Topic: Will scarcity ever come into play? (Read 364 times)

Isnt this already a factor, the lack of whole coins available means the price has risen because users is higher then 21 million.   So the bits are the real tradable currency more then the idea of swapping bitcoins, that means we get that higher pricing which maintaining liquidity and free exchange in a fungible way.




I'm just very quickly pulling this from google but we are likely way ahead of basic demand.    What really matters to me is how often are users reusing the Bitcoin blockchain to do their purchases, or value exchange, forex or whatever use they have.    A daily use by millions would be great but its very hard to measure because this is a global market not centered in any one place

Where did I say otherwise?

Speculative value means volatility, but volatility means that high prices are followed by low prices and vice versa (read, you can ride the spread). Whether this value is intrinsic or not is irrelevant here as there is no "intrinsic" value because all value is entirely subjective and marginally subjective at that. If you have 10 apples, adding 1 more apple won't give you a lot more pleasure in eating it, so the "eating" value of 1 additional apple is essentially 0 to you (so-called marginal utility applied to apples and similar fruits). If there is only this value at play (i.e. you can't give the apple to someone else or sell it), then it will be pretty much useless to you in these circumstances


Labor theory of value has been proven wrong right after its emergence. In other words, an abstract piece of bread costs so much only because people are willing to pay for it as much. If they aren't, the producer either lowers the price till people start buying it or stops baking bread at all, selling out the leftovers for pennies or giving them away for free

Speculative value doesn't mean high prices, it means whatever the value is it is speculative since it doesn't have an instinct value. If you buy a bread it has a value because it cost money to make it, if you buy an iphone it has a value just like bitcoin because it costs maybe 20 dollars for apple and its not 25 dollars to sell, hence people value it high enough to give it a high price.

There are some stuff in the world that people think that has a value because of the capital required to make it but most stuff do not have that type of value, most has value because of the "hype" around it. Look at Tesla cars, they definitely cost a lot to make but considering they do many things to drop the price and still sell really really high priced cars we can say that the line you need to wait to get a car and pay now but get the car 3 months later type of deals are the reason why Tesla cars worth this much.

Bitcoin is the same it has a speculative value because we all give importance to it, sometimes we don't care about it and the price drops and that is still speculative value, otherwise if it was because price of the resources dropped and less capital required to create a bitcoin that would be instinct value but since its not like that the rises and falls all come under the speculative value term.

But why do other people value it?

Because it can help them reach their goals. In this respect, even speculative value is technically value which consists in allowing people to earn money (say, the American dollar) via speculation. The problem with it is that it is even less intrinsic than any other value that Bitcoin might have (e.g. transactional utility) as with prices stagnating (which we see now), it won't be very useful for this goal, and thus will start losing its speculative value. Whether it will acquire real value in the process (due to "stable" prices) depends

because other people value it.

money has value via network effect. it's not entirely rational what gets chosen as money. it's just something that organically evolves in society. central banks don't store value in gold because it has some limited industrial uses worth a small fraction of its total capitalization. they store value in gold because other people value it.

other historical forms of money have had zero inherent utility. cowry shells, for example.


if nobody used bitcoin, it would be useful for none of those things. bitcoin has no inherent value or utility.

Exactly.

The question fails to realize that scarcity is always in play. If it weren't scarce (if there were near-infinite supply) bitcoin would be worthless right now. The same coins are not simply traded back and forth at all. The only coins that are traded are the ones that people decide to sell. Scarcity has and always will be in play at all times, this is what leads to bitcoin having a price - supply(scarcity) and demand.

I noticed that too with certain local exchanging services. Every chunk of Bitcoin they had in their reserve was sold in a matter of seconds. Refresh page, 2.5BTC in reserve, refresh again, 0BTC in reserve, and that went on for weeks. It went so far, that one of these services paid like 5% over spot to have people sell coins to them, and they still didn't manage to get people to sell enough coins to them to meet the demand.

It was pure madness, but these hype phases don't last long as we have seen. Current valuations look way healthier and stimulate smart money to enter and accumulate.

to point out something interesting regarding this I have to say that technically "scarcity of bitcoin" which comes from its maximum cap at 21 million is not written or hard coded anywhere. that is yet another beauty of bitcoin that its maximum is determined mathematically not with some limit written somewhere in the code.

