Stock-to-Flow Model: Modeling Bitcoin's Value with Scarcity - page 13.

fillippone

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Very nice presentation!

Quote

Great explanation of bitcoin stock-to-flow model by Manuel Andersch of
@BayernLB
at the
@ValueOfBitcoin
conference

https://twitter.com/100trillionUSD/status/1208082599354208258?s=20

Bitconometrics and what‘s driving the Bitcoin price | Manuel Andersch

Quote

In this presentation Manuel Andersch, Senior FX Analyst at BayernLB is discovering the path which leads to what he calls "bitconometrics". Working with different quantitative models to value Bitcoin he found the stock-to-flow ratio the most promising one and explains why.

This presentation was performed during the Value of Bitcoin Lecture on December 11th 2019 in Munich - more information: https://vob-conference.com
Follow the Value of Bitcoin Conference on Twitter - http://www.twitter.com/ValueOfBitcoin

fillippone

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Halving is a thing on Google Trends!

Google Trends: Bitcoin Halving Refutes ‘Nonexistent’ Retail Interest

Bitcoin (BTC) investors and mainstream consumers are paying more attention to the cryptocurrency’s block reward halving in May 2020.

According to data from Google Trends on Dec. 17, worldwide searches for “Bitcoin halving” have significantly increased in the course of 2019, over a year before the halving occurs.

We see from the image the interest for halving has already surged: not only it has been more searched than the complete halving in 2016 (I guess the area below the line is already bigger), but also it is actually been rising since March, time of publication of PlanB article on Medium.

The sad thing is: if halving is a well known fact bewteen investors, and probably this mean they know something about the SF model: why the is the price still struggling?

Tuur Deemester doesn't seems to worried about this:

Quote

Nonetheless, the heightened profile of the halving in particular did not go unnoticed among analysts. Commenting on the data, Adamant Capital co-founder Tuur Demeester noted that many still perceive the halving as a Bitcoin price catalyst.

“It's very clear that retail interest in BTC is nonexistent and investor sentiment is pretty bad right now. Question is whether the halvening could provide a bullish narrative - the Google trends data imo suggests it could,” he wrote on Twitter on Tuesday.

fillippone

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Another great tweet!
We already knew parameters were stable in time, but this comes as a nice confirmation!

Quote

So the biggest win today is that from now on, the 1 Million lost coins do nót have to be taken into account anymore. Because, even without discounting them, the model has been shown to have stabilizing coefficients. @phraudsta @BurgerCryptoAM @100trillionUSD

https://twitter.com/geertjancap/status/1204069538033209345?s=21

Stable parameters while using different subset are adding robustness to the model.

fillippone

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Quote from: fillippone on November 06, 2019, 08:10:34 AM

R^2=99% is impressive.
We know Bitcoin is digital gold, now we have the mathematical proof of it.

Quote

“Cyber-money will no longer be denominated only in national units like the paper money of the industrial period. It probably will be defined in terms of ounces of gold.”

-The Sovereign Individual (1997) Davidson & Rees-Mogg
#bitcoin

https://twitter.com/100trillionUSD/status/1192032782912040960?s=20

Very interesting reflection came out from this tweet:

https://twitter.com/cclerici/status/1192548291797569536

Quote

1/..@100trillionUSD applied the SF on the BTC price measured in gold. This model has a mind blowing 99% r^2. One thing anyway puzzles me: I can think BTCUSD going parabolic because USD breaks down... but BTCXAU? Is BTC going to break gold too? Digital gold breaking physical gold?

Quote

2/... Gold has worked in real terms for centuries because it was the only SoV around. If another (better) SoV is found, then Gold would drop to his intrinsic (industrial) value. This can trigger some steep BTCXAU appreciation. This is my only explanation, but still I am puzzled.

