My
original theory of Bitcoin was that it was created by TPTB to suck in the high-tech libertarians and keep them preoccupied on speculation and greed so they wouldn't actually develop Nick Szabo's idea into something that could actually challenge the NWO plan. It seems they are succeeding. The ETFs will be concrete boots on Bitcoin.
I posit that Btc was correlated with the speculative bubble that drove the silver and gold bubbles to peak in 2011. Btc's bubble was the follow-on effect as the hard money and libertarians moved on to the "next big thing".
We exhausted that demographic. Btc is unable to pull significantly from demographics outside its core. Every where it gains a little bit of traction (e.g. Brazil and Argentina) is slapped by back down (e.g. China, Ecuador and State of New York).
Even I see the Bitcoin whitepaper mentioned gold to suck in our libertarian demographic. And Nick Szabo had been writing about a
conceptual "bit gold" which was basically a description of what became Bitcoin. Nick Szabo is either Satoshi or his blog post inspired the NSA or whoever the group is that was "Satoshi".
The ETFs could (will likely) lift the price to say $1000 - $3000 from 2015 to 2016 (similar to the silver ETF in May, 2006 and the $21 peak in 2007), so let's assume $1-10 billion of new capital inflowing in 2015, thus 300,000 to 10,000 million coins removed from the market and
sitting in cold storage.
I understand the remaining coins are divisible to 1 Satoshi, thus there is no limit on the availability of coins if the price is higher. But the salient point is the percent of the market cap which is not moving, i.e. the Velocity of money, V, in the
M × V ≈ P × Q ≈ GDP Quantity Theory of Money.
http://arcticstartup.com/2014/09/01/estonian-bitcoin-castleI had explained months ago what is wrong with Bitcoin's targeted market of investment pump:
Now on to the analysis...
Well if this is the bottom it is U shaped, not V, which is what I predicted upthread.
The price action seems to be very quiet, so not much to talk about from a TA perspective.
First a math point about relating adoption rate to price.
Peter R confirmed upthread with a chart that proxies for adoption, N, are tracking price = N x N. And if adoption is growing by rate R per year, then it grows R x R rate in two years. Thus we can say that the annual rate of price increases is proportional to the biannual rate of adoption. You see when our Y axis is logarithmic (e.g. log 10 on chart Risto shows) then exponentiation becomes additive and thus linearly proportional.
So I've been FA thinking about why Bitcoin adoption is likely declining, i.e. as I showed a
log-logistic curve fit.
As I explained in that linked post, the slope of the price increase was 0.33 before July 2011, and has been 0.09 since January 2012 until now. So it had already declined. The question is was the early period an aberration or part of the trend?
SlipperySlope had been fitting a logistic curve to Bitcoin's price, because technology which spreads out to the masses typically has that S shape of exponential adoption. The key factor is that logistic adoption rate (slope) increases until the midway point, i.e. at 50% of the adoption before decreasing. Whereas, log-logistic adoption rate (slope) is maximum at the start and is always declining. This is a very important distinction because logistic means we can expect Bitcoin's price rate of increase to accelerate, whereas log-logistic we can expect the rate of price appreciation to slow further (as it already did slowing from 0.33 to 0.09 after July 2011).
I gave the explanation that money is power-law distributed and thus we should expect the greatest serious network effects on adoption at the beginning because the power investors come in the earliest. The log-logistic (cumulative distribution function) curve corresponds to the power-law distribution.
I had an epiphany in my dream last night that there is a simpler explanation which also corresponds to the power-law distribution of money as follows.
"Most people who learn about Bitcoin, don't adopt it".
Why? Because it doesn't fulfill a general need. The need it fulfills is very specific to a white male, hate central banking demographic. It doesn't have fast transactions, doesn't have consumer protection, the money is difficult to secure, it is technically challenging to use, etc..
A consumer adopted item such as a washing machine has logistic adoption curve because every person who hears about wants it. Thus maximum word-of-mouth is reached at 50% of adoption. Whereas, for Bitcoin maximum rate of effectiveness of word-of-mouth was when only the correct demographic was listening back before July 2011. Now as Bitcoin tries to speak to the masses, they mostly don't care.
Thus if you want to build a Bitcoin killer altcoin, you simply make sure it is something every person will want to do.
...
I was speaking to my filipino neighbor just now, who works online for a Florida real-estate foreclosure listing company and who is aware of Bitcoin. He confirmed exactly my suspicion, which is that he was merely jealous of missing out on the investment gains but he had no practical use for Bitcoin as a currency. He gets paid via oDesk which he can withdraw from his ATM locally. He said he doesn't even know what advantages if any Bitcoin could offer him over Paypal and it would surely be a hassle to use.
