seem to agree that it is Bitcoin sellers who are betting against it, while buyers betting in favor of it. Regardless, the problem is that with more accumulation Bitcoin becomes less useful. Seriously, of what use will it be if all coins are in the hands of a single individual? But this is what follows as you implicitly assume more coins get stashed away at the end of the day (otherwise there is no push for next rise in price)

Indeed, it is an extreme case but it still clearly demonstrates that holders are shooting themselves in the foot as it more and more becomes a game of musical chairs with fewer and fewer chairs at each iteration (price rise). If holders don't sell (in terms of coins stashed) what is left to buy there (in terms of liquidity)? And now this is the case for the subject matter of this highly disconcerting thread (read, we will get stopped halfway as in more like already)

I might've completely misunderstood the OP and the reddit post you've linked us to - my mistake. Hopefully I get it this time. If "how do hodlers get rich?" is your main question, then I got it right so continue reading below.

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Don't you think everything is actually just inside your mind? Like a psychological game?

When you buy & hold, you fix a goal in your mind. Will take it from my last post: "I won't sell before ". If you replace the <> with "$1M", I'll have to guess you probably really think it'll be worth more in the future. That's why we also have a lot of wealthy holders.

The fact that you know exactly by how much the Bitcoin supply changes with every block and that it's a deflationary currency, you just think it should be worth more as time goes on - hence, you hold it. Having enough people thinking positively just like you, as time goes on and the price increases, you'll want less and less to sell at earlier prices. You're waiting to hit the goal you've set in your mind. Times like 2015 and the beginning of 2019 (or whenever Bitcoin dropped from $20k to $3k) has shown us that the opposite is possible too. The decline could've never stopped and today Bitcoin could've been dead if negativity stayed.

Logically, when you buy at $1k, you want to sell higher. But how higher? If BTC drops to $200, do you sell?

Yes => then you don't think the future looks good for Bitcoin so you're helping the price drop. If enough people think just like you, it declines sharply.
No => you will not help the price decline.

In other words, it all really goes down to the market sentiment. And because Bitcoin's evolving, halving & growing up, the market sentiment has almost always been "limited supply, deflationary, scarcity. => will cost higher in the future".

"Those who bet against Bitcoin" are just sellers. They don't have an infinite balance. The faster they go, the quicker the market recovers. So.. if a higher % of them gets out of the market, there'll be more positivity => they indeed help the hodlers out.

There will be a time when the hodlers might want to sell too. At that point, they become "those who bet against BTC" themselves but will help the remaining hodlers on the long term only if the market turns positive after his sale: if everyone who set their goal as "selling after $1M" gets out at $1M, it means that if & when the market turns positive, it becomes harder and harder to stop an increase past $1M the more sellers there are.

And then, there's another factor in play: In the past 24h there has been 1.35 BTC traded every 68 milliseconds. That's about $12k. Well, as the price increases, 1.35BTC will have a harder & harder impact on the market. So this is basically my answer: without the psychological game of negativity and positivity in the market & if we never really knew exactly whether Bitcoin will turn deflationary or inflationary within an year, the "hodl & get rich" thing wouldn't have worked at all.

Sorry for the very long post. I spent an hour and a half trying to shorten it (edit: now I have removed & moved a few paragraphs) but I honestly have no idea how to do so without missing anything I've mentioned above.

I'm not sure if the matter in question has anything to do with that

As I got it, you are trying to somehow justify the rich and wealthy who got there by simple holding. But this is not what the topic is dedicated to. For starters, it is definitely not about how fair or unfair the world is, Bitcoin or otherwise, so I'm not going deeper into your post. If anything, it is oriented more toward exploring the mechanism with which people get rich by holding Bitcoin, its inner workings and particular details, as well as processes involved, without making any moral judgment about any of these

So is this basically a "I ain't buying BTC no more because I'm paying for the rich" attitude? It won't work.

It's not even like Bitcoin is the first one to come up with the "hodl and get rich" possibility. Take penny stocks from decades ago and you'd find out there are a lot of people who turned rich by doing nothing. This is how the trading system works. This is how the world works.

Weak hands will buy & sell at the worst times. There'll always be weak hands in the market. By holding, you're just placing more coins in the scarcity bag and you are fixing a certain goal: "I won't sell before ". That is much more helpful than having no holders. In fact, without the holders, markets wouldn't even work. It'd be just a mixture of crazy nonsense trades.

In the end, you trade Bitcoin for something which means that, if you don't hold Bitcoin, you'd hold .. say USD. Well, then following the same logic, those trading USD would pay for you to become rich?! What do you do now, buy BTC again in order to be fair with everyone else? But you can't hold BTC because then you'd help ... you get it now. An infinite cycle of nothing.

There could be a teen out there who mined back in 2010 when he was a little kid & knew nothing about money/crypto, but today he is a millionaire. 100% fairness in markets only exists in fairy tales.

If I'm holding $100k in BTC for 10 years, it's literally the same risk I'm taking as those who trade actively. In fact, it might be even worse: I could set a tx locktime for approximately 10 years and while active traders make a profit, when my Bitcoins are finally unlocked I might have nothing left - Bitcoin could be dead by then. In that case, who recovers my loss? Well, by holding $100k worth of BTC, I made the coin scarcer so everyone who traded before me basically traded a rarer cryptocurrency thanks to me.

By purchasing or selling BTC, you assume risks. If you don't agree with that, then trading or investing isn't your thing.

That's a very good point, we holders will not get rich because of those who bet against bitcoin, it should be from those who buy bitcoin as they drive the price up, just like the last bull run, it was the FOMO that makes bitcoin reach its ATH and as we can see it was the entire market of crypto were in bull run and those buyers keep coming because of FOMO, and I guess we will not gonna see that same scenario again, lucky are those who held their bitcoin and sold at peak.

That's how things stand with respect to purely speculative assets

If you buy an asset with the sole intention of selling it later at a higher price (the process quite adequately characterized by calling it speculation), you get richer when the price goes up. But how can it go up? Right, when other people buy after you. And if they are like you (read, profiteers and speculators), it is very well along the lines "he has to do it at the expense of someone else" ("throw that person down" is your invention, so I leave it out)


If he intends on selling this artifact at a higher price later, but the price goes down for whatever reason, he will lose money