Bitcoin Q&A
Q: Where will Bitcoin be in 2021?
A: I don’t know, nor does anyone else.
On Track? For What?
Please consider BTC on track for $100,000 in 2021 by William Suberg.
Stock-to-Flow measures the Bitcoin price using two factors: the stock — the number of Bitcoins in circulation — and the flow, which is the number of new Bitcoins entering circulation.
Bitcoin’s low emission rate relative to its existing supply — like gold — means Stock-to-Flow constitutes useful evidence in the argument that Bitcoin is “digital gold.”
As Cointelegraph previously reported, Stock-to-Flow’s creator, the analyst known as PlanB, originally suggested that Bitcoin would hover at an average of in the year before its block reward halving in May 2020.
Amusing Projections
I am amused by projections of $100,000 targets when previous targets were $1,000,000 or higher by 2020.
At least the projections are headed in the right direction.
But that is not the focus of this post. Rather, the author does not understand the true supply of Bitcoin.
Supply of Bitcoin and Gold
Interestingly, the supply of Bitcoin and Gold have one thing in common.
Contrary to popular misconception, the supply of Bitcoin rises every day.
Similarly, the supply of gold rises every day.
Suberg confuses the rate of increase in supply with supply.
Supply Facts
- Bitcoin is not used up, except for lost wallets and passwords, etc.
- Neither is gold used up except for a tiny percent of industrial use.
Every ounce of gold ever mined except for lost gold, buried and forgotten gold, priceless antiques, and industrial supply, etc. is the true supply of gold.
Similarly, every Bitcoin ever mined, except for lost Bitcoins, etc, is the supply of Bitcoin.
Peter Schiff provides an amusing example of lost Bitcoin.
Peter Schiff Bitcoin
I wonder what someone who believes Bitcoin is headed to zero is doing holding Bitcoin in the first place.
That said, I find it conceivable as some sort of hedge or lottery ticket. I might buy a couple of Bitcoins as a lottery ticket at some point in the future.
Amusingly, Bitcoin Jesus once gave me 1/100th of a Bitcoin back when it was worth 30 cents or so and I have no idea where it is. I certainly don’t blame Bitcoin Jesus or Bitcoin for my loss of the key.
Loss of keys is a side issue. Supply analysis is the real issue and point of this post.
Bad Analysis and Poor Projections
The true supply of Bitcoin is every Bitcoin ever mined, barring accidents like Schiff’s.
If there were no Bitcoins mined starting tomorrow, the supply of Bitcoin would not change. It would be constant from here on out.
The same is true for gold and for that matter every asset in general.
Someone MUST hold every stock, every bond, every dollar, every ounce of gold, and every Bitcoin ever mined, 100% of the time.
Supply of Bitcoin and Gold Constantly Rising
Unlike bonds which can mature and shares that can be repurchased by corporations, the supply of Bitcoin and Gold is constantly rising, albeit at a decreasing rate.
It is absurd to project the future price of Bitcoin or Gold based on a fundamental misunderstanding of supply.
Every day, holders Bitcoin and gold holders have to decide whether to hold or sell. That is the supply.
Moreover, the supply of Bitcoin is much more liquid than the supply gold. No one holds Bitcoin around their necks as jewelry.
Bitcoin Supporters Cannot Answer One Simple Question
I still await a reasonable answer to Bitcoin Supporters Cannot Answer One Simple Question
What would happen to the price of Bitcoin if the US did not allow merchants and banks to make Bitcoin transactions?
That’s a very simple question that I have been asking for months. My reason for asking is based on a simple premise: If central banks or governments are ever threatened by Bitcoin, they will destroy it.
What If?
The best answer to date is along the lines of what if the sun explodes.
For example, one person asked “What is stopping the EU, US or China from immediately taxing all blog revenues at 30%, 40%, 70%?“
Yes, I posed a hypothetical, but it is not an unrealistic one. Central bankers are very concerned about Bitcoin. They are not concerned about any other asset class, at least at the moment. Central banks are certainly not concerned about blog revenues.
While one can pose all sorts of “what if” questions, some are reasonable, others are not.