PlanB replied:

Quote

Puzzles me too. It could be that btc will extract monetary premium from gold, and then stocks, real estate etc, but that is just my first thought. Very interesting!

https://twitter.com/100trillionUSD/status/1192553080207945729

This means that when/if Bitcoin will succeed as a SoV, all other inferior SoV will be stripped of that function, returning to their "industrial value". This is a real paradigm shift.

Webetcoins

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Quote from: aardvark15 on November 18, 2019, 09:27:49 AM

Quote from: exstasie on November 13, 2019, 02:25:06 AM

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

Quote from: exstasie on November 12, 2019, 05:21:02 PM

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

I don't think it's really as "simple" as you say. Many people sell btc to buy altcoins for example, 300btc a day it's important but it's not the largest part of the sales.

Selling BTC for altcoins doesn't hurt BTCUSD prices.

In fact, the altcoin markets are very bullish for BTC. Instead of selling for fiat, BTC traders move their supply to altcoin exchanges instead. This makes for less available BTC supply on fiat exchanges. Altcoin investors also buy BTC off fiat exchanges to send to altcoin exchanges. Both these dynamics drive BTCUSD prices up.

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

If it's as simple as that why we are at the same price as 2 years ago while we are only 5 months before the halving now?
How do you explain that futures prices for the next year are so low?

Because markets take time to reverse from bear market to bull market. Bitcoin in particular moves in exaggerated boom-and-bust type cycles.

We are 6 months out from the halving. At this point in 2015, the market was trading at a 60% loss from the ATH. The market is currently down 55% from the ATH. Everything looks pretty normal to me.

The current price could basically be the bottom of the next exponential bull run that will start right before the halving and potentially peak 12-18 months after the halving with a price bubble. That is what we saw in the last 2 halvings.

So saying that investing in bitcoin at present moment is right thing to do, won’t be wrong at all. Better would be to say that this is the last chance to buy world’s most expensive asset at low value. We wont have same opportunity ever again. Halving brings good changes to all crypto currencies. This time will be the same also. So finally investors can stop waiting and complaining, and focus on getting more coins.

aardvark15

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Quote from: exstasie on November 13, 2019, 02:25:06 AM

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

Quote from: exstasie on November 12, 2019, 05:21:02 PM

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

I don't think it's really as "simple" as you say. Many people sell btc to buy altcoins for example, 300btc a day it's important but it's not the largest part of the sales.

Selling BTC for altcoins doesn't hurt BTCUSD prices.

In fact, the altcoin markets are very bullish for BTC. Instead of selling for fiat, BTC traders move their supply to altcoin exchanges instead. This makes for less available BTC supply on fiat exchanges. Altcoin investors also buy BTC off fiat exchanges to send to altcoin exchanges. Both these dynamics drive BTCUSD prices up.

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

If it's as simple as that why we are at the same price as 2 years ago while we are only 5 months before the halving now?
How do you explain that futures prices for the next year are so low?

Because markets take time to reverse from bear market to bull market. Bitcoin in particular moves in exaggerated boom-and-bust type cycles.

We are 6 months out from the halving. At this point in 2015, the market was trading at a 60% loss from the ATH. The market is currently down 55% from the ATH. Everything looks pretty normal to me.

The current price could basically be the bottom of the next exponential bull run that will start right before the halving and potentially peak 12-18 months after the halving with a price bubble. That is what we saw in the last 2 halvings.

Saint-loup

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Quote from: exstasie on November 13, 2019, 02:25:06 AM

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

Quote from: exstasie on November 12, 2019, 05:21:02 PM

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

I don't think it's really as "simple" as you say. Many people sell btc to buy altcoins for example, 300btc a day it's important but it's not the largest part of the sales.

Selling BTC for altcoins doesn't hurt BTCUSD prices.

In fact, the altcoin markets are very bullish for BTC. Instead of selling for fiat, BTC traders move their supply to altcoin exchanges instead. This makes for less available BTC supply on fiat exchanges. Altcoin investors also buy BTC off fiat exchanges to send to altcoin exchanges. Both these dynamics drive BTCUSD prices up.

