Topic: Why bitcoin will appreciate forever - page 9. (Read 20075 times)
What happened?
Any updates on this theory given the recent and significant sell off this week or based on the new retailers that have entered the market place accepting Bitcoin?
Clearly the price stability or appreciation is important to us all and there's not much thorough research on the topic.
Clearly the price stability or appreciation is important to us all and there's not much thorough research on the topic.
I saw a poll recently showing that about 80% of people are holding their coins, so the basic behavior has not changed much. But you can see from the chart, if everyone is investing for one year and then start to spend, the daily coin supply will actually rise year after year until the next reward halving
The natural appreciation tendency is caused by reward halving every 4 years, that will give a 19% appreciation each year when money inflow does not grow
However, even we had a huge boost in user adoption, that won't make a 10 fold increase in money inflow in one year. Money inflow can be several times higher than last year, resulting an exchange rate of several hundred dollars
Usually the technology shift causes lots of miners to lose the ability to mine and forced them to buy on exchanges, thus creating a rally. Now technology shift is over and daily coin supply will still be about 5000 coins. Since many new established large mining farms in china only sell the mined coins, the coin supply can be bigger than the time when ASIC first arrived. It is a test for how much money inflow the market really has
Anyway, a 19% increase in price during a time frame of one year is almost guaranteed, anything beyond that can be regarded as a bonus due to expoential increase in adoption and money inflow
To keep exchange rate at $500, for 5000 coins you need $2.5 million net inflow every day, that is about one apartment in big capital cities
this is a bullshit theory 
Any updates on this theory given the recent and significant sell off this week or based on the new retailers that have entered the market place accepting Bitcoin?
Clearly the price stability or appreciation is important to us all and there's not much thorough research on the topic.
Clearly the price stability or appreciation is important to us all and there's not much thorough research on the topic.
I'm thinking that eventually bitcoin will stand on its own. That is, you don't so much trade bitcoin for dollars and then dollars for bitcoin. Rather you earn bitcoin through your job or business and then spend them for the stuff you need and want - the people on the receiving end then spend the bitcoins and round and round it goes, no dollars needed.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
this is kinda what I am angling for by working on getting a community of people making something tangible that they have little to no money invested in making, just labor so we can start building a community that stands on crypto currency only.
possibilities are endless from making common lye used for making bio diesel to a number of other things like paper, to ferric chloride, both from table salt, using cheap ugly but still new and powerful solarcells that can cost as little as 14 cents per watt they output. I have found a way to extend the useful life of a solar cell too for anyone interested so you can either expand how long you can use them up to 5 times longer, or concentrate more light (reflectors made of anything but I plan on using MDF and aluminum foil) so you get 5 times more power RIGHT NOW but the lifespan is only as long as they are normally with out protection, thus you can get that value out of them faster rather than having to wait to get it.
There are tons of other things out there too that we can make at home easily if we only knew how to, so it is all down to figuring that out, and developing the skill set to allow the production and investing our spare time to do it for bitcoin or some other alt currency, instead of dollars or yuan
would be nice to figure out what our hourly time is actually work in a sort of community like that and use that to base our value on the bitcoin we collect for our work,
and we can be more flexible too by charging bitcoin for the products, and dollars (if you are in the USA) for shipping or something, till we have some people join the community that can and are willing to provide shipping for bitcoin.
Actually the "less than 10% cash out strategy" is a typical practice in today's fiat money system. For example, most of the QE money went into commercial banks' pocket by purchasing bad loans from them but they save all that money at FED and receive a 2% interest for those money, only those interest were spent. A typical pension scheme is also trying to spend the interest
Since bitcoin does not generate any interest (No one will use bitcoin to invest since itself is already the most profitable investment), the only way to benefit from bitcoin is to spend coins. But that is very positive, since it re-distribute the coin to other people and so on, not like today's system, rich people only spend the interest and their fiat money get more and more, thus the wealth distribution is extremely unbalanced after several generation
Since bitcoin does not generate any interest (No one will use bitcoin to invest since itself is already the most profitable investment), the only way to benefit from bitcoin is to spend coins. But that is very positive, since it re-distribute the coin to other people and so on, not like today's system, rich people only spend the interest and their fiat money get more and more, thus the wealth distribution is extremely unbalanced after several generation
I'm thinking that eventually bitcoin will stand on its own. That is, you don't so much trade bitcoin for dollars and then dollars for bitcoin. Rather you earn bitcoin through your job or business and then spend them for the stuff you need and want - the people on the receiving end then spend the bitcoins and round and round it goes, no dollars needed.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
Bitcoin stands on its own. It can be traded for other currencies and goods and services.
