Posted by hacker. Account recovered 4/27/2020.

HORRIBLE idea. You should be diversified into stocks, bonds AND alternatives such as Bitcoin, real estate or P2P Lending.

I make about $10,000 in the United States but I only work about 1000 hours per year and it's a fast food job that requires no experience. I pay 7.6% FICA taxes and 10% income taxes after the first $7,200 which is tax free. There is also an 8.25% sales tax in Texas but that's paid only on purchases and there is no state income tax (Texas is great).

So after FICA and Income taxes I keep about $8,700. Right now every bit of that is going to college expenses but I have some savings that I keep on hand. I'm also taking out student loans.

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Lest anyone think America sucks based on this post... This is a seriously bottom-rung job that I only keep because they are flexible while I'm in college. There are numerous opportunities to earn much more. America has issues, but the reality is most people have the opportunity to do much better than that.

I'm not trying to insult other countries either, but the story that free market economics has failed and that America is no longer a good place to live is a complete lie. We are becoming more and more socialistic which is a problem, but our free market foundation is still pretty great.

The median household income is $53,657 (mean is $69,821)  (lower than in 2007 after adjusting for inflation).

New rules have to work though. Yours don't. Economics is a science that explains how we make rational choices, and rational choice includes how we value things. There is a way that things are valued and it's not something you can change. If, for example, I suddenly declare that bread shall cost $0.01 per loaf (and enforce it), no one will make bread anymore.

So you can't just make up a new system of valuing things. It won't work.

I once made my own currency. I only created three units. By your logic, I could just divide the US money supply by 3 to derive the value of my currency, but I'd get laughed at when I took my currency to the bank and asked them to exchange it for trillions of dollars.

Quantity is not directly related to value. For example, a pound of bread has a different value than a pound of gold. Floating exchange rates set in a free market environment allow for accurate valuation. Your system does not.

Because you know exactly what the fair value of a Bitcoin is... 

Well, we are up $75 over the last 90 days. That is a significant increase.

Yeah, I agree, that particular piece of evidence does not support the "price surge" that is the topic of this thread. That said...


And look what happened when the dust settled:



Nothing to get exited about, but I would argue that the equilibrium shifted slightly higher.

As for your scenario, I believe you are suggesting that the halving is already priced in. I think you are right for the most part, but it may be only partly (mostly?) priced in due to the time value of money and the risk of holding Bitcoin to that point.

I'm not really sure what the disagreement is since we both have modest expectations about the halving. I may be slightly more bullish than you, but I think in general we are on the same page.

A job or a loan. Ideally a job since a loan is a short term solution with a long term cost.

I think people are disappointing that Bitcoin hasn't gone mainstream yet and may not at all. I've never felt that Bitcoin has been dead because I never expected it to replace fiat currencies and have a market capitalization of trillions, but if that was your expectation, you might be discouraged because it is taking longer than expected and probably won't happen at all.

I think we're seeing astounding success with Bitcoin becoming more and more mainstream and disrupting the established financial system. Really the biggest thing holding us back is tax law: You can't use Bitcoin in any realistic fashion without being or hiring a tax expert. Shame on the IRS (and equivalent foreign agencies) for that.

Sums it up nicely.

I agree with you in principle *general,* but there is still a supply and demand curve. Here's why:


BUT, we are aware that our guesses are not perfect. So consider my portfolio: I am a young college student and therefore have a small income and few assets. I do like to invest though, especially since, at my age, I have a huge potential to benefit from compounding by the time I retire.

Now, Bitcoin has the highest possible upside of ANYTHING I invest in. My stocks may return as much as 100% in a really good year, but there is a chance that Bitcoin could return as much as 2,000% if it has a really good year. My bonds, savings account, and p2p lending investments don't even come close.

Let's assume that I'm a rational person. What should I do? Well, I could invest everything in Bitcoin because it has the highest potential return, but that would be risky. Let's say I believe there is a 10% chance of a really spectacular return, a 50% chance of a good return, a 35% chance of losses, and a 5% chance Bitcoin becomes worthless. It has positive expected value but also high risk.

