"It's going up forever, Laura!" and the futility of Bitcoin day-trading
[This started as a one-paragraph reply to one of Jay's posts, but it grew uncontrollably, so I decided to post it on its own.]
As with any non-deterministic variable, Bitcoin price is volatile. And volatility means ups and downs. What many people fail to realize is that these short-term ups and downs are actually noise. Maybe not white noise, it's almost always tainted by various events like Elon's tweets, China's bans, futures' expiry dates and a million other things, but it's still essentially noise. And noise is a random process (i.e., a "roll of a dice" case, albeit a loaded dice at times). Would anyone in their right mind bet their Bitcoin stash on the roll of a dice? Would that really be a viable long-term winning strategy?
Short-term Bitcoin price action is noise (i.e., unpredictable in any practical sense), and yet there are day-traders ("daytarders", as I like to call them), who try to predict short-term price movement using all sorts of fancy tools and techniques, hoping to catch the market and make a profit. To me, it all feels like those mad "scientists", usually of poor theoretical scientific background, desperately trying to build a perpetual motion machine by using elaborate, complex contraptions, while the laws of thermodynamics explicitly state that this is not possible. To me, consistently profitable Bitcoin day-trading is almost as futile as trying to build a perpetual motion machine.
But the big question is this: why worry about the short-term volatility, when we can predict the long-term trend with pretty good accuracy? Long-term price action is much less noise and much more math and science, as has been repeatedly pointed out by Bitcoin advocates such as Andreas Antonopoulos, and as can be clearly seen by studying the protocol itself. Saylor has been screaming about it for some time now, I wonder how many understand him. Money is energy. Monetary energy. The laws of thermodynamics state that energy is conserved. You cannot have a working system when you have an energy leak. And what do banks of the fiat system do? They introduce leaks into their own monetary system "by design" (they call it inflation), and subsequently dilute their monetary units (fiat currencies) by having their money printers go brrrrrrrrrr... That's some "perpetual money machine" to the untrained eye, except that there's nothing perpetual about it. It's actually dissipative, repeatedly diluting and dissipating our wealth into piles of fiat paper money that are worth less and less each day goes by. This is the laws of thermodynamics in action, proving once more that "there is no free lunch" in the universe.
Bitcoin is the one and only monetary network in the history of mankind, which respects the laws of thermodynamics, as they pertain to monetary energy. But wait! Has this all become too complex? Is there too much math & science involved? Is there some complex equation we should all learn and understand? How about 1 BTC = 1 BTC? Is this simple enough? This, and the fact that there will only be at most 21,000,000 BTC in existence, ever. An equation and an upper bound -- these are the only two things necessary to predict the future behavior of this system. This is possible because it is a thermodynamically closed system. This has nothing to do with volatility, but with the long-term trend. It's like filtering out the noise and observing the resulting smooth, clean, upward curve. This is what the moving-average indicators do, which I consider about the only meaningful metrics when it comes to Bitcoin trend analysis.
As Saylor puts it: "It's a gift. Once in a thousand years do you actually see the invention of a fundamentally new thing, this is our once in a thousand years opportunity. You get to buy into it early, what would it be like if you owned 10% of all the electricity that's ever going to be pumped, or what if you could buy 1% of all the running water that's ever going to be pumped? That's what this is, it's 1% of all the fire that's ever going to be lit. You have a chance to buy a percentage of the future. Seems like a no-brainer to me."
"It's going up forever, Laura!" That's the only thing anyone really needs to know about Bitcoin.
[This started as a one-paragraph reply to one of Jay's posts, but it grew uncontrollably, so I decided to post it on its own.]
As with any non-deterministic variable, Bitcoin price is volatile. And volatility means ups and downs. What many people fail to realize is that these short-term ups and downs are actually noise. Maybe not white noise, it's almost always tainted by various events like Elon's tweets, China's bans, futures' expiry dates and a million other things, but it's still essentially noise. And noise is a random process (i.e., a "roll of a dice" case, albeit a loaded dice at times). Would anyone in their right mind bet their Bitcoin stash on the roll of a dice? Would that really be a viable long-term winning strategy?