Currently it is most practical to value it in USD, but for users of the other major currencies Yen, Pound, Euro and Renminbi, those currencies could be used for valuation. The valuation used is normally the good/money or money/money pair that has the thickest market. If necessary the users can change that in no time. See "thick market" on investopedia.
I'm thinking that eventually bitcoin will stand on its own. That is, you don't so much trade bitcoin for dollars and then dollars for bitcoin. Rather you earn bitcoin through your job or business and then spend them for the stuff you need and want - the people on the receiving end then spend the bitcoins and round and round it goes, no dollars needed.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
As the bitcoin economy grows, each bitcoin will buy an increasing amount of stuff - its value is increasing because of its limited nature. But you never run out because bitcoins can be divided into tens of thousands of units. Perhaps one day 1/1000th of a bitcoin could purchase what one full bitcoin does today.
You need to consider the difference between the fiat price of bitcoin vs the purchasing power in goods and services of a bitcoin.
The fiat price will go up faster than the purchasing power so that the 100 dollar cash out becomes worth less and less over time.
This is due to fiat inflation vs increased utility of bitcoin as a store of value and way to transfer value over time.
The fiat price will go up faster than the purchasing power so that the 100 dollar cash out becomes worth less and less over time.
This is due to fiat inflation vs increased utility of bitcoin as a store of value and way to transfer value over time.
The cash out strategy is based on a percentage of bitcoin holding, nothing to do with exchange rate. You should also consider that not only fiat money can exchange bitcoin, but also anything else with a value (goods/services/gold/securities, etc...), they will further reduce the daily coin supply on the exchanges
Not if the Bitcoin market continue to get harass by US government. At this rate, every Bitcoin related market would be closed down and Bitcoin would had no value
Yeah, like remember all those other things folks claiming to be goverment officials claimed the right to confiscate? They really dropped in value didn't they.
Not if the Bitcoin market continue to get harass by US government. At this rate, every Bitcoin related market would be closed down and Bitcoin would had no value
These charts don't really make much sense. Bitcoin could drop significantly at any time and there is a possibility (albeit a small one) of an altcoin usurping bitcoin.
You need to consider the difference between the fiat price of bitcoin vs the purchasing power in goods and services of a bitcoin.
The fiat price will go up faster than the purchasing power so that the 100 dollar cash out becomes worth less and less over time.
This is due to fiat inflation vs increased utility of bitcoin as a store of value and way to transfer value over time.
The fiat price will go up faster than the purchasing power so that the 100 dollar cash out becomes worth less and less over time.
This is due to fiat inflation vs increased utility of bitcoin as a store of value and way to transfer value over time.
The exchange rate is fundamentally a measure of relative confidence with the supply and demand dynamics impacting the confidence considerably. The Bitcoin exchange rate is very unlikely to increase steadily. Predicting when exactly to exchange out 10% each year is actually much harder than imagined. Worse, if you expect it to continue to rise then why exchange out at all? If you take too much into Bitcoin and need to exchange some out to make purchases available only in fiat then that was a risk (some might call it a mistake).
The biggest confidence of bitcoin comes from the limited/fixed supply and unlimited demand. It can not be inflated by central banks, nor inflated by added gold producers. You can spend 10% per year by evenly distribute the spending throughout the year.
You start to cash out or spending when you have already accumulated enough coins, and if you cash out carefully, you won't affect the constantly shrinking supply trend. (Actually, even with a 100% cash out strategy (everyone sold all of their coin after one year), the daily coin supply will still stablize after 10 years, and it will only be 1 magnitude higher than a 10% cash out scenario, like 60,000 coins per day) And of course those 370,000 babies per day will not buy the coin when they were born, but when they grew up 20 years later. Currently you have more than 500,000 grown ups entering the bitcoin world everyday due to higher birth rate 20 years ago, and no old people die with bitcoin savings yet
Daily coin supply for 100% cash out strategy after a certain investment period
I think at current price level, those who have already accumulated >10k bitcoins are the major spenders in bitcoin economy. In fact, lots of bitcoin promoters today are those early adopters who accumulated enough coins and have the motivation to drive this ecosystem further
It is clear the OP is just beginning to understand the dynamics of this thing called Bitcoin (and many other things).
