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Author Topic: Bitcoin should outperform any investment long term wise  (Read 1297 times)
johnyj
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May 15, 2015, 01:53:26 AM
 #1

We know that all the investment inevitably causes inflation in capital goods, this can be clearly observed on stock prices and house prices after added QE money supply

Although this kind of inflation does not count as inflation by CPI/PCE definition, it anyway indicated fiat money's reduced purchasing power against those capital goods: Same fiat money, now you can only buy one share while before you can buy 2 shares

However, bitcoin do not inflate as much. The increase of capital goods are caused by a large increase of fiat money supply, and the capital goods inflation as a result. But that will almost for sure cause their bitcoin price to drop (long term wise, currently bitcoin still have an inflation rate of more than 6%, that will be cut by half by next reward halving)

So, capital goods' value rises against fiat money (fiat money inflation), their value drops against bitcoin, thus bitcoin become the top performer in all investments

The reason for this is simple: Any capital goods, if you pour more fiat money into it, it will be produced in more quantity, thus reduce its value somewhat, but bitcoin's coin generation speed will not be affected by added fiat money supply, it is the most accurate measure of fiat money inflation



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There are several different types of Bitcoin clients. The most secure are full nodes like Bitcoin Core, which will follow the rules of the network no matter what miners do. Even if every miner decided to create 1000 bitcoins per block, full nodes would stick to the rules and reject those blocks.
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May 15, 2015, 06:31:55 AM
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But bitcoin has inflation regardless whether fiat pours into it or not.
There cannot be a mining boom, true, so if the price rises then the number of bitcoin being made will not increase, I agree that that is a good thing.

But even when the price goes down, like now with Bitcoin and Oil etc, other commodities can reduce the amount being mined to compensate, Bitcoin cannot.
So what I am saying is, in a rising market it is a good thing, but in a falling market it is a bad thing.  Unfortunately we are in the latter.  Block halving will be good though, unless you are a miner!
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May 17, 2015, 06:11:28 AM
 #3

We know that all the investment inevitably causes inflation in capital goods, this can be clearly observed on stock prices and house prices after added QE money supply

Although this kind of inflation does not count as inflation by CPI/PCE definition, it anyway indicated fiat money's reduced purchasing power against those capital goods: Same fiat money, now you can only buy one share while before you can buy 2 shares

However, bitcoin do not inflate as much. The increase of capital goods are caused by a large increase of fiat money supply, and the capital goods inflation as a result. But that will almost for sure cause their bitcoin price to drop (long term wise, currently bitcoin still have an inflation rate of more than 6%, that will be cut by half by next reward halving)

So, capital goods' value rises against fiat money (fiat money inflation), their value drops against bitcoin, thus bitcoin become the top performer in all investments

The reason for this is simple: Any capital goods, if you pour more fiat money into it, it will be produced in more quantity, thus reduce its value somewhat, but bitcoin's coin generation speed will not be affected by added fiat money supply, it is the most accurate measure of fiat money inflation


Does this assume that demand remains constant?  Change in the demand of bitcoin can influence its price incremental to any price movement from fiat expansion.

Currently, everyone values and accepts fiat currency, and pretty much anything can be purchased with fiat.  There are many people that do not value bitcoin, and would not accept bitcoin as a form of payment and I think that plays an important role in bitcoin's valuation.
randy8777
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May 17, 2015, 10:43:43 AM
 #4

But bitcoin has inflation regardless whether fiat pours into it or not.
There cannot be a mining boom, true, so if the price rises then the number of bitcoin being made will not increase, I agree that that is a good thing.

But even when the price goes down, like now with Bitcoin and Oil etc, other commodities can reduce the amount being mined to compensate, Bitcoin cannot.
So what I am saying is, in a rising market it is a good thing, but in a falling market it is a bad thing.  Unfortunately we are in the latter.  Block halving will be good though, unless you are a miner!

block halving will change the demand just for a short period of time. 6 months or 1 year after the halving we will be in the same situation as we were before the halving. that's normal. block halving or not, there has to be a constant demand as bitcoin creates an equal amount of coins every day.
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May 17, 2015, 10:53:21 AM
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Does this assume that demand remains constant?  Change in the demand of bitcoin can influence its price incremental to any price movement from fiat expansion.

