Topic: An interesting case of a widespread misconception - page 2. (Read 663 times)

That is kind of confusing because that is not how prices work, to make it all simple, the price goes up just like a normal currency. This kind of misconception is very prevalent, good thing about that is there are people who are going to refute this idea to make something better out of it.

the price will only go up if bitcoin is bought massively, also when massive buying occur more people do not sell so that they can sell at higher prices so sell wall decease and pice go even more up

I am hoping someone would counter this view. Not many benevolent OGs around to do that i guess. Apart from libertarians, i was putting my bet on those geeks and cypherpunks. People into software and high-end technology are generally kind. At least to begin with. The "take it and use it" deal isn't too bad either if they were actually building something. One thing i do understand from your in-your-face explanation though, is that one should stop being emotional about it all.

Well, we are not talking about purchasing power itself

Rather, we are discussing changes in it, and these are different things (e.g. a function and its derivative are typically, nay, typically different functions). Moreover, we are talking about the sources of this change. If you visit a poorer country, you may feel wealthy indeed but your wealth didn't increase at the expense of the poor population (though they may still suffer from your relentless expenditures). However, you make it look like people in the "against" group who got there solely by virtue of losing their purchasing power are the source and cause of this increase for some (i.e. holders) in the first place. They are not even if they get affected (become poorer) as a side effect of such an increase

OTC trading still relieves buying / selling pressure, even if it's not visible to the other market participants. I fully agree that margin trading is a wholly different beast though, which is why I chickened out at assessing its market impact.



I wouldn't say that the disadvantaged group is directly the source of the holders' wealth, but purchasing power doesn't exist in a vacuum. If you visit a poorer country than your own the same amount of absolute wealth has increased purchasing power by merit of everyone else being poor alone.

But who am I kidding, that reddit point is close to impossible to hold.

It's actually funny that some people think they're paying for those who get rich. That when someone advances onto another floor of this wealth pyramid he has to do it at the expense of someone else and throw that person down.
When someone values whatever you own higher, you become more wealthy, but it doesn't mean other people's holdings have to lose value. You can have an old war relic lying in the attic and later find out it's worth 100k USD. If someone buys it he will not lose money or literally finance your wealth but simply transfer the ownership of that valuable item. Everything will remain in equilibrium and a new item will enter the market.
Bitcoin wil be that new item ofexchange. Something that will allow people to transfer value, just like when a new fiat currency is created. When a new country was formed and it had its own currency, nobody had to lose for it to go into circulation. It just did.

Don't forget that there's not enough fiat money in the world to buy everything people have to offer (every single car, plane, boat, piece of land).

Selling something doesn't automatically mean that you're damaging the market. There's a reason why market makers exist, and why liquidity is extremely important for any growing asset.

If everybody was holding, there would be no liquidity, so there always need to be sellers—they're actually helping to fuel the growth by providing liquidity for the active users.

I don't instabuy into this line of reasoning

I agree that it often makes perfect sense in real life circumstances, like having more purchasing power leading to grocery prices rising and thus effectively putting those seemingly uninvolved into the "against" group, as far as the effects are concerned. However, this doesn't mean that the disadvantaged group is the source (cause) of the holders' wealth and the increase in their purchasing power. They can be victims (I agree with this), but they are not the source of their victimhood in the sense it is not through them that the growth in the purchasing power of holders becomes possible. In other words, your "inversion" doesn't work here in the way as it follows from that Reddit post. The same with frugal miners

that's true but things are a lot more complicated than that in the market that we can't say they pulled the price up or down or contributed to it. for example someone who is selling might have bought their coin over the counter which has no effects on the price or could have mined the coins which again has no effects on the rising price. same with margin traders, they may not pull the price down but only provide liquidity for those who want to buy at a certain price but are waiting.

That's if you view Bitcoin as a commodity that needs to be liquidated (ie. exchanged into a fiat currency) before using it to spend on goods and services. Since you can use Bitcoin as a currency this line of thinking doesn't fully apply in my opinion. Of course one may argue that someone somewhere down the line will have to exchange Bitcoin into their local fiat currency but then again this applies to international trade with foreign currencies as well.



The (relative) rise of purchasing power is twofold: First, due to the rise in price of course. Second, however, because the rise of wealth in a group of people often leads to goods and services becoming more expensive for those outside this group. Most commonly you'll see this when cities or city districts go through a process of gentrification -- In absolute terms the purchasing power of the disadvantaged group might be unchanged but in relative terms they are pushed down. In a way you could see this as realized opportunity cost.

Now the severity of this secondary effect is of course debatable and will largely depend on each individual situation (ie. how strong your local currency and how wealthy your country is). And its impact is likely limited unless Bitcoin pulls a McAfee for whatever inconceivable reason. However I would not completely dismiss its significance.



Depends on whether you want to account for opportunity cost.

As with most things it's a spectrum, with no-coiners being straight in the center, but some lines of thinking necessitate a binary cut (ie. "if you're not with us, you're against us"). Upon inspection this may be a sign of being on the wrong track though.



Excellent, excellent point. I'd argue that whether their "purchases" contribute to the price growth depends on whether they are holding or instantly selling to cover running costs and then some.

