I agree that the direct reason for Bitcoin dropping from $9k to $5k was panic selling. However, there is a cause of panic selling as well, and it is Covid-19 becoming a pandemic (or, rather, how serious and scary it all became in the media when the WHO made the announcement). Another thing I want to address is you referring to 11 years without Bitcoin being affected by any other market. The thing is, the last World economic crisis was before Bitcoin was created, and the last pandemic was not occurring in the media era plus Bitcoin was in its early days back then. So I'd say that the current situation is the one Bitcoin never experienced before, so what never happened before might well happen now.
Short term wise, it still works as before, such kind of price drop is common in bitcoin's history, and has not reached 90% as it used to do. But long term wise, it is unclear at current stage IMO, since cryptocurrency always goes online, and internet is not disrupted, so this whole ecosystem has not been affected. Supply still will shrink after a few months, but demand might drop a bit due to that people are chasing USD right now. But because of measures like curfew, people will stay at home more, thus go online more QE infinite will provide unlimited USD, but the question is wether those liquidity will enter crypto market and how. USDT is also in a QE phase, maybe that is the reason this time it stopped the price drop, this is the most interesting development right now comparing with the last several market downturn: Now we also have a QE to save the market, how ironic |
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Bitcoin is not made for this, it is for those who have the idea of saving, and already save for it before the storm hits.
For those who don't have this habit, they should turn to the state and banks, since state currently have unlimited money to print and give them. And this is also why bitcoin is not going to replace fiat money, since it lacks the ability of dealing with crisis, thus can only be used as a medium of saving, hedging inflation
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Ideally you want to cash out some coins to stable coins when the price has peaked during a short time, and then buy back when there is a crisis. Buffet is very good at this, now he is sitting on billions of dollars that can pick whatever oversold assets at a bargain
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The most secure way: Buy a mining farm and mine the virgin coins  |
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With only 21 million Bitcoins that will ever be mined, there's more than enough reason for it to be widely compared as Gold.
UTTER STUPIDITY... There is a LOT more than limited supply needed to give something value, limited supply itself means NOTHING. Only 1000 " Hard Facts Coins " have ever been mined, so are they worth trillions each  BitCoin grew up in a bubble where virtually everything went up. This is BitCoins first economic crisis, and the price has CRASHED, it is down by 66 % since its all time high, how is that limited supply thing working out ? BitCoin price is heading down again as I post, you should be very worried.... $ 6,263.21 -7.80% This kind of volatility is totally normal on bitcoin, you can not expect hundreds of times of value increase without such scale of withdraw. But the concern that bitcoins grew only because of economy bubble is interesting Bitcoin has not really experienced any major economy crisis since it was born, and this time it is actually performed quite well: Given the scale that crash on S&P and Oil, bitcoin should have crashed more than 99.9% by now if it is correlated to normal financial market, since its volatility is usually 5-10 times bigger than them. But it did not, clearly says that it is either independent of the economy crash or it is highly resistent But for its price to rise, we need some other mechanism or consensus, so that when in panic, a lot of fiat money are going to buy bitcoin without the slightest hesitation. (Edit) In fact I prefer a smart contract kind of design, where smart contract automatically buy bitcoin based on the scale of economy crash or the scale of QE. The only question is how to get the QE liquidity into cryptocurrency market, or you just create them out of thin air as well like USDT. I feel that the people with the access of QE money have the possibility to do this but their motivation might be a question
Exactly. As long as Bitcoin is measured against Fiat, it'll never be able to achieve independency from the existent monetary system.