But Coinmarketcap uses altcoin markets to calculate the BTC price

Quote

(1) Price (Market Pair)
The price for each individual market pair is calculated by taking the unconverted price reported directly from the exchange and converting it to USD using CoinMarketCap’s existing reference prices. Let’s take LTC/BTC market as an example:

Let (E) be the price of LTC/BTC reported directly from the exchange.
Let (C) be the last known reference price of BTC from CoinMarketCap in USD.
Let (D) be the derived price reported on CoinMarketCap for the market pair.

For this example, let (E) = 0.01 BTC / 1 LTC and let (C) = 10,000 USD / 1 BTC.

D = E * C
D = (0.01 BTC / 1 LTC) * (10,000 USD / 1 BTC) = 100 USD / 1 LTC

Therefore, the derived price for LTC/BTC on this specific market pair is $100 USD.

https://support.coinmarketcap.com/hc/en-us/articles/360034116491-Market-Data-Cryptoasset-Rank
https://coinmarketcap.com/currencies/bitcoin/markets/

If people sell btc for potatoes and potatoes worth 1$, of course it will affect the price discovery process.

exstasie

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Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

Quote from: exstasie on November 12, 2019, 05:21:02 PM

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

I don't think it's really as "simple" as you say. Many people sell btc to buy altcoins for example, 300btc a day it's important but it's not the largest part of the sales.

Selling BTC for altcoins doesn't hurt BTCUSD prices.

In fact, the altcoin markets are very bullish for BTC. Instead of selling for fiat, BTC traders move their supply to altcoin exchanges instead. This makes for less available BTC supply on fiat exchanges. Altcoin investors also buy BTC off fiat exchanges to send to altcoin exchanges. Both these dynamics drive BTCUSD prices up.

Quote from: Saint-loup on November 12, 2019, 07:06:15 PM

If it's as simple as that why we are at the same price as 2 years ago while we are only 5 months before the halving now?
How do you explain that futures prices for the next year are so low?

Because markets take time to reverse from bear market to bull market. Bitcoin in particular moves in exaggerated boom-and-bust type cycles.

We are 6 months out from the halving. At this point in 2015, the market was trading at a 60% loss from the ATH. The market is currently down 55% from the ATH. Everything looks pretty normal to me.

meanwords

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This thread itself is so deep. I never knew 2020 (which is next year) would have a great impact on the price flow of Bitcoin for the upcoming years. Merit to you sir. I don't understand some of the things since I'm not a native speaker and my knowledge of economics is not that deep but I do have questions.

I think the past halving was successful due to the fact that Bitcoin is still an infant. There's not much invested in it compared today and it isn't advertised as extensive as today. The last bull run was successful because of many factors like altcoins, ICO, even the scam Bitconnect, airdrops which is so extensive that even people without knowledge about Bitcoin gets to invest in it, and many more.

What if those factors didn't happen this year? does that mean the price of Bitcoin would decline significantly for the upcoming years? Why would more people buy Bitcoin just because it is halving? Well if we did get a Bull run up to 25k, will the model still continue or it's a fail?

Saint-loup

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Quote from: exstasie on November 12, 2019, 05:21:02 PM

Quote from: Saint-loup on November 12, 2019, 04:09:58 PM

Quote from: exstasie on November 12, 2019, 01:41:06 PM

Quote

Also, in traditional markets, price is rarely a function of supply. It’s more influenced by demand, which the S2F model does not take into account. In the absence of an established and widespread fundamental use case (for now), demand in crypto markets is narrative-driven.

Constant demand (all else being equal) would lead to a price increase, so the author is implying there is or will be a decrease in demand. I'm not sure that's a well-founded assumption, given that the numbers of crypto users continue to swell:

Why constant demand would lead to a price increase? The supply won't decrease like for a token burn for example, it will just increase less quickly...