When I purchased my Bitcoins on an exchange, the coins came from someone (or perhaps multiple people) willing to sell them (the Bitcoins weren't created then and there new just for me). If I *ever* sell my Bitcoins on an exchange then they will go to someone et al willing to buy them; if there is no one then I won't be able to sell them at all, i.e. the effective exchange rate goes to zero. The number of Bitcoins doesn't go up or down per se during these exchanges.
The exchange rate (for example, USD/BTC) can vary (sometimes wildly) even when people brand new to Bitcoin are or are not purchasing their very first Bitcoins ever. The exchange rate is fundamentally a measure of relative confidence with the supply and demand dynamics impacting the confidence considerably. The Bitcoin exchange rate is very unlikely to increase steadily. Predicting when exactly to exchange out 10% each year is actually much harder than imagined. Worse, if you expect it to continue to rise then why exchange out at all? If you take too much into Bitcoin and need to exchange some out to make purchases available only in fiat then that was a risk (some might call it a mistake).
New people are born; old people die (for now). New people have little ability at first to purchase Bitcoins; they might be given some as gifts. Dying old people put their Bitcoins at risk of being lost if they don't take steps to make them available to their beneficiaries.
A wide variety of hopefully unlikely catastrophes can befall Bitcoin pushing confidence down; down even to zero.
When I purchased my Bitcoins on an exchange, the coins came from someone (or perhaps multiple people) willing to sell them (the Bitcoins weren't created then and there new just for me). If I *ever* sell my Bitcoins on an exchange then they will go to someone et al willing to buy them; if there is no one then I won't be able to sell them at all, i.e. the effective exchange rate goes to zero. The number of Bitcoins doesn't go up or down per se during these exchanges.
The exchange rate (for example, USD/BTC) can vary (sometimes wildly) even when people brand new to Bitcoin are or are not purchasing their very first Bitcoins ever. The exchange rate is fundamentally a measure of relative confidence with the supply and demand dynamics impacting the confidence considerably. The Bitcoin exchange rate is very unlikely to increase steadily. Predicting when exactly to exchange out 10% each year is actually much harder than imagined. Worse, if you expect it to continue to rise then why exchange out at all? If you take too much into Bitcoin and need to exchange some out to make purchases available only in fiat then that was a risk (some might call it a mistake).
New people are born; old people die (for now). New people have little ability at first to purchase Bitcoins; they might be given some as gifts. Dying old people put their Bitcoins at risk of being lost if they don't take steps to make them available to their beneficiaries.
A wide variety of hopefully unlikely catastrophes can befall Bitcoin pushing confidence down; down even to zero.
The recent polls (https://bitcointalksearch.org/topic/poll-miners-what-will-you-do-with-all-your-mined-coins-296264 and https://bitcointalksearch.org/topic/poll-your-trading-style-295753) indicated that majority of the miners and traders will select a less than 10% per year spending strategy, so this chart shows the daily coin supply under such a spending strategy
The chart showed different daily coin supply under 3 different scenarios: Investing for 1,2 or 4 years, then spend 10% each year afterwards
Under a 10% spending strategy, after about 16 years, the daily coin supply will be stabilized at a level around 5000-6000 bitcoins. The volatility for 2 and 4 year curve comes from the assumption that one group of investors only purchase during a 2 or 4 years period, in reality the curve should be much smoother, since there are investors starting anytime
So it is clear to see, under a 10% spending strategy, the future daily coin supply will never get above 5000-6000 coins, and if the investment increase due to more population or higher productivity, the coin value will appreciate forever
Even all the existing person have already fully invested in bitcoin, there are still 370,000 babies born every day. Suppose that each day same amount of person start to invest in bitcoin, and they are competing for those 5000 coins, they would averagely get 0.0135 coin per person
Suppose that each person need $ 1,350,000 for a comfortable retirement, and they put all those savings into bitcoin and get 0.0135 coin, e.g. 1,350,000 satoshi, this means 1 satoshi = 1 usd, 1 BTC will worth 100 million dollars, this might be the highest possible value bitcoin can achieve
The chart showed different daily coin supply under 3 different scenarios: Investing for 1,2 or 4 years, then spend 10% each year afterwards
Under a 10% spending strategy, after about 16 years, the daily coin supply will be stabilized at a level around 5000-6000 bitcoins. The volatility for 2 and 4 year curve comes from the assumption that one group of investors only purchase during a 2 or 4 years period, in reality the curve should be much smoother, since there are investors starting anytime
