[2013/2018 Paper] The False Premises and Promises of Bitcoin

[fingoals]

Just ran across this paper authored by Brian P. Hanley. Quite an interesting read. And, perhaps, ironic, considering recent developments in the ecosystem.

https://arxiv.org/abs/1312.2048

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

[hoofaman]

Won’t be surprised to see BTC hit $50k in 2021.

It will probably be 50k next month

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

It will probably be 50k next month

Well, until 3D printing technology catches up, crazed central bankers can’t just “print” land, houses, cars, TVs, and other useful “stuff”.

[fingoals]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

[ohboy!]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

I agree with your assessment. Over $50k looks pretty certain and $80k looks likely. $100k could be a big barrier. I imagine a big fall ($10kish) and another big run within 5 years that eclipses $100k. I own bitcoin but $100k won’t change my life. $4k Ethereum would though.

[spanky123]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

I use a ouija board. Much cleaner than goat entrails.

[ohboy!]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a few months ago and there’ll be another one in 2024 I think. You don’t need an astrophysics degree here...

Edited because I had to look up the predicted date of the next halving in light of later more informed posts.

[bogivan]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

This halving cycle so far compared to the previous two:

[ElJefeDelQueso]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

This halving cycle so far compared to the previous two:

Some have pointed to modest correlation to a 'stock to flow' model of scarcity. This suggests possible at least transient movement to the low six figures by 2022-2023 timeframe assuming persistent demand in the face of inelastic supply.

https://medium.com/@100trillionUSD/mode ... fa0fc03e25

Live update:
https://digitalik.net/btc

[ohboy!]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

Happened in May. Next one won’t be for years. Last I checked prediction was spring 2024.

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

Happened in May. Next one won’t be for years. Last I checked prediction was spring 2024.

Thanks you’re correct I should have looked it up before posting, and I’ve corrected my post. Point is the same, they drop a bit periodically and it cuts the mining rate in half, increasing the rarity. Anyone investing in BTC should have this stuff at top of mind (which is why I had to look it up!)

[fingoals]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

Thank you for sharing your thoughts. I was surprised by a complete lack of the paper's mention and analysis of the store of value arguments (pro & contra).

On one hand, psychological barrier is a good argument. On the other hand, looking at how easy BTC price broke such previous barriers, I'm not so sure. Perhaps - and most likely - recent BTC price dynamics is the effect of momentum and soon we will see a relevant correction. At least, many people thought that way before BTC has hit the $30K mark. I think that the correction will push the price down to $20K (or, perhaps, $15K, at the most), after which the uptrend will continue (until the next cycle based around the halving process cadence). The pace of the uptrend in 2021 will most likely be driven more by institutional investors rather than individual ones.

My crystal ball says that, by the end of 2021, BTC could reach somewhere from your very conservative "target price" ($50K-$80K) to $150K (moderate estimate) up to $200K (in case of very active institutional investor involvement and lack of any essential government restrictions). It is my understanding that most of BTC price estimates and predictions are based on the stock-to-flow (S2F) model: https://medium.com/@100trillionUSD/bitc ... d260feed12 (I'm curious about what people here think about it).

[oldfort]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

When you put money in a bank, it doesn't get hoarded in a vault until you need it again. The bank loans it out to people who can make purchases with it.

[fingoals]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

When you put money in a bank, it doesn't get hoarded in a vault until you need it again. The bank loans it out to people who can make purchases with it.

If only that (i.e., deposited) money would be loaned ... Unfortunately, under fractional reserve system, it gets mixed with "out-of-thin-air" money ...

[dmcmahon]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

Thank you for sharing your thoughts. I was surprised by a complete lack of the paper's mention and analysis of the store of value arguments (pro & contra).

On one hand, psychological barrier is a good argument. On the other hand, looking at how easy BTC price broke such previous barriers, I'm not so sure. Perhaps - and most likely - recent BTC price dynamics is the effect of momentum and soon we will see a relevant correction. At least, many people thought that way before BTC has hit the $30K mark. I think that the correction will push the price down to $20K (or, perhaps, $15K, at the most), after which the uptrend will continue (until the next cycle based around the halving process cadence). The pace of the uptrend in 2021 will most likely be driven more by institutional investors rather than individual ones.