To overcome this phenomenon, Bitcoin would need to become the global unit of account, much like the dollar is today. This goes beyond just the abandonment of fiat currencies. Imagine if fiat currencies are abandoned and people return to using gold and gold-backed notes as their primary unit of account. In that situation, I think bitcoins would at best occupy the same space that gold already occupies in relation to fiat today. Bitcoins would be treated like any other commodity: When economic turmoil strikes, speculators would sell them for safe haven assets like gold, gold-backed notes, and government bonds whose credit rating would be linked to gold reserves. Besides that fiat money religion is everywhere, I also don't think it is a good idea to make bitcoin a standard unit of account, since the production cost (mining cost) rises too fast. The cost basically decided the value of a coin, and if a coin's value rises very fast, and you use it as unit of account, everything's price (counted by bitcoin) will drop so dramatically that merchants simply have no way to make a profit The unit of account should be stable, and can not be created out of thin air (against debt). So I promote to use energy unit like Jole or KWH as unit of account. Since everything's production eventually goes back to the use of energy, it can be a very stable and object measure of value By using energy as unit of account, there will be different view of value. For example, currently when a barrel of oil price crashed from $40 to $20, and people use USD to measure value, they will call oil price crashed. But if you use energy as the unit of account, a barrel of oil always contains same amount of energy, so it is just the USD suddenly get more valuable |
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I'm thinking about an extreme case, where the pandemics keep going on for a year or two, and there are almost no one here have USD, all go broke, all they have is cryptocurrency, is it possible to start to use cryptocurrency to make some economy activities without caring about fiat money anymore?
It seems that no matter how much fiat money they print, it still don't reach the people that most need them
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None of the replies or comments above has addressed my questions: According to "The Bitcoin Standard" book, U.S. prints an average of about 7% more money per year and China prints an average of about 20% more money per year over many years or decades. Why the actual average yearly inflation rates seem to be less than half of those numbers? Why the huge injection of U.S. dollars after 911, 2008-2009 Great Financial Recession, and 2020 Health and Financial crisis don't seem to cause any jump in inflation but only the mild or steady inflation many or most people desire?
We need more experts' input!!! Thanks.
Normally when you pump in lots of money, you should have corresponding increased products/services/assets that can be traded with those money. That is what happpened in China, their money were used to modernize their country that billions of people are living But this time, due to the total lock down of the whole city and whole country, transport is disrupted world wide, there are less products, services and assets available to be traded. If the virus can not be controlled in a few weeks, then there will be shortage of many things in every shop. Even with purchase quota, those who simply double the price will have no problem to sell. Unless the whole country fall into a communist model that uses planned economy, there will be run away inflation, because now everyone have received some cash, unlike 2008 that only banks received the money |
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But this is short term market shock and USD supply is unlimited based on FED. Supply and demand theory says that if something's supply is unlimited, it should have zero in value, why not apply it to USD? I am not disagreeing with you on this part. I also think USD is turning in to a joke. Having said that, the supply isn't unlimited per se. There is a still finite amount of USD in circulation, so the supply does have a limit when we look at a snapshot. The worrying thing is looking to the future, with the Fed committing to printing however much money is required. The supply won't actually be "unlimited", as the Fed will stop somewhere, but the supply will be heavily inflated and the value of USD will be heavily diluted. What I am disagreeing with you about is that your proposed energy-based money would be anything other than completely subjective, as not only is energy not a constant value (as I explained in my last post - 1 KWh of energy is worth vastly different amounts depending on the state or form it is in), but there is no objective way to accurately measure the energy required to create a product. Supply and demand is what gives a product or a currency value, and it is no different with bitcoin. Bitcoin's fixed cap, however, overcomes the problem of USD and all fiat and makes it a superior currency. The problem with USD is, even with unlimited supply, you don't even get a cent of those newly created USD, its only for the riches. However, most of people still live in illusion and think that USD should have stable value and can be used to measure value. It is something like religion, as long as they believe it, it works. (And that religion easily break in another country, when another government claim that USD is illegal in circulation and force people to use their fiat currency, so it is actually based on violence) That's the reason there should be a non-violence and non-political approcah. Energy can not be created out of thin air, and there is no problem to measure the energy content in food or in oil, in