So it is clear to see, under a 10% spending strategy, the future daily coin supply will never get above 5000-6000 coins, and if the investment increase due to more population or higher productivity, the coin value will appreciate forever
Even all the existing person have already fully invested in bitcoin, there are still 370,000 babies born every day. Suppose that each day same amount of person start to invest in bitcoin, and they are competing for those 5000 coins, they would averagely get 0.0135 coin per person
Suppose that each person need $ 1,350,000 for a comfortable retirement, and they put all those savings into bitcoin and get 0.0135 coin, e.g. 1,350,000 satoshi, this means 1 satoshi = 1 usd, 1 BTC will worth 100 million dollars, this might be the highest possible value bitcoin can achieve
I went a little bit deeper into this analysis, here is a screen shot of my excel sheet:
In the upper part of the chart, each row represent part of the coin supply, row 2 represent the number of coins coming from daily mining reward, row 3 through row 9 are number of coins sold by a corresponding row of investors in the lower part of the chart
In the lower part of the chart, each row represent the number of coins that a group of investors hold
Take Row 29 for example: This group of investors mine/purchase all the daily coin mined during the first 4 years period, the number of coins they hold rise year after year. From the 5th year, they stop buying and start to sell part of their holdings every year, at a rate that is defined in cell A1(10% in this chart), so their number of coins shrink continuously through F29, G29, etc...
Row 30: From the 5th year, another group of investors enter the market, they have the same strategy: First save for 4 years and then spend 10% each year. Notice that they could only mine/purchase 6480 coins per day: F2 (daily coin generation) and F3 (cash out by the first group of investors)
Row 31 means another group of investors from the 9th year enter the market, and they could only get 6120 coins per day due to a summarize of J2,J3 and J4 (J3 and J4 are spending from 1st and 2nd group investors)
Row 23 is a summarize of all the coin supply from the upper part of the chart, e.g. the total daily coin supply on market
In the upper part of the chart, each row represent part of the coin supply, row 2 represent the number of coins coming from daily mining reward, row 3 through row 9 are number of coins sold by a corresponding row of investors in the lower part of the chart
In the lower part of the chart, each row represent the number of coins that a group of investors hold
Take Row 29 for example: This group of investors mine/purchase all the daily coin mined during the first 4 years period, the number of coins they hold rise year after year. From the 5th year, they stop buying and start to sell part of their holdings every year, at a rate that is defined in cell A1(10% in this chart), so their number of coins shrink continuously through F29, G29, etc...
Row 30: From the 5th year, another group of investors enter the market, they have the same strategy: First save for 4 years and then spend 10% each year. Notice that they could only mine/purchase 6480 coins per day: F2 (daily coin generation) and F3 (cash out by the first group of investors)
Row 31 means another group of investors from the 9th year enter the market, and they could only get 6120 coins per day due to a summarize of J2,J3 and J4 (J3 and J4 are spending from 1st and 2nd group investors)
Row 23 is a summarize of all the coin supply from the upper part of the chart, e.g. the total daily coin supply on market
The motivation behind alt-coin is very clear: Many people missed the chance to be an early adopter of bitcoin, they saw the huge benefit of being an early adopter of bitcoin (much less difficulty and much more coins), and want to become an early adopter of an alt-coin
But this is the same as time travel trading. When thousands of geeks were mining bitcoin with their CPUs and GPUs, the price of bitcoin were very low, they never knew that one bitcoin will worth $100 today, just like today's miner never know if one bitcoin will worth $10,000 some time in the future
And, just as my analysis revealed, the early adopter's sell pressure will only be temporary during the first several years, it becomes less and less each year, for all the people joined after the first reward halving, they won't be affected too much
I made the chart again from 2009 (Edit: corrected an error in previous calculation, those cashed out coins would be bought together with newly mined coins and they will increase the daily coin supply until each reward halving)
For 10% cash out strategy, the coin supply will be shrinking slowly. The 20% cash out strategy would keep the coin supply constant, and 50% cash out each year will cause the daily coin supply to increase very fast. A price appreciation can be projected if cash out less than 20% per year
Looking back at 2011-2012, the coin supply actually increased a lot (over 10000 coin per day) due to the cash out pressure from early adopters, maybe that is the reason the last price crash is much more severe than this time (it crashed from 30 to 3)