My crystal ball says that, by the end of 2021, BTC could reach somewhere from your very conservative "target price" ($50K-$80K) to $150K (moderate estimate) up to $200K (in case of very active institutional investor involvement and lack of any essential government restrictions). It is my understanding that most of BTC price estimates and predictions are based on the stock-to-flow (S2F) model: https://medium.com/@100trillionUSD/bitc ... d260feed12 (I'm curious about what people here think about it).

You could be right. If it gets through likely resistance at 100k then Katy bar the door. I’m guessing there’s a near-term floor in the 15-20k range, too many potential buyers will feel they missed out in that range and pile in on a pull-back. There is almost no way to value it on traditional metrics. I don’t think this would be happening in 2020-2021 absent the massive COVID money printing. What we’re seeing is IMO a pull-forward of a process that was going to take a decade. Not clear how the party ends. There’s never a goat around when you need one!

[ohboy!]

Won’t be surprised to see BTC hit $50k in 2021.

Compared to other predictions floating elsewhere, your expectation for BTC price in 2021 is very conservative.

Ok $80k. But not $100k, that’ll be a big psychological barrier. And yes I’m serious. And no, I still wouldn’t touch it with a 10 foot pole. Feel free to laugh at me in a year’s time.

OK, I can’t seem to read more than the abstract at the link. Just reading it I can see points of agreement and disagreement with the authors.

The statement that hoarding is not saving seems overly dismissive. In the real world, you really only have two ways to defer income towards later consumption, one is investing, and the other is stockpiling. Investing means putting the excess production into capital goods and infrastructure with the expectation that the net returns from said capital goods will be greater than the amount put into it. Stockpiling is in general impractical, but one can stockpile goods with anticipated trade value for future goods. Some purchases, such as homes, straddle the two worlds (is a house a capital good, or a stockpiled “housing” expense?).

When you are being “paid” in a fiat currency and you put the money in the bank, what do you have? A promise of future payment by the government that issued the fiat. Is that investing or stockpiling? If the fiat currency is being created far in excess of the collective value of efforts being rewarded with it, what then?

When you put money in a bank, it doesn't get hoarded in a vault until you need it again. The bank loans it out to people who can make purchases with it.

See BlockFi, or Celsius. Or more leveraged options out there. If you aren’t securing your own crypto/keys it’s likely they are being lent out. BlockFi pays 6% currently to hold your bitcoin for you. Similar on Celsius. Higher yields on stable coins.

[NoRegret]

Based on what? Your intuition? Your crystal ball?

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

This halving cycle so far compared to the previous two:

Some have pointed to modest correlation to a 'stock to flow' model of scarcity. This suggests possible at least transient movement to the low six figures by 2022-2023 timeframe assuming persistent demand in the face of inelastic supply.

https://medium.com/@100trillionUSD/mode ... fa0fc03e25

Live update:
https://digitalik.net/btc

https://s2f.hamal.nl/s2fcharts.html
I like this version better.

[ElJefeDelQueso]

Check the chart Spanky. Bitcoin goes up! It’s a worldwide party.

Ok a more serious answer than mine, but yeah, I based my prediction on eyeballing the chart. We had a “halving” just a month or two ago and there’ll be another one in 2021 I think. You don’t need an astrophysics degree here...

This halving cycle so far compared to the previous two:

Some have pointed to modest correlation to a 'stock to flow' model of scarcity. This suggests possible at least transient movement to the low six figures by 2022-2023 timeframe assuming persistent demand in the face of inelastic supply.

https://medium.com/@100trillionUSD/mode ... fa0fc03e25

Live update:
https://digitalik.net/btc

https://s2f.hamal.nl/s2fcharts.html
I like this version better.

I agree, this is a very nice illustration of the model.