the end, only the production energy input matters. Food making is achieved by absorbing energy from solar power, those energy can be regarded as free, but you still need labor and land and chemicals to realize its value, and that is the basic cost of food. All can be calculated, much easier than rocket science So by using an energy unit, where 1 unit is 1KWH, once people have their religion established upon it, it will be rocksolid, much more than fiat currency. And over time, since the production technology improves, every product's energy cost will be less, means cheaper and cheaper products and services. In fact petroleum is already such an energy unit, with one barrel of oil, you basically can do similar amount of things using internal combustion engine, no matter what kind of job that is. I think the Petro cryptocurrency in Venezuela very closely assemble my idea, but it is also affected by oil price, which is measured by USD, so the religion of USD really twisted the world |
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Gold, petroleum, energy, they are all much more objective, and energy being the most precise one Energy is the least precise one. A kilogram of gold is worth more or less the same regardless of where it is, or if it is flat or brick shaped, or if it is stored as 10x 100g bars. Conversely, a KWh of energy stored in a hydrogen fuel cell is worth a vastly different amount to a KWh of energy stored in broccoli. They are not comparable. A good example is bitcoin, you could judge its value buy the power used to mine it. You keep repeating this but it simply isn't true. If it were true, then price would follow the difficulty or the hashrate, which it doesn't. When bitcoin was $20k, the hashrate was 15 EH/s. When bitcoin fell 85% to $3k, the hashrate more than doubled to 40 EH/s. More energy was being used to generate less valuable bitcoin. In my model, more energy input means more value, so it is just USD value suddenly get pumped due to lots of demand but lack of supply. But this is short term market shock and USD supply is unlimited based on FED. Supply and demand theory says that if something's supply is unlimited, it should have zero in value, why not apply it to USD? |
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It's not so much that I believe in supply and demand theory. It's that we don't have an objective measure for value. It's a factual observation that people socially decide on a unit of account for value. Currently, fiat money fits that role. If inflation of the money supply is too extreme, and high enough price inflation or hyperinflation results, people will drop fiat money for something that more reliably holds value. If price inflation stays low enough, then people will ignore the problem. It reminds me of the boiling frog analogy. People will continue believing in fiat money until something drastic happens. That is why I promote to move away from using fiat money as an objective measure of value. In old time people use gold, but I think in modern time people can use KWH. A good example is bitcoin, you could judge its value buy the power used to mine it. The power used to produce those ASIC chips might be bit difficult to calculate, but for majority of the chips that is no longer profitable, the power is converted directly to coins. There is a reason that people prefer to exchange energy to bitcoin, since that does not need KYC, you get original coin without tx history, and the energy can be from anywhere. In this case energy has worked more like a world wide fiat money |
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All the valuation is done by energy input or cost That's my point. It is utterly impossible to accurately and objectively place a value on something in terms of its energy cost, which means the value has to be a subjective estimate, which means it is no different to using fiat at present. It's a very big difference that you use something that can not be created out of thin air at will. Gold, petroleum, energy, they are all much more objective, and energy being the most precise one If you insist on using fiat, then why using USD instead of Zimbabwe dollar? IMO, it is just US banks are much better at manipulate KPI, so that anything in KPI does not get their USD injection |
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If you adopt an energy coin that always equal to 1KWH to measure value, then things will be priced like 1 ENE, 100 ENE, etc. Impossible to quantify. Let's take a car for example. How can anyone possibly calculate accurately the energy expenditure required to take that from design to being driven out the showroom? The energy output of the engineers who design it? What about the energy required for the computers they design it on? What about the raw materials of those computers? What about the machinery used to mine those raw materials? What is the lifespan of that computer, and so what percentage of the energy cost can be attributed to this car? Already we are in an unsolvable situation and we haven't even reached the drawing board yet. The best we can do is a subjective estimate of the value of each individual component, process, material, person, etc., which is exactly what USD does. An objective measurement is impossible. All the valuation is done by energy input or cost, in short term, fiat money can be used to estimate the value of each component, since they are inter-exchangeable to same amount of energy anytime. For example, if 1 USD can buy you 10 KWH on energy market yesterday, it will be roughly the same today However, in the long run, and especially during some extreme situation like we are having now. The exchange rate is no longer stable. 40 USD can buy one barrel of oil weeks ago, and now 2 barrel of oil, maybe next week it can buy you only 1 barrel of oil again due to unlimited QE started Let's take another example, suppose that 1 million Zimbabwe dollar can buy you one barrel of oil yesterday, and now it can buy you 2 barrel of oil today, is it Zimbabwe dollar value doubled or the oil value decreased? Most possibly you will consider Zimbabwe dollar value increased: If you don't have any idea about fiat money's value, then energy would be a much more objective measure of value Value is driven by supply and demand, but price is driven by supply and demand of fiat money Just saw this news that reflected how absurd today's fiat money system is: https://www.commondreams.org/news/2020/03/21/two-1-trillion-coins-rashida-tlaib-proposal-calls-us-treasury-fund-coronavirus |