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

I don't think it's really as "simple" as you say. Many people sell btc to buy altcoins for example, 300btc a day it's important but it's not the largest part of the sales. If it's as simple as that why we are at the same price as 2 years ago while we are only 5 months before the halving now?
How do you explain that futures prices for the next year are so low?

exstasie

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Quote from: Saint-loup on November 12, 2019, 04:09:58 PM

Quote from: exstasie on November 12, 2019, 01:41:06 PM

Quote

Also, in traditional markets, price is rarely a function of supply. It’s more influenced by demand, which the S2F model does not take into account. In the absence of an established and widespread fundamental use case (for now), demand in crypto markets is narrative-driven.

Constant demand (all else being equal) would lead to a price increase, so the author is implying there is or will be a decrease in demand. I'm not sure that's a well-founded assumption, given that the numbers of crypto users continue to swell:

Why constant demand would lead to a price increase? The supply won't decrease like for a token burn for example, it will just increase less quickly...

Price is not determined by the total supply, but rather the supply available for sale.

Inflation = new available supply. If inflation is lowered, there will be less coins available for sale because some portion of mining rewards will always be sold (covering mining overheads/liabilities and profit taking).

Constant demand + decreased supply = price increase. It's simple economics.

Saint-loup

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Quote from: exstasie on November 12, 2019, 01:41:06 PM

Quote

Also, in traditional markets, price is rarely a function of supply. It’s more influenced by demand, which the S2F model does not take into account. In the absence of an established and widespread fundamental use case (for now), demand in crypto markets is narrative-driven.

Constant demand (all else being equal) would lead to a price increase, so the author is implying there is or will be a decrease in demand. I'm not sure that's a well-founded assumption, given that the numbers of crypto users continue to swell:

Why constant demand would lead to a price increase? The supply won't decrease like for a token burn for example, it will just increase less quickly...

exstasie

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Quote from: Saint-loup on November 12, 2019, 01:10:37 PM

Interesting article :
Why Bitcoin’s Next ‘Halving’ May Not Pump the Price Like Last Time
https://www.coindesk.com/why-bitcoins-next-halving-may-not-pump-the-price-like-last-time

Thanks for posting. It's an interesting analysis and I'm glad to see some counterpoints to the bullish halving narrative.

Quote

While this model has its critics, it has undergone rigorous cross-examination, and it seems that the regression holds up. It also makes intuitive sense: a reduction in supply should enhance value, all else being equal. So why isn’t the price already heading up to that lofty level?

The reduction in new supply hasn't even occurred yet. It's impossible to predict when the reduction would be "priced in" by market demand.

Quote

Also, in traditional markets, price is rarely a function of supply. It’s more influenced by demand, which the S2F model does not take into account. In the absence of an established and widespread fundamental use case (for now), demand in crypto markets is narrative-driven.

Constant demand (all else being equal) would lead to a price increase, so the author is implying there is or will be a decrease in demand. I'm not sure that's a well-founded assumption, given that the numbers of crypto users continue to swell:

https://cointelegraph.com/news/number-of-crypto-users-nearly-doubled-in-2018-study-says
https://news.bitcoin.com/the-number-of-cryptocurrency-wallet-users-keeps-rising/

Saint-loup

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Interesting article :
Why Bitcoin’s Next ‘Halving’ May Not Pump the Price Like Last Time
https://www.coindesk.com/why-bitcoins-next-halving-may-not-pump-the-price-like-last-time

Also, in traditional markets, price is rarely a function of supply. It’s more influenced by demand, which the S2F model does not take into account. In the absence of an established and widespread fundamental use case (for now), demand in crypto markets is narrative-driven.

Last of the V8s

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Be a bank

Quote from: fillippone on October 18, 2019, 04:07:29 PM

Regarding the stack exchange expalination, I see a circular reference: he could have adjusted block reward to get different total amounts. What if started with 100 BTC as first reward? Or 60? We would end up having different maximum number of bitcoins. So it might be a miscalculation, or a little bit of luck, or a mi tire of the two, but I don’t buy the stack exchange post as an explanation on WHY 21 millions, rather than HOW...
So

quite right and I apologise for doubting you. Here's the real infos, showing the history:

Quote from: Cryddit on October 11, 2014, 10:28:14 PM

I remember this discussion, actually.