It is naive to believe Central Banks cannot squash Bitcoin if they want to. Whether or not they will want to depends on how high the price of Bitcoin rises.
Supply Side Analysis
I am not going to convince any true Bitcoin believers based on “what if” issues.
Heck, I am unlikely to convince anyone of anything at anytime at all.
Regardless, the main point of this article is a 100% mathematical certainty: The supply of Bitcoin, ignoring accidental losses like Peter Schiff’s, is constantly rising.
Misconceptions Abound
Analysis based on alleged falling supply is fatally flawed.
Misconceptions about in gold as well, in supply analysis and as related to the dollar.
In contrast to widespread belief, Since 2015, Gold Surprisingly Correlated With the US Dollar
Mike “Mish” Shedlock
Bitcoin cannot be banned by any single government or central bank, it is a decentralized network. If you don’t understand decentralized network, educate yourself. If the internet gets shutdown, there are bigger problems than Bitcoin. People will value daily needs over money, things like bread will hold more value. Gold will be useless. Gold can be confiscated by the border patrol agents when leaving country, ask Venezuelans. Gold has been confiscated by the US govt in 1933, Bitcoin cannot be confiscated. Because you can keep bitcoins in ur brain, all you need is to memorize 12 words also know as wallet seed or backup for your wallet. Bitcoin is a internet native money, the future economy will be driven by internet and you need something which works seemlessly with the internet and Bitcoin fixes this. Gold is not divisible and is not money. The cumbersome nature of gold is what gave birth to fiat money or paper notes. Why would anyone go back to a gold system, makes no sense. Gold is a relic.
I am very poor at these kinds of knowledge. But I really want to know more about economics, Bitcoins and everything associated to the economy. Hostsailor I expect that the posts in this site will help me for that.
“If central banks or governments are ever threatened by Bitcoin, they will destroy it.”
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Absolutely.
In case anyone missed the obvious, TPTB are moving us toward a cashless society, BUT in a way they control. With control they will be afforded the opportunity to tax any / all transactions if desired … and Wall Street will get their pound of flesh by skimming (processing) each and every transaction. ANYTHING that threatens this honey pot on the endangered list.
Blockchain is the totalitarians’ dream. As long as it is under their control.
A dedicated rogue entity can literally take over all Bitcoins in existence. That is not possible with gold.
Well there’s a 150 billion reward just waiting. Why not show us all how it’s done
Taking over all bitcoin would make it worthless. So, if someone does it, it’s with the aim to destroy it. A government could be motivated to do that. Combine government bans on transactions with a 51% attack and Bitcoin is done.
Something like this is impossible with gold.
51% attack a network that dwarfs all of Google. Good luck with that.
If ifs and buts were candies and nuts, we’d all have a wonderful Christmas
Your faith is strong. Not a good mindset for an investor.
Latkes,
the way bitcoin has bee constructed, it is almost impossible for one big entity to take over the network and own all the bitcoin. It is possible though.
The reason for doing this wouldn’t be to get hold of all the bitcoin for its monetary value. If you did that, you would render bitcoin valueless, as no one wants bitcoin if it can be stolen. A heist such as this would prove it can be stolen, and bitcoin’s value would evaporate just as the big entity felon got his hands on all of the loot.
The other reason for taking over the network would be to destroy bitcoin. That is a valid reason if bitcoin threatened something of yours, like the ability to issue money and become rich off of the back of it. In order to do this, you would need to pay for a huge number of computers, I think that you need to have over a third of the bitcoin network under your control in order to corrupt the system (it might be 66% cant remember the detail). Then you could make your move and take bitcoin down. Something like this would cost billions to achieve.
People might ask who you were though and why you were so desperate to do this.
That is what pools are for. You can have one big entity + multiple pools even. You don’t always know who is in control.
Yes, I already said as much in my comment.
Yes. Governments / banks may have enough motivation to do that.
Wonder how many different “coins” there are out there :
Seems like 2869 !!
Go to 7min 29 sec mark in the vid.