So, I should invest SOME but not all of my portfolio in Bitcoin, which is what I have done. So let's say I want to invest 10% of my portfolio in Bitcoin and I have $10,000 to invest (just making up numbers here).

I'd invest $1,000 regardless of price.

I'd invest the following:

   1,000 BTC if they cost $1.
   100 BTC if they cost $10.
   10 BTC if they cost $100.
   1 BTC if they cost $1000.

Meaning this is my demand curve:



Now of course this is just my personal demand curve, and it also changes based on my personal expectations of future returns. That said, there will still be some kind of curve for every participant in the market. For some people it will be vertical, for some people it might be highly elastic, but there will be a curve for the market.

Also, remember the willing and able part. I might think that Bitcoin is an excellent value at $100 per coin and be willing to buy nearly infinite BTC. However, If I only have $1,000, I can buy only 10 BTC. At $10 per coin, I can buy 100. Once again, that creates a downward sloping demand curve.

On the supply side, I suspect there is an explanation of why there would be a curve (for example, the opportunity cost of holding Bitcoin: USD is more widely accepted. At higher prices, you get more goods per Bitcoin by selling) but the point of my diagram was not to provide an exact picture of the market. Let's assume you are correct and there is no supply curve but rather a supply "point" (or vertical line).

[NB: Once again, the assumption is that not all owners of Bitcoin are willing to sell at the current price (I think exchange volumes prove this (and also suggest the existence of a supply curve) and that miners sell most of what they mine.]

The point moves around unpredictably based on all the different factors that control whether or not participants in the market (on aggregate) are inclined to buy, sell or hold at a given price. One factor though, block reward, is KNOWN to be positively correlated with supply. So a decrease in the block reward will, as one of many factors, tend to reduce supply.



So cetaris paribus, the block halving reduces supply. Reduced supply with results in higher prices as long as the demand curve does not change. The demand curve could change, but probably not as a result of the halving.

I'm not trying to argue that we *will* see a spike in price, rather, that the effect of a block reward halving is one of many factors that could contribute to higher prices. It's possible that expectations have overbid prices now and that, as a result, they'll actually fall. But, over the long term, prices should average higher with a reward of 25 than they would have with a block reward of 50.

That is a fair point, but not exactly relevant to my argument. Let's say demand is 100% inelastic, which is not likely. In that case, the demand curve is a vertical line, but the price will still vary depending on where the supply curve intersects it:

Supply does not represent the total quantity in existence, but rather, the quantity that sellers in the market are willing and able to provide during a given time.

Also, note that I differentiate between the supply resulting from existing coins and the supply resulting from new coins. The supply curve resulting from the willingness to sell existing coins depends on many factors, of which number of coins in existence is only one. So while you are correct that the blue supply curve, cetaris paribus, will shift very slightly to the right each time a block is mined, but I don't think cetaris paribus is a necessarily a realistic assumption in this case and even if it does prove true, the impact is very slight.

As for the green and yellow curves, they absolutely do not shift every block. That's like saying the supply curve for baked goods shifts to the right every time Shipley's makes a donut. The supply is currently 50 coins per (approx.) 10 minutes minus whatever miners decide to hold. In several months, this curve will shift to the left by about 50%.

There is no way to do this. Risk-free returns max out at around 2%. If you want more return that that you can take on more risk, but, in general, you can't get a higher risk-free return. For example you could invest in stocks for about a 7-10% return with relatively high risk, or venture capital, casinos (I don't recommend this), or illegal investment schemes (strongly recommend against) with VERY high risk.

It's called a risk premium. If anyone could just "double their money safely in a year" we'd all be rich and no one would bother with risky stocks with a much lower return.

If you are a U.S. citizen you have to pay U.S. taxes regardless of where you sell or what currency you receive. I think there are deductions for foreign taxes paid though if you also owe foreign tax.

I think the assumption is that miners sell the majority of the coins they mine. Since most existing Bitcoins are not on the market at current prices, a reduction, by one-half, of the new coins being mined could change the supply/demand dynamic.

