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Topic: Elasticity and inelasticity of bitcoin's supply and demand - page 3. (Read 4716 times)

legendary
Activity: 2044
Merit: 1115
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If you buy 100 coins and hold it for 10 years, they will disappear from market for 10 years, thus make the supply decrease by 100 bitcoins

That is simply not true. Neither the money supply nor the market supply decreases when someone holds coins. If someone offered you $100 thousand or $100 million for those coins, would you sell them? Yes, so they are still counted as supply. Only if you destroy the coins would they be removed from the the market supply and the money supply because could never be sold or circulated.

Coin holder decide how much money supply there will be in the market, not the bidder. FED has printed 5x more money since 2008, and you never notice anything's price going up by 5x, because banks hold majority of those money and never move them, so they are not entering circulation and will not cause inflation

The reserve holder typically have long term plan than simply profit from selling his reserve. If I have 100 bitcoin and someone offered me $100 million for 100 coins, I would maximum sell 5 bitcoin, since that is enough for me to spend for a while and does not affect the exchange rate too much. Similarly , if Satoshi have 1 million bitcoin and someone offered this price, he might still sell maximum 5 bitcoin, but his reserve's value will raise to 1 trillion


This is correct, and a great example. The FED printing all that money after 2008 hasn't resulted in massive inflation because that money hasn't made it all the way to the money supply. If it did, you would see the inflation you would expect, but it's not part of supply right now, even though it exists. Perfect analogy to coins being held off exchanges.
legendary
Activity: 2044
Merit: 1115
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If you buy 100 coins and hold it for 10 years, they will disappear from market for 10 years, thus make the supply decrease by 100 bitcoins

That is simply not true. Neither the money supply nor the market supply decreases when someone holds coins. If someone offered you $100 thousand or $100 million for those coins, would you sell them? Yes, so they are still counted as supply. Only if you destroy the coins would they be removed from the the market supply and the money supply because could never be sold or circulated.

This is not true. The "market" is whatever is trading on the exchanges. Any coins not listed for sale on the market are not increasing supply of bitcoins for sale. Price swings may induce more holders to agree to sell, thereby increasing supply, but coins being used for transactions outside of exchanges cannot be counted as supply until they are listed for sale on an exchange. The number of coins in circulation only matters to the market cap of the coin, but only the coins on the exchanges are part of supply and demand which determines price.
legendary
Activity: 1988
Merit: 1012
Beyond Imagination
If you buy 100 coins and hold it for 10 years, they will disappear from market for 10 years, thus make the supply decrease by 100 bitcoins

That is simply not true. Neither the money supply nor the market supply decreases when someone holds coins. If someone offered you $100 thousand or $100 million for those coins, would you sell them? Yes, so they are still counted as supply. Only if you destroy the coins would they be removed from the the market supply and the money supply because could never be sold or circulated.

Coin holder decide how much money supply there will be in the market, not the bidder. FED has printed 5x more money since 2008, and you never notice anything's price going up by 5x, because banks hold majority of those money and never move them, so they are not entering circulation and will not cause inflation

The reserve holder typically have long term plan than simply profit from selling his reserve. If I have 100 bitcoin and someone offered me $100 million for 100 coins, I would maximum sell 5 bitcoin, since that is enough for me to spend for a while and does not affect the exchange rate too much. Similarly , if Satoshi have 1 million bitcoin and someone offered this price, he might still sell maximum 5 bitcoin, but his reserve's value will raise to 1 trillion
legendary
Activity: 3248
Merit: 1070
and anyway without the right demand the price would not increase, no matter if you destroy the whole supply minus one or everyone is holding

the price won't magically increase because of this, you need a catalyst, something that start the escalation
legendary
Activity: 4438
Merit: 3387
If you buy 100 coins and hold it for 10 years, they will disappear from market for 10 years, thus make the supply decrease by 100 bitcoins

That is simply not true. Neither the money supply nor the market supply decreases when someone holds coins. If someone offered you $100 thousand or $100 million for those coins, would you sell them? Yes, so they are still counted as supply. Only if you destroy the coins would they be removed from the the market supply and the money supply because could never be sold or circulated.
legendary
Activity: 1232
Merit: 1000
Demand:
1) My experience as a seller on localbitcoins.com tells me that there is a baseline daily demand of bitcoin coming from people who are price-agnostic such as Joe Schmoe who is buying $2000 worth of bitcoin per day for.. something. Maybe remittances. I never ask. But I will tell you that every day he needs $2000 worth of bitcoin no matter what the price is. He doesn't care what the price is. This component of total demand, measured in USD, is inelastic.

Should you be measuring demand in terms of USD? That might not give the true picture. If Joe Schmoe was buying 10 bitcoins a day, no matter what the price is, I would agree that this component of total demand is inelastic. But if he is buying $2000 worth of bitcoins everyday, I am not sure you should be considering this demand inelastic.
legendary
Activity: 2912
Merit: 1852
I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.