To be fair to Peter, he does expain how he came to own Bitcoin. He didn’t buy any himself: https://www.youtube.com/watch?v=3iFolFv4RV0&t=7m19s
Bitcoin loses all utility if the grid is down. You can use cash at the corner store without electricity. Gold has infinite uses. It is great at transmitting electricity. Just too expensive to use for wiring your house or high transmission lines. It is used in computers and on the shields of astronauts in small quantities.
If the grid goes down, you ain’t eating, as jit inventory also goes down. You ain’t eating, buying gas, etc, etc. and your gold is worthless, as food becomes priceless. Can’t eat gold.
> Can’t eat gold.
This is idiotic. Gold is not supposed to be eaten. Its properties, including inedibility, are what make it a store of value.
Gold will not cease to exist when the grid goes down. It will be still a store of value. Bitcoin will be gone.
You stop by my store with gold, but I have bread. Why again do I want your gold? Your still hungry, my belly is full. That is what happens when the grid goes down. This is common knowledge.
But please do tell me when you’ve experienced the grid being down? I’m nearly 40 and don’t even need one hand to count how many times I’ve been in that scenario. It’s tantamount to suggesting, what happens when aliens arrive and vaporize all the gold. What then? Both scenarios are possible, but not probable.
A more down to earth scenario is executive order 6102 when the US made real restrictions on gold. All tangible assets, including gold can be seized. The bitcoin wallet passphrase in my head would be a lot more difficult to seize.
Bitcoin and gold are not even in the same league. Unlike gold, all Bitcoin can be completely destroyed in a very short time. It’s just ones and zeroes on some computers after all.
You are right. They aren’t. For example I can leave my country and fly to any other country and I will take all my money with me. Can’t do that with gold. Also, do you hold your own gold? Probably not if it has any large value. So most of the time you are forced to trust a third party to hold your wealth. Ouch. Not good. Be your own bank. These arguments didn’t make sense from the last person that suggested it.
You are a true believer. Blind.
Yep. Got in at $200. Still holding above $8000. Might have trouble seeing, but should be able to afford some nice reading glasses.
Here is something I don’t get about Bitcoin (when compared to gold): gold is not only rare, non-perishable, compact etc. – it’s also reasonably unique in those characteristics. We can be fairly confident that no one is going to discover another substance than can replace gold. Bitcoin may be rare and convenient etc. but there’s no limit to the number of identical systems we can create. Imagine if gold was only one of a thousand metals with those properties, and new examples were being discovered on a regular basis. Since that is possible with Bitcoin, how can it be worth anything?
All worth when you think about it, is in the mind. Food and water are obvious things that our mind places value on, but prices are low due to their abundance. Other items, say such as clothes, we can value differently according to their label or colour etc, and somewhere in our minds we derive a value for a product.
Same with bitcoin. It is quite a neat construct when you look at it. You can transfer a bitcoin to someone else in a completely different place. It is secure, and limited in supply. The other thing about its value is that you will also take into account its value to others. You will make an estimate for this too either consciously or subconsciously.
Gold is the same. Gold means little to me intrinsically. Its value to me is solely based on knowing that others will value it. And yes, that in theory could mean that we all value gold because of the value others ascribe to it, there might be no intrinsic value to anyone in the system and yet it can still hold value.
Whether bitcoin can bring in new people who value it in the future is of course unknowable. Just like with a phone system, the marginal user adds more value to the entire system than the previous person did on average. You cant have one bitcoin user and have a price/value for bitcoin, nor can you with phones, there has to be a whole community of people using it for it to have real worth.
And this is how bitcoin has value to some people at least. It is knowing that others use it and value it which gives it its value. Other cryptos are not so valuable because you know not as many people value them.
“It is secure, and limited in supply.
…
…
Gold is the same.”
This is exactly the point I’m making: gold is not the same, because gold enjoys these characteristics more or less alone in the world of physical stuff. There aren’t any other physical substances that can replace it’s function as a currency. Silver is too abundant; $1500 of silver is a hell of a lot of bulk and weight compared to 1 oz of gold.
Bitcoin has no such uniqueness – it’s one of a potentially unlimited array of digital coins that all have the same suitability as a currency.
Bitcoin without internet access?
Hardly an “off the grid” tool.