Currently, everyone values and accepts fiat currency, and pretty much anything can be purchased with fiat.  There are many people that do not value bitcoin, and would not accept bitcoin as a form of payment and I think that plays an important role in bitcoin's valuation.

In global terms right now bitcoin demand is effectively nil. Most of the buying on exchanges is just bots lining up for another dump or pump.

If 0.5% of the world's population wanted some coins demand would be volcanic compared to where it is now.

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May 17, 2015, 11:15:46 AM
 #6

the only problem right now is the supply getting introduced to the market without the corresponding level of demand and thus cause the price to drop. I would see the effect more towards psychological rather than economically inherent because basically if you have price decreasing, that would give impression to people that bitcoin is nothing other than an unstable, worthless currency which you can't depend on. Bitcoiners would understand that although I have doubt that not many people outside the circle of community here, would think and look it that way

AtheistAKASaneBrain
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May 17, 2015, 01:06:31 PM
 #7

Obviously it will. We have VC money and big infrastructures like NASDAQ showing interest on a daily. After 2020 when the mining starts lowering a lot, the price will be so high that we can't imagine it right now because we would feel as stupid as saying BTC would reach 10 dollars back in early 2009. Thats how the human brain works.
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May 19, 2015, 12:40:02 AM
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IMO the key factor for bitcoin's future will be whether the world develops faith in it as a reserve currency.

The dollar enjoys demand, because it does.  Capital goods are useful for producing real goods and services.  Bitcoin needs to develop its own special strength before it can be related to these two in a purely quantity-based analysis.  (In other words, if people lose faith in bitcoin overnight, it can collapse, regardless of the relative quantities of these three things.)

On this I'm pretty optimistic.  The global elites, for a variety of reasons, seem to want to see bitcoin do well (though not so well as to threaten the major fiat currencies.)  Among these reasons is a potential future refuge for paper to be pegged against, when it finally runs out of steam (which it will.)  It's almost analogous to bringing up a child -- you don't want the child to be more powerful than you, and you want to keep them under your control, but you nurture the child and hope they will help you when you grow old and weak.

If the authorities ever peg paper to cryptocurrency, it will probably not be bitcoin itself, since they are much better off developing their own version (but basically identical in design -- to gain public trust) and mining half the coins before publicizing it.  But bitcoin has to do well and be well-regarded, before that can happen.
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May 19, 2015, 12:50:30 AM
 #9

IMO the key factor for bitcoin's future will be whether the world develops faith in it as a reserve currency.

The dollar enjoys demand, because it does.  Capital goods are useful for producing real goods and services.  Bitcoin needs to develop its own special strength before it can be related to these two in a purely quantity-based analysis.  (In other words, if people lose faith in bitcoin overnight, it can collapse, regardless of the relative quantities of these three things.)

On this I'm pretty optimistic.  The global elites, for a variety of reasons, seem to want to see bitcoin do well (though not so well as to threaten the major fiat currencies.)  Among these reasons is a potential future refuge for paper to be pegged against, when it finally runs out of steam (which it will.)  It's almost analogous to bringing up a child -- you don't want the child to be more powerful than you, and you want to keep them under your control, but you nurture the child and hope they will help you when you grow old and weak.

If the authorities ever peg paper to cryptocurrency, it will probably not be bitcoin itself, since they are much better off developing their own version (but basically identical in design -- to gain public trust) and mining half the coins before publicizing it.  But bitcoin has to do well and be well-regarded, before that can happen.

I think this last point by BobK71 is really interesting.  The idea of Cryptos as a reserve currency seems really powerful, and one of the instances where even if it's not bitcoin, it may be blockchain technology which assures the correctness of the ledger of these future reserves.  This seems especially nices as robots want to do high speed trades, distributed blockchain consensus lets who decided who traded first and at what price.