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Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective. Yes, it's an oversimplified example, but your point only seems to reinforce that valuation is subjective -- based on supply and demand, not the cost of production. Yes, that's why using supply and demand model is too abstract and flexible, it does not give you any scientific measure about the value of the object. Of course it's not scientific. No economic model is scientific -- there are too many variables to consider, none of which can be isolated and tested in an empirical way. It would be nice if we could fit things into scientific models like a labor theory or cost-based theory of value, but we can't. Market pricing simply is not predictable, which is why we just shrug and say "supply and demand." So I think in this case, an objective measure will be the energy input (e.g. cost) required to make the food. Using energy as unit of account will make the valuation more objective, since no amount of fiat money printing can change the energy input of making a beef filet, thus its value (measured by energy content) is not affect by the supply and demand of fiat money
Is that a valuable metric, if it doesn't line up with actual market prices? What is market price if there is no fiat money like USD or EUR? And now FED has decided to print unlimited fiat money, what that market price reflect is the supply and demand of fiat money, not the actual goods. It is relatively easy to understand, if you don't do anything to a product, its value should be relatively stable over night, however, FED can change anything's market price by 50% over night, given their unlimited money supply ability Those economy books that I read 20 years ago, I slowly realized that all those books are just like bible, just strengthen people's belief on fiat money, unconsiously. Since if you believe supply and demand theory, you will need a tangeble unit of account for value, then fiat money automatically fit into that slot and you get skrewed by supply and demand of fiat money forever |
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I don't think those people intentionally want to get fat. It doesn't matter. You can't say energy is directly linked to value. A sirloin steak and a month of gym membership might both cost $20. They have the exact opposite effect on the person in question in terms of energy input and output, yet both have value. The energy required to create a product, or the energy the product provides or uses, are not directly correlated with its value. but I just do not use fiat money to measure the supply and demand, but using energy instead I understand what your theory is. My point is that it doesn't hold up as I've explained above. There is no direct link between energy and value. My point is that people should get rid of the habbit of using fiat money to measure value I would love to move towards more things being priced solely in bitcoin, but this does not require your energy theory to do so. 1 bitcoin = 1 bitcoin is all that is required. Animals never need gym, gym is a higher level demand that reduce the energy loss of human body: less sick, longer life. The biggest energy loss is desease or die There is also no direct link between dollar and value, but people get used to it. So it will be the same, as long as people get used to it, energy will work the same as USD. If you adopt an energy coin that always equal to 1KWH to measure value, then things will be priced like 1 ENE, 100 ENE, etc... Bitcoin is not a good unit to measure value, since its production cost rises too quick thus its value changes too fast. Energy on the other hand, is like Lbs, Foot or Second, it is very objective and stable. In some other theories, labor time like man hour had also been considered a good unit of value, but it is not very objective, since different people have diffrent ability |
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If everyone stay at home and start to buy coins, the price will rise and they will get extra income on paper and feel more confident. And if they don't sell everything they invested later on, they indeed can make some profit in a few months
But we have on a different story because in my place there is so much panic and they don’t even care it the stocks are cheap and it bitcoin is also cheap, they care about their lives more than anything. This situation can’t happen if the establishments are still not accepting bitcoin and of course, during on a lockdown they are also closed. Yes the panic is coming, but if they sit down and do some homework, they will see that: 1. jobless rate will be very high and there is no job to seek 2. their living cost has to be dealt with, but they are losing income even if they have some insurance 3. they have to find a way to make some money Then they will see that, at such a time, bitcoin investment is the only thing that might make them some money, at least that is something that they can start to get their hands on. Seeking a job currently is totally impractial |
