After last nights excursion into how bitcoin adoption plays out, I played around with some charts. Broadly based around these concepts.
A. There is an underlying sigmoid function (wikipedia'd that one!) that drives base valuation - the adoption curve.
B. That the market price is some cyclical function underpinned by the base valuation (A).
C. We end with widespread adoption after about 10 years, representing a base value of BTC based on some percentage of the economy. I picked risto's $300k because its as good a figure as any
If you use the function tan^-1 to model the s-curve
If you use some function such as sin to model a cycle
Then all is left to do is set up some start and end points, and mess around with modifiers to amplitude and frequency of the cyclical input, and rate of adoption of S-curve.
After trying out a variety of values it became obvious this was just an exercise in throwing darts
- if it wasn't already obvious this is not a method of trying to predict highs and lows so you can trade your way to victory. It is more an exercise in preparing mentally for the magnitude of movement that one might expect were these assumptions of mass market adoption true.
It became clear, that it doesn't matter what values you put in. There is always some point where, despite how incredible/insane you think BTC price has been up to know, it pales compared to what it would need to do to fulfil this kind of projection.
No matter how you try to tame this model, doing so makes early movements far too placid.
Eventually I settled on a model that roughly followed the trend up to $1200ish with a sell off to about $400, then zoomed out to see how those parameters unfold over the 10 year adoption curve.
I got this...
I though this is ridiculous, it can't possibly happen. Then I thought, how else *could* it happen.
*if* it is ever to go mainstream. like a serious part of the world economy mainstream, there has to be a tipping point. Up until now the whole bitcoin market cap has been toy money compared to the kind of numbers that are thrown around when people start talking about things like the money supply, and absolute chicken feed compared to things like derivatives.
There has already been talk that the most recent price spike was 'the last time'. People claim everybody already knows about bitcoin, its all over now. I think this is nonsense. If I go out in the street and do a spot survey on people, your answers range from "oh yeah I think i heard of it on the news one time" to "huh?". The man in the street does *not* know about bitcoin. Anyone claiming they do is merely demonstrating their embarrassingly limited world view. Maybe every one of your online mates knows about it, but bitcoin isn't WoW gold. In a 'success' scenario - widespread adoption - it's slightly more relevant on a global IRL scale.
Wall st has indeed come. Its just that people are looking at things from the wrong angle. Wall st is part of the infrastructure that is currently rising up, such that once everyone notices what has happened. It's already happened.
To get to 300k we have to get through 3k and 30k. When the world's eyes turn to what bitcoin has become, then there will be no orderly queue, and understandable rise. It will be full on (mask) hysteria. The rise to 32 was when the neck beards were buying into a 7200BTC per day production. The rise to 266 was the first wave of internet interest, the rise to $1200 was a continuation fuelled the rest of the plugged in generation. It made the MSM which may have fuelled a little speculation. That's when things got serious.
Governments have noticed it, powerful people have noticed it, *banks* have noticed it. Right now we are in a perfect storm of the aftermath of a huge overshoot on the purchase of mining equipment - this is *fact* as evidence by the hash rate/difficulty.
This will take time to unravel. It surely will though, as irrational as people are, they will eventually stop flushing money down the mining drain. That money will turn towards the supply. As it becomes obvious the bottom is in, that is when people will start the next run up. Only this time it isn't going to be just neckbeards, redditors, hipsters and anonymous, it will be institutions. That have pretty much unlimited buying power by virtue of them essentially being able to print their own money, because they are TBTF and will just keep bankrolling each other whilst nuzzling the teat of QE washing away their toxic assets.
So the move will be unprecedented.
Unprecedented to you and I and all the other peons around here. To those behind the move, they just spent a few hundred millions to acquire assets they can now assign book values of billions. Selling into this only makes you weaker in the end game, and selling is what they want you to do because those dollars you are acquiring get more worthless the more bitcoin they have. Who here though has the constitution to hold as they see the price double repeatedly. We are still at the end of the day all hardwired for fiat. As much as anyone pretends they are not.
So the number I have picked is probably not that accurate. The magnitude, and the colossal unbeleivableness of it, is what is important. That's the black swan that nobody sees coming. That 90% of the people in the world will miss 90% of the bitcoin.
I repeat this exercise is about being ready if this happens. About having thought about what you are going to do. Me personally, I don't pretend for a second I can hold tight to everything. I'll sell a little on the run up just like a have every other time, and just like every other time, I will regret the stuff a sold a week earlier for far less. Just like every other time, when the dancing is done I'll reflect about how I used to have soooo many more bitcoin. Just like every other time, I will have made my end game worse.
I won't have sold everything though.
That's the difference between this post and every "talking your book but pretending not to" post on here. Everyone knows I'm long, I'm not telling anyone to go all in or all out I don't think posts on here make the slightest bit of difference, we are way beyond that now. The train has left the station and the driver is still drunk in the station bar. I'm just chatting to people about what I think. Getting more responses and replies from people who have other ideas and using this to shape my future decisions.
I'm already well past caring about whether I *lose everything* because for a long time now that's been impossible. The fact that people are up on here posting "advice" to sell is even more ridiculous to me than the suggestion that btc will be worth over half a million in just over a years time.
For the record, yes that chart does say over 1m in 3 years. It also says 250k the year later. It absolutely terrifies me to think how one might ride that out. Once again the figures aren't right, its the magnitude of the moves you might have to go through that is the message.
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