Back in the 90s or so, someone demonstrated one could support internet protocols, hence the internet, on top of smoke signals……. I wouldn’t want to attempt streaming 4K movies over such a medium, but with a bit of patience, a Bitcoin transaction may just about work…
I think it is a mistake to view Bitcoin within the context of its utility as a currency. The blockchain technology that underpins Bitcoin was never designed to support a high volume of transactions. Bitcoins’ value is rooted in its secure structure for transferring large quantities of capital (mostly illicit) from one country to another. Therefore, its value resides within the 1% of the 1% who’s needs are well served by Bitcoin.
The 1% of the 1% don’t have nearly as much use for illicit anything as the rest, since they are the ones writing and interpreting “The Law.”
I very strongly agree that attempting to use distributed ledgers as a day to day “micropayment” transaction medium, is fools errand and a dead end, though. And it becomes even more so, once you start upping a blockchain currency’s requirement for verifiable anonymity, as that is never computationally free.
You can use cannabis & firearms, what can you use bitcoin for and would you still be able to use it if it was banned?
What can you use bitcoin for? Cannabis and firearms. Just look to the Darknet markets. The answer has already played out for you in real life. This isn’t as hard to understand as you make it to be.
Oh I see, so its a sort of underworld currency.
It would have to be in this scenario, as it has been banned. But this all makes no sense as I can’t go buy Taco Bell today with bitcoin, as retailers are already not accepting it and it seems to be doing very well. So if the government banned it, this type of interchange would not affect bitcoin. Most government restrictions only cause higher demand. Smart Governments already know what would happen, which is why the smart ones won’t ban it.
If they suddenly banned it with effect from 1st February I can’t imagine everyone rushing out to buy it. If I happened to have a lot of it (which I don’t) I think I’d panic sell. Might be wrong though. -:)
It has many substitutes, I suspect it would morph into something else.
Not sure I agree with the idea of what would happen to bitcoin if governments banned it. I mean what current examples do we have. Cannabis, as with all other drugs cost more when the Government bans it. This can be clearly seen in the current legalization in the US. States. Where Cannabis is illegal it is far higher priced than legal states. What about illegal firearms. Guess what? Same thing. You fail to understand that crypto is used by freedom lovers, who would most likely ignore the government, as the government was most likely why they started using crypto in the first place.
The price of something is always set by the intersection of supply and demand.
The drug ban increase prices by reducing supply, while (at least in the short run) having little/less effect on demand. By way of making drugs riskier/more expensive to grow/manufacture, and also to simply hold. Not merely to transact in.
A ban solely on transacting in Bitcoin, OTOH, leaves supply constant. But instead reduces demand, since there simply is no other use for Bitcoin than as a transaction medium, and the ban makes transacting in it less attractive.
Hence the predictably opposite effect on prices of the two bans.
At least based on first order, static analysis. In practice, economic actors acting freely are a clever and unpredictable bunch. If, for example, holders of Bitcoin believe the ban will eventually be lifted, enough of them may choose to simply “go underground” for awhile, and in the process temporarily remove so much Bitcoin from circulation, that the resulting effect becomes effectively higher prices. There’s simply no way to tell.
But still, the ban on drugs works very differently, than a ban on merely transacting in Bitcoin, even if the end result on prices should happen to end up the same in some possible scenarios.
“The best answer to date is along the lines of what if the sun explodes.”
Mish, you did not critique the previous answers we gave. I am not sure where you got this quote from, but I don’t think it is much of an argument to take an individuals ridiculous quote and tarnish everyone else with it.
Now in terms of the previous answers, someone said that the price of bitcoin would fall if one or more central banks banned transactions, at least in the short term. That is the correct answer, simply because it would have a immediate and direct effect on the demand for bitcoin. As supply of bitcoin is pretty static in the short term, then as demand falls then the price must fall.
I argued that the longer term effects wouldn’t be quite so clear. If people want to transact in bitcoin, then that wish to do so might override any intervention by a central authority. A central bank is not a God, it doesn’t always get its way. The longer term outcome would be decided by people’s choices and the intrinsic usefulness of bitcoin to solve people’s problems.
Long term then I think we agree, the future price of bitcoin is unknowable. But I think that your question was fairly answered.