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Many of the human's behavior, seems like a waste of energy, but improve some efficiency. Going to gym for example, will make you much less likely to be sick and in hospital. That is a huge reduce of the potential energy loss. So what about all the obese people in the world. It is a massive waste of energy to work extra hours to buy all that extra food, it is a huge waste of energy to do simple tasks while significantly overweight, and it is a huge increase in potential energy loss by suffering a heart attack or diabetes. You are giving an example to disaffirm the basis of mainstream economy theory: Rational person hypothesis. I don't think those people intentionally want to get fat. Of course there are some economists that deny the rational person hypothesis, but that will also mean the supply and demand curve will not work, since any irational banker would suddenly buy anything in the market and raise their price for magnitues, and crash it in the next minute My theory does not diviate too much from the classical supply and demand theory but I just do not use fiat money to measure the supply and demand, but using energy instead, that is the fundamental difference. In fact fiat money is also exchangeable to energy, but the difference is that it is highly manipulative If human have a tendency to waste energy instead of getting energy or reduce energy loss, then the theory of modern economics will never work What is procrastination if not wasting energy? The majority of social media wastes time and impacts negatively on mental health. What a massive waste of energy, and yet a hugely valuable industry. Your analogy does not hold up. Maybe you are only seeing the energy wasting part, which is a small part of whole picture. The overall result might still be plus on energy, otherwise the activity is not happening. You can just exchange energy to USD, if that fits your habit Imagine that there is no exchange, the only way to get bitcoin is through mining, then mining cost will be a very good indicator of the bitcoin value. But it won't. That's the point I'm making. It doesn't matter how much energy is used to create or build something. What matters is how much demand there is for that thing. I could create an altcoin which requires $10,000 of electricity to mine a single coin. That doesn't mean a coin is worth $10,000. If all I can sell a coin for is $1, then it's only worth $1, regardless of how much energy was used to create it. The price of bitcoin is based on the supply and demand of the market, and not on the hashrate or the difficulty. You still want to sell the coin for USD, so USD is still your biggest religion, that is what I'm seeing, and all my theory is just to avoid this religion The demand is not from the exchange, but from the people that need bitcoin, even there is no USD in this world. My point is that people should get rid of the habbit of using fiat money to measure value, otherwise they will not see the real demand but a demand that is manipulated on exchanges by whales that is full of fiat money, very speculative Another example, now oil price crashed to less than 20USD a barrel, but the energy content remains unchanged. In my model, the value of one barrel of oil remains unchanged, while USD's value doubled. And if you use oil as a standard unit of value, then many things' value actually get pumped a little bit |
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Does my bitcoin i have in my wallet (like 70 bucks) increase / decrease over time depending on bitcoins worth?
This is only true when you use USD exchange rate to measure bitcoin's value (notice that USD's value is also changing against other things), a more objective measure of its value is the production cost, e.g. mining cost |
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Entertainment for example, is used to reduce energy loss: Although they don't directly provide energy, but they reduce the inefficiencies inside your body, thus makes your mental status more healthy. What inefficiencies? You are suggesting that watching a moving somehow makes the human body more efficient at metabolizing glucose? Ok, what about a gym membership then? That doesn't help to reduce energy loss - in fact, the exact opposite. It promotes energy loss. Why is that valuable? Entrophy is always going to increase, that is the underlying inefficiency in the universe. You can fight this trend by input lots of energy. Human are complicated living being, since we have brain, and the brain coordinate all our behavior. Many of the human's behavior, seems like a waste of energy, but improve some efficiency. Going to gym for example, will make you much less likely to be sick and in hospital. That is a huge reduce of the potential energy loss. Of course brain can do missjudgement (like gambling), but generally it tries to make wise decisions based on your own energy requirement, that is also the basic assumption in modern economy. If human have a tendency to waste energy instead of getting energy or reduce energy loss, then the theory of modern economics will never work When it is scarce, the energy input to acquire it in open market competition will become prohibitively high. You are mistaking scarcity for demand. When there is demand for a product, its price increases. Scarcity alone is meaningless. There is only one pair of dirty socks I wore yesterday in the whole world. Only one! It would take a huge amount of energy for someone to track me down, break in to my house, fight me, and steal the only pair of my dirty socks in the whole world. None of this makes them valuable in any way. Demand is the basic prerequisite, then scarcity decide the level of competition It is