Scarcity alone won't suffice

If something is scarce, it doesn't mean that it will have a price tag attached. It should also be useful for something. Really, why would you care about something which is of no help to you? Will you care if it is scarce or not? Bitcoin has a price tag because it is not just scarce but it is also useful at that for a variety of things like a store of value, a means of payment, a device for transferring wealth, and also as a vehicle for speculation (we can't discard such a use)

What makes you think that there's the same number of coins on exchanges? Coins are moving in and out all the time. But even if we agree with your assumption, then you've already got your answer - the price is determined by supply and demand, and if demand is growing, but supply is the same, then the price is rising.

However, you can't just assume that all coins that are out of exchanges can for some reason be ignored. During the last bubble we had a huge transaction backlog near the top of the bubble, which means that a lot of Bitcoin were moved to exchanges in order to sell them.

What do you mean? The controlled scarcity of bitcoin that is hard coded and can't be manipulated is the one of the characteristics that makes bitcoin valuable and a store of value in the long run. Unlike fiat, it can't be manipulated by a single entity.

I think you're misunderstanding the term scarce here. Bitcoin is scarce, which is why there is a price to trade it on exchanges. If it could be obtained infinitely then it wouldn't have a value at all.

So yes, scarcity will and already is in play in determining the value of bitcoin. And in the long run, this scarcity will only increase as demand increases and the disinflationary curve of bitcoin slows down in new currency creations.

That is in fact a double-edged sword

Which also cuts both ways at that. At first, scarcity may actually contribute to giving Bitcoin real value as that's one of the factors required for a currency to be money (even as a purely speculative asset). It kinda goes without saying and is easily understood by everyone and his dog. But then, after a certain point, scarcity becomes a hindrance since it starts to create imbalances and interferes with further expansion and adoption until it actually prevents this expansion and adoption from achieving their true potential determined by the real value of something (in this case, Bitcoin)

it is already in play and will continue to have a bigger impact as we move forward and we get more adoption. the way scarcity comes in is when we talk about supply and demand and when i say "move forward" i am talking about increasing adoption or demand for bitcoin. and since it is capped the price continues rising stronger than if there was no cap.

additionally scarcity or having a cap is a good thing because the monetary supply of bitcoin is clear that way. so it helps with the transparency and with speculating the future of it compared to if there were no cap.

Scarcity is definitely going to play out one day.  It is a well known fact that bitcoin is going to be one day mine all and from there only what we have in circulation will be traded.  That is going to create scarcity and we would have it difficult to buy then and that is going to push bitcoin price upwards.

I think not only because of scarcity but also in terms of demand, the increasing demand will make the value increase.

I was not aware something like that happened since I have never sold my bitcoin for fiat but do not worry those days will come back again and things will get even more outrageous, when the US stopped convertibility of their fiat to gold during the Nixon shock few years later they had to face the oil crisis in which the OPEC raised the prices of oil and in the US some gas stations gave priority to those that had gold and silver to pay and I expect in the future something similar happening with bitcoin.

From Wikipedia

https://en.wikipedia.org/wiki/1973_oil_crisis
https://en.wikipedia.org/wiki/Nixon_shock

Don't know if anyone remembers but actually in Nov-Dec 2017 there was a shortage of bitcoins to sell and a particular exchange and several Bitcoin ATMs had to halt any sales.

I think it was some India type of Bitcoin exchange and they had to halt their trading temporarily because there wasn't enough supply to fill any orders.

Same with Bitcoin ATMs, many didn't have any BTC left to sell so they either marked up the premium or just temporarily disasbled selling. If you were lucky and wanted to actually Sell BTC for cash, they even waived the fees and you could cash out for free.

Those were the days...

if it were the same number of coins changing hands then the price would have never gone up or down! it is the change in supply and demand that is causing the rises and falls. for example in 2017 when there was a surge of adoption (aka demand) there were more buyers than sellers which meant price went up from around $800 to the moon.

it is not about "shortage" it is about being deflationary. which basically means we won't see unlimited amount of money (ie. BTC) printed out of control!

The answer is of course. As demand increases, those coins being batted back and forth get bought and held, and the ones doing the batting back and forth slow their asses down - price goes up.
That was the easy question of the day. Wtf did you think happened Dec 2017?!

Scarcity is always into play, but the strength of such factor is not strong at the moment since the demand is low, if at some point in the future our predictions about bitcoin becoming adopted by an important amount of the world population becomes true you will see scarcity being the dominant factor when it comes to determine the price of bitcoin since the amount of bitcoin being created is going down with each halving while the demand goes up.