The premise that there will always be price-agnostic bidders defies the laws of economics, and there are too many competing cryptos that fulfill the same function as bitcoin for this to be true indefinitely. What you have is a tremendously small sample size (relative to the whole bitcoin market) that you are projecting into an absolute truth.

Litecoin has been "competing" with bitcoin for years and no one is using it for any non-speculative purposes. I'm not saying that the existence of bitcoin's price floor is an absolute truth but it will be true for the next 1-2 years, which is what I'm interested in.

I wouldn't call litecoin competing to bitcoin. I would rather look at it as living next to it or being in symbiosis.

Litecoin is great for its cheaper price and faster blocks, while still being secure.


Can you buy gold NOW with Litecoin?  If so, well then LTC might become a viable contender to BTC.  If not..., then my guess is that BTC's advantages as the first useful crypto are too hard to break for the medium-term.  

Retail acceptance is an important part of the BTC Equation...

legendary
Activity: 1988
Merit: 1012
Beyond Imagination
If you buy 100 coins and hold it for 10 years, they will disappear from market for 10 years, thus make the supply decrease by 100 bitcoins

If you buy 100 coins and sell them after 10 days, they will disappear from market for just 10 days, then another buyer hold it for another 10 days, and they will disappear from market for another 10 days...

So if the interval between buying and selling are days instead of years, you will need 365x more people to make the same amount of coin disappear from market for 10 years

It is clear, the supply shrink caused by high frequency trading is magnitudes lower than long term holding. But high frequency trading increase the market liquidity, some trader might trade forever for 10 years thus reaching the same result (but contributing large amount of fees)

Suppose that an exchange's daily average volume is 20K coins, then all those transactions on the exchange have the effect of removing 20K coins from circulation. However, the exchange might have a cold wallet holding 200K coins, they seldom move, causing a large decrease in supply
legendary
Activity: 2044
Merit: 1115
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I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.

The premise that there will always be price-agnostic bidders defies the laws of economics, and there are too many competing cryptos that fulfill the same function as bitcoin for this to be true indefinitely. What you have is a tremendously small sample size (relative to the whole bitcoin market) that you are projecting into an absolute truth.

Litecoin has been "competing" with bitcoin for years and no one is using it for any non-speculative purposes. I'm not saying that the existence of bitcoin's price floor is an absolute truth but it will be true for the next 1-2 years, which is what I'm interested in.

Fair enough on the 1-2 year time span, but that's not how you presented your point initially. You said there would always be price-agnostic buyers, an absolute which cannot be true.

As far as competition goes, every alt coin that exists is competing with bitcoin, and they all in turn are competing with fiat. All bitcoin is is a method of value transfer, and the same is true of any other cryptocurrency. To the extent any alt coin has a market cap above zero, it means there is some market for it, so it is succeeding to that extent. (A failed coin has a market cap of 0, because no one is willing to trade anything of value for it, whether that be another coin or any physical object.) Litecoin is used for the same purpose as bitcoin: to transfer value from one person to another. Same as Doge, Dash, Clams, etc. They're all competing over the same market of value transfers.
sr. member
Activity: 434
Merit: 250
Loose lips sink sigs!
Conclusion:

1. Bitcoin has a floor but practically no ceiling. But it's impossible to calculate where the floor is.
2. The effect of the halving really depends on market sentiment at the time of the halving. It could be large or insignificant.

Your conclusions are correct:
1. Bitcoin has a floor, it's zero. And the sky is technically the limit
2. The halving will depend on market sentiment at that time...so predictions are meaningless

I feel that you're missing some categories in your Demand section. First, I don't think the people willing to buy at any price represent a large portion of demand. Maybe it's in your wording, but people that need bitcoin regardless of price are still limited by the price. They can only afford $xxx to spend so if the price of bitcoin rises they can exchange that fiat for less bitcoin, therefore their impact on demand goes down (because they can't buy as many bitcoin).

PS: If you want all 21 Million you'll need mine...what are you offering for mine?
hero member
Activity: 560
Merit: 500
Well some people trying the luck witht the halving that will happen,the question is demand and supply doesnt affect bitcoin at the moment,since as you stated around 3600btc coins daily ,but well poloniex one of the biggest exchanges has around 800btc to 5k btc trading daily soo whales present at it .
The demand and supply doesnt work at the bitcoin,the big value and market capitalisation,is too big to this works at the moment,even when the mine ends the demands and supply will keep being impossible ,bitcoin market need more interest and new investors.
legendary
Activity: 1946
Merit: 1007
I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.

The premise that there will always be price-agnostic bidders defies the laws of economics, and there are too many competing cryptos that fulfill the same function as bitcoin for this to be true indefinitely. What you have is a tremendously small sample size (relative to the whole bitcoin market) that you are projecting into an absolute truth.

Litecoin has been "competing" with bitcoin for years and no one is using it for any non-speculative purposes. I'm not saying that the existence of bitcoin's price floor is an absolute truth but it will be true for the next 1-2 years, which is what I'm interested in.

I wouldn't call litecoin competing to bitcoin. I would rather look at it as living next to it or being in symbiosis.