intereting that in bitcoin's case, that the constant competition in mining makes the energy input higher and higher, so its value is purely driven by the competition, it does not have a base value, or the least amount of energy input to make the product. If this were the case, that the price of an object was driven entirely by the amount of energy required to obtain said product, then the price of bitcoin would directly correlate with the hashrate. I do hope so. Imagine that there is no exchange, the only way to get bitcoin is through mining, then mining cost will be a very good indicator of the bitcoin value. But unfortunately since most of the people are using fiat money to measure the value, and bitcoin is traded against fiat money, then bitcoin's value will be heavily affected by the supply and demand of fiat money And the reason I want to use energy to measure value is trying to get rid of the affect of fiat money supply, that might increase its price stability a lot |
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One object has value, because of mainly 2 reasons:
1. It contains useful energy that can be burned (like food, electricity or petroleum)
2. It can reduce your energy loss (like cloth or house that protect you from excessive energy loss in cold weather, or computer to reduce the physical paper work) This is far too simplistic a way to look at things. There are plenty of very expensive things out there which do neither of things. Pretty much the entire entertainment industry (television, cinema, music, video games) neither contains useful energy nor reduces energy loss (in fact, they all use up energy and increase energy loss, without a tangible "benefit"). Drugs, including things such as alcohol and nicotine, also don't fit in to your definition, despite being the second largest market in the world. Luxury goods, sports cars, watches, jewelry, precious metals, the list goes on. If you look at it closely, it always fall into two of the above categories. This is because, human as a living being, require constant energy input to maintain its activities throughout its life, so anything that contains usable energy or reduce the energy loss is of value to human Entertainment for example, is used to reduce energy loss: Although they don't directly provide energy, but they reduce the inefficiencies inside your body, thus makes your mental status more healthy. You can compare with another case: The same energy input but pure loud noise through speakers, that will make you tired and lose energy quickly. A high level of mental status can come from reduced energy loss, which can be caused by drugs, drinks, luxury goods, holiday, etc... it does not give you any scientific measure about the value of the object. But the scientific measure of the value of an object is irrelevant if nobody is willing to pay that. Look at a sports car, for example. Thousands of dollars in design costs, in raw materials, in production and manufacturing costs, in testing, in labor, etc. which is reflected in its price. But then look at a Jackson Pollock painting - a few hundred dollars for a canvas and some paints, sells for over $100 million. The "scientific cost" means nothing. Just look at what's going on at the moment. Toilet paper, with a production cost of maybe 30-40 cents per roll, is being sold for $30-40 dollars instead. Supply and demand is all that matters. True, supply and demand do affect the price of goods and services, but that can also be explained with energy theory The paint art's value does not only decided by the original production energy input. When it is scarce, the energy input to acquire it in open market competition will become prohibitively high. It is the same for bitcoin, its value now increased mainly due to the increase of energy input in competition It is similar for the toilet paper example. A demand surge in a short time increase the energy input for end consumer to get the goods because of competition, but in the long run it is the energy input in making of the product decide its base value, or cost. And that cost is not easily changed by supply and demand, thus relatively stable It is intereting that in bitcoin's case, that the constant competition in mining makes the energy input higher and higher, so its value is purely driven by the competition, it does not have a base value, or the least amount of energy input to make the product. And this explained the phenomenon that there are always people asking the question like "Why does bitcoin have value", since they just can not see that base value component in bitcoin, and they feel uncertain |
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Of course that is also a personal thing, it would be opposite for vegetarian person, that feeling is subjective. Yes, it's an oversimplified example, but your point only seems to reinforce that valuation is subjective -- based on supply and demand, not the cost of production. Yes, that's why using supply and demand model is too abstract and flexible, it does not give you any scientific measure about the value of the object. If I'm a banker, and willing to pay 100 dollar for a can of bean, but only 10 dollar for the beef filet, that does not make the bean worth more than beef filet. You must also count the supply and demand of the money itself in the equation, but no economy book tell you that So I think in this case, an objective measure will be the energy input (e.g. cost) required to make the food. Using energy as unit of account will make the valuation more objective, since no amount of fiat money printing can change the energy input of making a beef filet, thus its value (measured by energy content) is not affect by the supply and demand of fiat money |
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