If they hold, they contribute to price growth in that they are literally withholding supply from the open market (and from other miners that instantly sell). I do concur that the majority of miners is likely "betting against Bitcoin", however it'd still be interesting to see what percentage of coins get immediately sold vs held.

And what are we to make of this?

The question raised in the OP goes well beyond simple math. In fact, the so-called simple math can be quite confusing, misleading, and distracting. Ultimately, it is whether the long term growth (as this is what holders are hoping for, and can derive or obtain their profits from) comes from the people investing their money in Bitcoin (that should count as betting in its favor) or the people investing their shekels in something else instead (that should count as betting against Bitcoin)

I don't understand how this is such a hard concept to get.  This is how markets work, this is how the share price of any sort of stock, mutual fund, ETF, cryptocurrency, etc.  It's buys vs sells.  Market Maker matches the buy and sell orders and whomever has more win the number whether that be higher or lower.  Simple math.

I don't think we can say so

Even in the sense you mean it. No-coiners are not losing their purchasing power because there's none unless and until you liquidate your stash. Okay, you bought your bitcoins cheap and sold them dear, so your purchasing power did in fact rise. However, it rose thanks to someone buying from you and not because of someone who doesn't or didn't have any coins, to begin with. Similarly, you can't say that no-coiners are betting against Bitcoin for the simple reason they are not betting at all, either in favor or against it


It is more complicated than that

For example, miners are not buying any bitcoins but they are still selling them. I see you are going to claim that they effectively buy bitcoins by paying for their mining rigs, rent, electricity, whatever, but that would be a faulty logic anyway, even if we accepted this assumption. How come? Because their "purchases" don't contribute to the price growth as they don't "buy" these bitcoins in the open market. Then, you could just assume that by selling their rewards they are in fact betting against Bitcoin, which is the case in real life as their sells do indeed move the price down. It is hard to get around this

Yeah,the statement is wrong,but I get where the author of that statement is going.He wants to say the profits that HODLers make are coming from the naive Bitcoin buyers,who are pumping the price.
Every financial market is a zero sum game.The profits of the winners are the losses of the losers.If everybody wins,the profits would be zero,so actually nobody wins and nobody loses anything.
He's wrong about "betting against Bitcoin" and yet he wants to FUD with a little bit of sarcasm(by saying "completely fair").

Depends a bit on how you read it. If you take "those who bet against Bitcoin" as no-coiners they are not entirely wrong. Holding coins in a bull market increases your purchasing power over those that don't, so relatively speaking they lose purchasing power ie. "pay for it".

Note that actively betting against Bitcoin requires to have bitcoin to sell in the first place either by (a) having it bought before or by (b) borrowing it in the case of margin trading. In case of (a) that means you can't drag the price down without having it pulled up first; additionally you presumably bet on Bitcoin at least one point in the past. In case of (b) you presumably have a counterparty taking the opposite position.

So the only move to actually "bet against Bitcoin" is by not participating in the market at all, ie. being a no-coiner as mentioned above. At least in case of (a), in the case of (b) I'm not so sure.



I guess I now ended up arguing in favor of the reddit post, which is not what I intended, since it's still a silly argument. In the end I mostly take issue with the "completely fair" bit that triggered the reddit response in the first place:


There's no fairness to any of it.

(And I mean, any, not just Bitcoin)

Arguing that "those who bet against bitcoin" are "paying for it" as per the reddit post is just trying to rationalize the inherent randomness of the world. It gives people an illusion of control, an entitlement based on a perceived "fairness" whatever that may be. "If I get rich I must be in the right."

Just accept that sometimes you get lucky and sometimes you don't. Fairness has nothing to do with it.

Who pays for this? Thats how market works, money from air, hah. People should understand this

And even in this case it remains a misconception or fallacy

If you literally bet against Bitcoin, there necessarily should be the other party which holds their end of the bet, wagering in favor of Bitcoin. In this way, it is "a zero-sum game" in terms of how it affects the price as all gains are balanced out by losses in the same currency (dollars, bitcoins, etc). Put differently, such bets can't change the price because the wagered amounts are equal and offsetting each other (in a real trading environment it is not so), so the market impact is nonexistent. No amount of such betting can change that, much less enrich holders

Bitcoin hodlers get richer by the second because of others trying to buy Bitcoin and join in on the hodl gang is it not? I don't actually understand how they mistake the idea that Rich people get rich because of those that are against them. It's not like hodlers are making non-hodlers work for them like how a landowner makes others work for him. Even if we assume that the word "against" means something else other than selling, anything closely synonymous to against would still not make sense imo.

Yes, I don't even understand the logic behind the misconception. If by betting against Bitcoin it is meant that people sell BTC, this is indeed can only be driving the price down. If it means something else, such as literally betting on Bitcoin going down on websites that allow such bets and then losing the bet when Bitcoin goes up, the money still does not go to hodlers. It goes to the owners of the place where people decided to bet on low price. Alternatively, it goes to those who were betting on Bitcoin price increasing if we're talking about player vs player version, but it's still within the limits of one 'casino' where people are placing their bets.