Litecoin is great for its cheaper price and faster blocks, while still being secure.
hero member
Activity: 798
Merit: 1000
21 million. I want them all.
I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.

The premise that there will always be price-agnostic bidders defies the laws of economics, and there are too many competing cryptos that fulfill the same function as bitcoin for this to be true indefinitely. What you have is a tremendously small sample size (relative to the whole bitcoin market) that you are projecting into an absolute truth.

Litecoin has been "competing" with bitcoin for years and no one is using it for any non-speculative purposes. I'm not saying that the existence of bitcoin's price floor is an absolute truth but it will be true for the next 1-2 years, which is what I'm interested in.
legendary
Activity: 2044
Merit: 1115
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I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.

The premise that there will always be price-agnostic bidders defies the laws of economics, and there are too many competing cryptos that fulfill the same function as bitcoin for this to be true indefinitely. What you have is a tremendously small sample size (relative to the whole bitcoin market) that you are projecting into an absolute truth.
hero member
Activity: 630
Merit: 500
PM me to buy traffic for your site!
I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.
¸

Trust me, there will also be speculative investments as well. Looking at the whole bitcoin architecture and possibilities , there's just too much money to be made regarding bitcoin,
so people will never abandon it and it will most probably never even return to double digit price. On the other hand, top price could be anything really, from what i can see, the bigger the price overtime,
the stronger infrastructure builds around it.
hero member
Activity: 798
Merit: 1000
21 million. I want them all.
I think the main thing that I can contribute is the idea that there IS a non-zero floor. Because there will always be price-agnostic bidders who are using bitcoin for non-speculative purpose. There is a floor and it's above zero.
hero member
Activity: 630
Merit: 500
PM me to buy traffic for your site!
Interesting write-up based on your observations, but the conclusions aren't particularly meaningful:

1. Bitcoin has a floor but practically no ceiling. But it's impossible to calculate where the floor is. True of literally any asset. The floor of any asset is 0 and the ceiling is hypothetically infinite.
2. The effect of the halving really depends on market sentiment at the time of the halving. It could be large or insignificant. The halving could be a significant event but it could also be an insignificant event. This is a truism.

As far as the halving goes, it seems more people than not (based on what I've observed on these boards) expect that the halving will result in a rise in price. If this is the case, you should expect the bulk of the effect of the halving to be priced in before the actual halving occurs, not after.

i'm not sos ure, take a look at the 2012 halving, the price rosed not only before but after the halving, and on a very generous scale

it's not mathematical that the price increase will occur before or in the same date, it can happen at anytime around the date of the halving

You can't really count on halving to increase the price at that date. I think that price will be tanked way before the actual halving, so that when the days of halving come,
people that expect the rise will be dumped onto by people that bought much earlier and at lower price.

But like i said, there are no rules about this, there's just too many possible scenarios that can happen, but the halving - technical point or not , is definitely a part of the equation.
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
I think sentiment is all. The halving is a technical detail. It's up to the humans to get excited about it. There may well be some self fulfilling prophecy involved. Ultimately there isn't a realistic supply constriction if demand doesn't grow.
legendary
Activity: 2044
Merit: 1115
★777Coin.com★ Fun BTC Casino!
Interesting write-up based on your observations, but the conclusions aren't particularly meaningful:

1. Bitcoin has a floor but practically no ceiling. But it's impossible to calculate where the floor is. True of literally any asset. The floor of any asset is 0 and the ceiling is hypothetically infinite.
2. The effect of the halving really depends on market sentiment at the time of the halving. It could be large or insignificant. The halving could be a significant event but it could also be an insignificant event. This is a truism.

As far as the halving goes, it seems more people than not (based on what I've observed on these boards) expect that the halving will result in a rise in price. If this is the case, you should expect the bulk of the effect of the halving to be priced in before the actual halving occurs, not after.

i'm not sos ure, take a look at the 2012 halving, the price rosed not only before but after the halving, and on a very generous scale

it's not mathematical that the price increase will occur before or in the same date, it can happen at anytime around the date of the halving

Developmentally, the bitcoin community is eons past the point where it was at the last halving. I would not draw any conclusions based on how it went last time, because there is very little about bitcoin's public presence now that is similar to how it was 3 years ago.
legendary
Activity: 3248
Merit: 1070
Interesting write-up based on your observations, but the conclusions aren't particularly meaningful:

1. Bitcoin has a floor but practically no ceiling. But it's impossible to calculate where the floor is. True of literally any asset. The floor of any asset is 0 and the ceiling is hypothetically infinite.
2. The effect of the halving really depends on market sentiment at the time of the halving. It could be large or insignificant. The halving could be a significant event but it could also be an insignificant event. This is a truism.

As far as the halving goes, it seems more people than not (based on what I've observed on these boards) expect that the halving will result in a rise in price. If this is the case, you should expect the bulk of the effect of the halving to be priced in before the actual halving occurs, not after.

i'm not so sure, take a look at the 2012 halving, the price rosed not only before but after the halving, and on a very generous scale

it's not mathematical that the price increase will occur before or in the same date, it can happen at anytime around the date of the halving
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