The target market for Bitcoin was originally the high-tech inclined among the alternative asset investors (e.g. goldbugs). The investment pump pulled in the white males motivated by a goal to get rich in high-tech while satiating their idealistic tilt against government-gone-mad. Problem is there are only so many of us. We reached that stampede peak in Nov. 2013.
The problem is that many people have heard of Bitcoin, but their only true interest is as an investment. Thus many have heard but not availed of it (because they are not investors).
Dogecoin managed to attract a different demographic of altruists and I am not sure if this was sourced solely from those in Bitcoin or if it drew in new people who would not be attracted to Bitcoin? Does anyone have any data on this?
The way to beat Bitcoin and blow away every existing altcoin is to target a non-investor demographic and scale outside the confines of Bitcoin's paradigm.
Risto's egregious
category error is he seems to not appreciate the critical importance of spenders, i.e. that savers and spenders are in the same category. Without spenders, there can't exist savers and vice versa.
http://armstrongeconomics.com/2014/09/02/will-gold-still-go-to-5000/I am asserting that the challenge is to design an upstart crypto-currency which has enough near-term investment appeal to drive excitement and investment adoption, while simultaneously driving synergistic adoption for spending which eventually subsumes the investment gains.
Some here are challenging my assertion.
Money cannot have an issuer that must be trusted.
Bingo.
And currency can't all end up in the hands of the power-law distributed savers. It also has to be continuously debased so that spenders can spend. Savers and spenders are symbiotic.
You can claim that investors send the money back to spenders via wages, but the fact is they don't. They pool their money in usury interest bearing bonds, which is a form of mutual bondage (slavery) for both the lender and the borrower. That is a deeper, detailed mathematical analysis that I don't have time to reexplain right now. Refer to my older writings on the Hommel forum. There is a reason the Bible says you can only lend at interest to a stranger, not to one of your own.
In other words, savers will destroy themselves if left to their own natural behavior. Don't just look down on spenders, look down on savers too.
Thus I posit that if you want to drive the price of the coin skyhigh, you need everyone who uses the coin to mine with their sunk costs. And then you need to scale usership to millions or billions. The other route is to allow centralization and sell out to the powers-that-be as I posit Bitcoin has done (and Ethereum also), who then drive the investment in mining higher in an investor pump with their mass media and Congressional hearings, etc.. I posit the latter is log-logistic (did a rough curve fit as mentioned) and the former is logistic (refer to our discussions in the Monero economy thread on the adoption rates of technologies that were not centralized).
As to whether higher prices (i.e. via usership demand) drive more investment in mining, I posit that network effects and the Metcalf law correlation that Peter R showed are driven more by the investment in mining, than vice versa, at least while debasement rates are high early on. Those with the most investment also invest the most (time, effort, and capital) to drive adoption, so when the investors are not also the miners early on then there is a loss of synergy (as you say below many miners just dump the coins to a whale and don't even spend them into the ecosystem to drive network effects such as more merchants).
Thus despite sharing some facets of agreement, yes we appear to disagree fundamentally on how crucial mining and breadth of distribution are.
Crypto-to-crypto markets are largely frictionless, and people who want the coin can just buy it while miners who don't want it can just sell it.
Agreed but that says nothing about why one coin is demanded more than another.
Specialization and trade make an economy stronger, not weaker.
Agreed the maximum division-of-labor and the 51% Rule of Decentralized Consensus are fundamental.
However,
assets can be specialized but currency can not be. Just because we can trade between crypto-currency assets, doesn't mean all of them are currencies.
Why? Even if you ignore the round-trip costs of spread, the fundamental problem is that
when people use one currency as their unit-of-account, then all timing-dependent exchange rate risks disappear.
And this is why Moldberg is correct "there can only be one", and why either we "aim big or go home".
Yeah we could make an anonymous crypto-currency asset that we can use to protect capital in the coming chaos, but if it is not a currency then we will have to trade out to the majority's currency in order to spend this asset. And this is where the powers-that-be have us cornered. When they require everything to be computerized, even including real estate purchases and rentals, then where we will spend our anonymous crypto-asset without being forced to reveal our private keys and the entire trail of ownership??
Open Question: could we end up with two economies?
One the official government edict digital fiat and another the underground economy that goes anonymous because the government becomes unreasonable (as socialism always does at the end stage mega-death mode).
I wrote my logic for why I think this is likely and the underground economy could be largely virtual digital works.
Thus perhaps Moldberg is correct and the government's edict fiat is the one that is dying with the dying Industrial Age and the rise of the virtual Knowledge Age means the winning one could be the decentralized crypto-currency after a battle of chaos interim.
I'd like to try for that goal. Succeed or fail, is it not worthy?
With such a goal, there is enough prosperity to share with everyone. So we should cooperate.