Basically, a large amount of sellers are content to hold their coins until prices are higher. This supply (which is elastic, or price sensitive) will increase as price goes up. Mined coins, however, are inelastic (or price insensitive) because the same amount of coins are mined regardless of price. The supply of these coins can only be altered by miners changing the percent of their coins that they sell versus what they hold.



So the blue line will remain the same post halving, but the green line should be replaced by the yellow line. The aggregate of these two lines represents total supply. Total supply will drop as long as expectations don't change. The point where supply and demand meet determines the price, so a drop in supply, along with constant demand, results in an increase in price.

So in other words, the price will have to go up unless people's expectations (or their income) change on either the supply or demand side. So if we're irrationally exuberant right now, after the halving people might change their minds and the price might drop, or, they might go crazy and create a bubble.

Either way, the underlying effect of a halving does support some increase in price. We just don't know how much.

Fees are intended to replace block rewards as transaction volume increases and Bitcoin matures. It's worth noting that miners have already invested in millions of dollars of capital (mining equipment) for the purpose of mining. From an economic perspective, as long as miners receive enough to cover electricity and any other variable costs (such as time requirements, maintenance, etc), those miners should continue to operate.

Higher block rewards served to compensate miners for investing in the capital needed to enter the market, but they are very expensive for the network long term. Fees will help set a fair market compensation for miners over time.

Excellent info. The one thing I'm still not clear on is if all my transactions have to be reported separately.

For example. If I buy 1.15 on 1/1/16 for $565 and buy 2.0 on 1/5/16 $1020 and sell it at some point in the future for a total of $5000, when I file, can I just say I have taxable gains of $3,415 ($5000-($565+$1020)) or do I have to differentiate the transactions?

I like your site by the way, the thing that makes it difficult for me is that I have Bitcoin from prior years for which I have no records...

He never changed his demeanor, I've read the Bible and I get a completely different impression out of it.

He literally asks us to call him Father, so that's how I'm qualified. But you do bring up a fair point about fear: we fear him because he is just. Just like children fear their earthly father when they've done wrong and know that he's not okay with that.

It would take me a long time to completely address the jealous, vindictive, misogynistic, proslavery, homophobic and genocidal god thing, but you aren't getting the whole picture taking verses out of context. Here's a few points:

  --> He literally created us so it's not jealous (in the negative sense) to want obedience.
  --> Slavery in the bible is more like indentured servitude, and God commanded that slaves be treated well and given the chance to go free periodically unless they wanted to stay. It's nothing like American slavery or modern slavery, which God condemned: “Anyone who kidnaps another and either sells him or still has him when he is caught must be put to death” Exodus 21:16
  --> Homosexuality is a sin, but so is greed, gluttony, premarital sex, divorce, lust and turning a blind eye to the poor. God loves gay people just like he loves everyone else, because everyone has sinned. That *obviously* includes me. I've broken a good half of the 10 commandments. Some Christians have hateful biblical views on this topic, but that doesn't reflect the mind of God. He hates sin, but he doesn't hate us. A gay person who turns to Christ is in the same boat as my parents who are divorced, or myself since I've lied, cheated and stolen. But I believe we'll be in heaven.
  --> I'll admit, I have a hard time explaining why God would kill off a whole city. But remember that Abraham asked God to preserve the city if even one righteous person remained, and none did. God's justice makes us uncomfortable because we are sinners, but he is merciful which is why he send his son to die on the cross for our sins.
  --> He's certainly not misogynistic. I have no clue where you get that idea.

You are correct that God never changes: "Jesus Christ is the same yesterday and today and forever” and with God “there is no variation, or shifting shadow”

One final thought: The world is a pretty horrible place, and humans, not God are responsible for that. Who are we to judge God when we've screwed up so bad? We have people starving to death in a world of plenty! In India, more baby girls are murdered than are born in the US every year. Half the world is a warzone full of people defrauding and killing each other. Our marriages fail, our institutions are corrupt and greedy, and millions of people are in prison, some even being tortured. But yeah, let's ignore all that and judge God according to the standard that causes so much suffering on earth.