Short-term Bitcoin price action is noise (i.e., unpredictable in any practical sense), and yet there are day-traders ("daytarders", as I like to call them), who try to predict short-term price movement using all sorts of fancy tools and techniques, hoping to catch the market and make a profit. To me, it all feels like those mad "scientists", usually of poor theoretical scientific background, desperately trying to build a perpetual motion machine by using elaborate, complex contraptions, while the laws of thermodynamics explicitly state that this is not possible. To me, consistently profitable Bitcoin day-trading is almost as futile as trying to build a perpetual motion machine.
But the big question is this: why worry about the short-term volatility, when we can predict the long-term trend with pretty good accuracy? Long-term price action is much less noise and much more math and science, as has been repeatedly pointed out by Bitcoin advocates such as Andreas Antonopoulos, and as can be clearly seen by studying the protocol itself. Saylor has been screaming about it for some time now, I wonder how many understand him. Money is energy. Monetary energy. The laws of thermodynamics state that energy is conserved. You cannot have a working system when you have an energy leak. And what do banks of the fiat system do? They introduce leaks into their own monetary system "by design" (they call it inflation), and subsequently dilute their monetary units (fiat currencies) by having their money printers go brrrrrrrrrr... That's some "perpetual money machine" to the untrained eye, except that there's nothing perpetual about it. It's actually dissipative, repeatedly diluting and dissipating our wealth into piles of fiat paper money that are worth less and less each day goes by. This is the laws of thermodynamics in action, proving once more that "there is no free lunch" in the universe.
Bitcoin is the one and only monetary network in the history of mankind, which respects the laws of thermodynamics, as they pertain to monetary energy. But wait! Has this all become too complex? Is there too much math & science involved? Is there some complex equation we should all learn and understand? How about 1 BTC = 1 BTC? Is this simple enough? This, and the fact that there will only be at most 21,000,000 BTC in existence, ever. An equation and an upper bound -- these are the only two things necessary to predict the future behavior of this system. This is possible because it is a thermodynamically closed system. This has nothing to do with volatility, but with the long-term trend. It's like filtering out the noise and observing the resulting smooth, clean, upward curve. This is what the moving-average indicators do, which I consider about the only meaningful metrics when it comes to Bitcoin trend analysis.
As Saylor puts it: "It's a gift. Once in a thousand years do you actually see the invention of a fundamentally new thing, this is our once in a thousand years opportunity. You get to buy into it early, what would it be like if you owned 10% of all the electricity that's ever going to be pumped, or what if you could buy 1% of all the running water that's ever going to be pumped? That's what this is, it's 1% of all the fire that's ever going to be lit. You have a chance to buy a percentage of the future. Seems like a no-brainer to me."
"It's going up forever, Laura!" That's the only thing anyone really needs to know about Bitcoin.
Great post. My favorite thing in that clip is when Saylor asks if you were able to would you buy 1% of all the fire, or all the water that would be pumped. He is framing The Bitcoin Network correctly when he does that. He realizes that RIGHT NOW he is able to buy 1% of the TOTAL base asset traded on what will be the Earth's primary monetary network, an invention as important as fire. He has made his fortune by being able to see the really big shifts in the technological landscape and putting his money directly into those things. And he has realized that NOTHING he has seen in his WHOLE LIFE is even CLOSE to the magnitude of this nascent network.
Even the internet and the pocket super computer. Which are the inventions that made him the fortune that allowed him to leapfrog all us early bitcoinners and become one of the richest humans in history (not yet, but he will be).
This is also why I will STILL risk my reputation and say that the "supercycle" is still in play. In that clip he says he does not expect an 80% drawdown. And I still agree with him. I would imagine the short sighted Shin has already baked herself a cake after the 55% drop we HAVE seen. I am sure in her mind that proved the validity of her question. And I suppose it sort of did, though it did not invalidate Saylor's answer at all. As you put it "Who in their right mind would roll the dice with their Bitcoin?" Many have, and the battlefield is littered with the corpses, and scratched up lambos.
But I still see this pullback of the most recent breathtaking bull run as the first HUGE wave of a continuing series of waves on the ascent that we have all dreamed about.
Why the HELL are we still asking "Wen Moon"? Are we THAT greedy? Maybe a little. But also we all know we still have not seen it yet. Bitcoin WILL find a fairly stable price in our lifetimes. And that will involve a very violent series of moves up in value. We have not seen that really complete yet.
But we are about to.
Carolina.