This chart is just a hypothesis, we all know that there are many coins never moved since they were mined, the actual cash out speed could be less than 5% per year
But this is the same as time travel trading. When thousands of geeks were mining bitcoin with their CPUs and GPUs, the price of bitcoin were very low, they never knew that one bitcoin will worth $100 today, just like today's miner never know if one bitcoin will worth $10,000 some time in the future
And, just as my analysis revealed, the early adopter's sell pressure will only be temporary during the first several years, it becomes less and less each year, for all the people joined after the first reward halving, they won't be affected too much
I made the chart again from 2009 (Edit: corrected an error in previous calculation, those cashed out coins would be bought together with newly mined coins and they will increase the daily coin supply until each reward halving)
For 10% cash out strategy, the coin supply will be shrinking slowly. The 20% cash out strategy would keep the coin supply constant, and 50% cash out each year will cause the daily coin supply to increase very fast. A price appreciation can be projected if cash out less than 20% per year
Looking back at 2011-2012, the coin supply actually increased a lot (over 10000 coin per day) due to the cash out pressure from early adopters, maybe that is the reason the last price crash is much more severe than this time (it crashed from 30 to 3)
This chart is just a hypothesis, we all know that there are many coins never moved since they were mined, the actual cash out speed could be less than 5% per year
Some argue that while no current altcoin offers any significant improvement over bitcoin, "someday" it will happen....Well, take a look at betamax versus vhs. Betamax was unquestionably the superior format. But they lost the format war because they came 2nd. I predict the same fate for any new altcoin startup.
Great example, nothing will ever top VHS right? it has first mover advantage, meaning no superior video formats will ever replace it.
Consumer products and money are very different
Money must be able to carry value through decades, people put their value and trust in money, highest credibility and popularity is the key
Most of the credibility of bitcoin come from its limited total supply. Alt-coins are inflation in the crypto currency world, this is against the idea of deflative currency, and dilute the wealth in crypto currency world. Even they are technically superior, they are politically wrong
I have mined several different coins but most of them disappeared after 1 year, finally I realized that people here don't want their wealth to be stolen by inflation, be it a central bank or an alt-coin
1. Value of bitcoin started at 0, and after some time had a value. If you want to apply a function for that transition, it can not be exponential, because the exponential function will all ways be 0. Something easy: additional, or maybe magical.
The value maybe never started at 0, since there is a cost, no matter how small it is. Running CPU mining on a computer still need some hardware investment and electricity and maintenance
Don't agree with this one, we don't support valuation base on cost around here, only subjective valuation from the market.
2. In the beginning, the value will be exponential, for two reasons: each new user spawns new users, and, the coins are more usable for indirect trade as there will be more traders with bitcoins.
3. As all humans in the world get on (or all that wants to use bitcoins), the number of new users will flatten. 2 and 3 represents an S-curve.
4. When the adoption is completed, we have only left growth in productivity, natural expansion of the user base because the world population increases, and lost coins. All these means lower prices measured in bitcoins (price deflation, higher bitcoin value).
3. As all humans in the world get on (or all that wants to use bitcoins), the number of new users will flatten. 2 and 3 represents an S-curve.
4. When the adoption is completed, we have only left growth in productivity, natural expansion of the user base because the world population increases, and lost coins. All these means lower prices measured in bitcoins (price deflation, higher bitcoin value).
Yes, an exponential increase in the user base will cause the price to rise quickly, but due to there are always new baby born each day, the new users that start to purchase bitcoin will stay relatively stable after a full saturation of existing potential users
In such a situation, the price appreciation will purely depend on the population growth and productivity growth. Suppose that population growth is 0, e.g. every day same amount of new people start to purchase bitcoin, then productivity growth will decide the growth of the bitcoin value. Since there will never be liuquidity problem with bitcoin, the productivity growth will always be at their optimum speed
Mostly agree. You forgot the lost coins. The consequence of all this is, yes, bitcoins will appreciate forever, but hopefully eventually rather slowly so it does not disturb the day to day trade.
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