Finney, Satoshi, and I discussed how divisible a Bitcoin ought to be. Satoshi had already more or less decided on a 50-coin per block payout with halving every so often to add up to a 21M coin supply. Finney made the point that people should never need any currency division smaller than a US penny, and then somebody (I forget who) consulted some oracle somewhere like maybe Wikipedia and figured out what the entire world's M1 money supply at that time was.

We debated for a while about which measure of money Bitcoin most closely approximated; but M2, M3, and so on are all for debt-based currencies, so I agreed with Finney that M1 was probably the best measure.

21Million, times 10^8 subdivisions, meant that even if the whole word's money supply were replaced by the 21 million bitcoins the smallest unit (we weren't calling them Satoshis yet) would still be worth a bit less than a penny, so no matter what happened -- even if the entire economy of planet earth were measured in Bitcoin -- it would never inconvenience people by being too large a unit for convenience.

anon241469

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Quote from: fillippone on November 06, 2019, 08:25:41 AM

Quote from: anon241469 on November 06, 2019, 08:12:59 AM

<....>
- that's hardly proof. Why does Plan B use so few data points? A high R^2 is quite useless if you only pick the points that fit on the line. there are thousands of other points! Just read my paper, he could have found what I found!

He demonstrated that high stability in the parameters indipendently of the sample you use.
I only diagonally read your paper, for the moment, sorry.
You could better point out in the post what your conclusion are because they aren't clear reading abstract and conclusion paragraph, actually.

Yes, I know. But there is really no way to summarize it because it is difficult to explain, even in 4 pages. There is one reddit user who still doesn’t get it, even after I’ve tried to explain it further.

fillippone

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Quote from: anon241469 on November 06, 2019, 08:12:59 AM

<....>
- that's hardly proof. Why does Plan B use so few data points? A high R^2 is quite useless if you only pick the points that fit on the line. there are thousands of other points! Just read my paper, he could have found what I found!

He demonstrated that high stability in the parameters indipendently of the sample you use.
I only diagonally read your paper, for the moment, sorry.
You could better point out in the post what your conclusion are because they aren't clear reading abstract and conclusion paragraph, actually.

anon241469

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Quote from: fillippone on November 06, 2019, 08:10:34 AM

R^2=99% is impressive.
We know Bitcoin is digital gold, now we have the mathematical proof of it.

Quote

“Cyber-money will no longer be denominated only in national units like the paper money of the industrial period. It probably will be defined in terms of ounces of gold.”

-The Sovereign Individual (1997) Davidson & Rees-Mogg
#bitcoin

https://pbs.twimg.com/media/EIrzfXCXUAAiRl2?format=jpg&name=large

https://twitter.com/100trillionUSD/status/1192032782912040960?s=20

- that's hardly proof. Why does Plan B use so few data points? A high R^2 is quite useless if you only pick the points that fit on the line. there are thousands of other points! Just read my paper, he could have found what I found!

fillippone

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R^2=99% is impressive.
We know Bitcoin is digital gold, now we have the mathematical proof of it.

Quote

“Cyber-money will no longer be denominated only in national units like the paper money of the industrial period. It probably will be defined in terms of ounces of gold.”

-The Sovereign Individual (1997) Davidson & Rees-Mogg
#bitcoin

https://twitter.com/100trillionUSD/status/1192032782912040960?s=20

anon241469

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Everybody likes pictures, so here are the pictures from my paper:

https://i.imgur.com/ILuCNFj.jpg

https://i.imgur.com/VEomSf7.jpg

https://i.imgur.com/PNXor1c.jpg

https://i.imgur.com/6BeHWrI.jpg

https://i.imgur.com/FbJniPY.jpg

Topic: Stock-to-Flow Model: Modeling Bitcoin's Value with Scarcity - page 13. (Read 5740 times)