However, I'm not sure how the exporting of bitcoin ideas like blockchain and distributed consensus will affect the price of our old-school, original bitcoins.
johnyj
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May 19, 2015, 02:55:15 AM
 #10


Does this assume that demand remains constant?  Change in the demand of bitcoin can influence its price incremental to any price movement from fiat expansion.

Currently, everyone values and accepts fiat currency, and pretty much anything can be purchased with fiat.  There are many people that do not value bitcoin, and would not accept bitcoin as a form of payment and I think that plays an important role in bitcoin's valuation.

Demand will rise over time, since bitcoin is purely based on volunteer adoption, people will only adopt it when they start to understand how money works, it will take decades for people to think and act (My 10 year old cousin already knows banks print money out of thin air, that is a great improvement Grin). Fiat money is forced upon its users, thus banks must keep feeding them with fiat money in order to keep its adoption

So fiat money expansion is inevitable and the increase of bitcoin popularity is also inevitable, at least for decades, like internet did

BobK71
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May 19, 2015, 04:58:25 PM
 #11

...
However, I'm not sure how the exporting of bitcoin ideas like blockchain and distributed consensus will affect the price of our old-school, original bitcoins.

Ah, as some famous investor said, always learn from history.  Wink

This idea came to me as I realized how gold and not silver became the state reserve, "by accident."  Britain tried to peg paper to both gold and silver, but a miscalculation caused gold to be over-valued by the state's fixed conversion rate, and silver left circulation by getting hoarded and sold abroad to silver countries.  (This became known as Gresham's Law -- bad money drives out good money.)  Thus the gold standard was born.  Britain went to gold because the state had plenty of it.  As Britain became the world's dominant power, eventually the world was on gold, and silver has been trading at a fraction of its long-term historical price ratio to gold.

The analogy with crypto is not total, since the state can create a whole new crypto out of thin air.  The lesson is that the state will only work with the reserve that it controls.

BTW, since we now realize having more than one reserve for paper is unstable (the British "miscalculation" was really bound to happen sooner or later), they will probably only peg paper to one reserve.

In any case, at present bitcoin is a good investment, if you bet on the scenario of pegging against crypto.  If the state is considering this pegging, it will first give bitcoin room to grow, if not help it, and see if bitcoin can make it.  And that likely means a lot of upside from today's price.  Just get out (and take your profit) before the state announces pegging.
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May 19, 2015, 05:38:30 PM
 #12

I'm not sure if it will out perform any investment, but it certainly has the potential to be the best by far. If bitcoins potential is fully realized by certain big industries bitcoin will likely be worth several thousands of dollars. Will that ever happen? Who knows. We can only wait to find out.
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May 19, 2015, 07:59:06 PM
 #13

it will be worth thousends of dollars if will be huge inflation in westerness world,one day we will see that or it will becover by something,wars for example,price isalways very relative,i  think to have some btc,bought at that price it can be good saving account with possibilities to get more in some future,btc is much more savehevean than anything alse
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May 19, 2015, 08:14:21 PM
 #14

I don't know about the future, but this is the only thing in my portfolio that I paid pennies for and now spend at a rate of hundreds of dollars a piece. And in only 5 years!

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May 20, 2015, 01:08:14 AM
 #15

I`m trying to see it more as how the dollar of purchasing power comparison.

Back in 1950s $7k and up to current time value is now a little over more then $70k.

But, thats only if we go pass the whole mining done and the miners fee etc.
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May 20, 2015, 07:11:26 AM
 #16

Obviously it will. We have VC money and big infrastructures like NASDAQ showing interest on a daily. After 2020 when the mining starts lowering a lot, the price will be so high that we can't imagine it right now because we would feel as stupid as saying BTC would reach 10 dollars back in early 2009. Thats how the human brain works.

apparently this is not enough, we need everyone to show interest for it, to speed up the adoption/price ratio, something should take us off from this current stagnation, before the block halving
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May 21, 2015, 03:12:28 AM
 #17

I just asked my friend if he would buy bitcoin if it was on the exchange of nasdaq, he said yeah but only used for day trading..

So thats pretty intresting to hear, since most bitcoin daytraders now have the ability to it on the traditional side as well.

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