[CHART] Bitcoin Inflation vs. Time

[xxjs]

Browsing through the stickies, I would like to say:

The reason the guy with the digger is more productive, is the capital expended on the digger (education (investment) could be a part too). Since labour is higly movable, usable in all kinds of production, wages tend to equalize over all production. Hand digging is still useful near house walls and past existing tubes and cables, and the hand digger is well paid (I met one), but it is less used. The same with servants, they have not been able to increase productivity using capital so much, thus they are far less numerous. (At a time in England servant jobs were the most numerous jobs by far).

A difference between inflation and deflation is that the deflationary effect is felt (positively) by all holders of money, while inflation is negative for the holders of money but lucrative for the ones who get the new money first. Had the new money been proportionally doled out to all existing holders, the effect would not be that negative, but don't hold your braeth for that.

[bernard75]

Excellent work!

[MinermanNC]

Can you make a version with logarithmic scales?  Given the exponential decay it would provide more detail for later years.

Hey there you are! lol,,,waiting for you guys to re open...we miss ya!

[whitslack]

@EuropeanMiner: This chart shows monetary inflation, not price inflation. It's impossible to predict price inflation because it depends on demand. Monetary inflation is entirely determined by supply, which we know exactly in Bitcoin for all times.

[hgmichna]

Cause every market is unpredictable, …

To some extent markets are predictable. Otherwise there would be no successful speculators.

Often, like with bitcoin, it can be hard work. You have to watch and evaluate lots of different indicators, and you have to understand the basics of the market, for example, that the bitcoin market consists of 5% real users, paying for goods and services, and 95% overly greedy speculators. Due to bitcoin's deflationary rules, it is something like a bubble economy, creating a new bubble every two years. So you have to understand bubbles as well.

It can be done. If you stay cool, switch off your emotions, and look at bitcoin from a realistic point of view, you can predict the bitcoin price at least better than the get-rich-quick crowd.

My prediction is that the price will go down to new lows later this year or the next. $20 comes to mind.

[xenofanesSkarak]

Cause every market is unpredictable, …

To some extent markets are predictable. Otherwise there would be no successful speculators.

Often, like with bitcoin, it can be hard work. You have to watch and evaluate lots of different indicators, and you have to understand the basics of the market, for example, that the bitcoin market consists of 5% real users, paying for goods and services, and 95% overly greedy speculators. Due to bitcoin's deflationary rules, it is something like a bubble economy, creating a new bubble every two years. So you have to understand bubbles as well.

It can be done. If you stay cool, switch off your emotions, and look at bitcoin from a realistic point of view, you can predict the bitcoin price at least better than the get-rich-quick crowd.

My prediction is that the price will go down to new lows later this year or the next. $20 comes to mind.

I agree
after all what we have seen so far
5 years ago, if anybody offered you some BTC for $100 or even $1 you would probably rather gave the money to charity than to this project.
And taking into account processes and industrial development in last 100 years I assume nobody will even think of bitcoin in year 2113.
Just remember what happened during last 10years- Who watched at home videotapes in 2003 and in 2013 or who listens to music on CDs in 2013.

Why the hell people is buying BTC right now like crazy everytime it drops under $90?
They expect evaluation but who should buy BTC for eg $500 or $1,000 next year with expectation of further evaluation?
My bet is by the end of summer we can buy btc for $50 and by the end of year it may hit $20.       
OnceBTC starts declining it will imply huge selling which inevitably will lead to even lower price. 

This is how all bubbles ends we all know it.
Unfortunately cat this time some people have pure greed in their large open eyes instead of common sense approach.
Someone will have to pay the evening party when comes the time to pay the bill from waitress!!

[hgmichna]

Why the hell people is buying BTC right now like crazy everytime it drops under $90?

It did drop below $70.

They expect evaluation but who should buy BTC for eg $500 or $1,000 next year with expectation of further evaluation?
My bet is by the end of summer we can buy btc for $50 and by the end of year it may hit $20.       
OnceBTC starts declining it will imply huge selling which inevitably will lead to even lower price. 

This is how all bubbles ends we all know it. …

There may well be a next bubble. If we keep the rhythm, it will burst in 2015 somewhere above $1,000.

[xenofanesSkarak]

There may well be a next bubble. If we keep the rhythm, it will burst in 2015 somewhere above $1,000.

if it makes again 25 - 35 multiple of the beginning before bubble then the top could be on $3000 to $7,500                  

[nolove1ty1s2]

Nice done charts!..More people mining..More blocks is completed

[DrGregMulhauser]

To some extent markets are predictable. Otherwise there would be no successful speculators.

At the risk of nudging the thread off topic, it seems to me that this doesn't quite follow. The success of speculators by itself does not imply anything about the predictability of markets. Given enough people trying in enough different ways, there will always be some who 'succeed' at speculating, even if they wind up getting the 'right' answer for the wrong reasons.

Similarly, if you set up a single elimination tournament to be decided by tosses of a fair coin, there will always be a winner. There will always be someone who wins every single coin toss, one after the other, regardless of how big the tournament is. The fact that there must be a winner does not mean that anyone is naturally more talented than anyone else at winning coin tosses. It doesn't mean we could identify them beforehand as top notch coin toss winners, and it doesn't mean we could analyze after the fact how they came to be such great coin toss winners. Of course, there could be natural born -- or fantastically skilled -- coin toss winners, but the fact of winning doesn't by itself make a compelling argument for that conclusion. (I suggest a related line of thought in an article called 'How to Lose Money with a Bitcoin Investment, Part 1: The Easy Money Mantra'.)

None of this implies that there are no talented investors. Of course there are. But relying on that for an argument that therefore, markets are predictable, takes more work. IMHO, the longer term success of some investors comes down to quite a bit more than predicting markets.

[hgmichna]

To some extent markets are predictable. Otherwise there would be no successful speculators.

At the risk of nudging the thread off topic, it seems to me that this doesn't quite follow. The success of speculators by itself does not imply anything about the predictability of markets. Given enough people trying in enough different ways, there will always be some who 'succeed' at speculating, even if they wind up getting the 'right' answer for the wrong reasons.

Similarly, if you set up a single elimination tournament to be decided by tosses of a fair coin, there will always be a winner. There will always be someone who wins every single coin toss, one after the other, regardless of how big the tournament is. The fact that there must be a winner does not mean that anyone is naturally more talented than anyone else at winning coin tosses. It doesn't mean we could identify them beforehand as top notch coin toss winners, and it doesn't mean we could analyze after the fact how they came to be such great coin toss winners. Of course, there could be natural born -- or fantastically skilled -- coin toss winners, but the fact of winning doesn't by itself make a compelling argument for that conclusion. (I suggest a related line of thought in an article called 'How to Lose Money with a Bitcoin Investment, Part 1: The Easy Money Mantra'.)

None of this implies that there are no talented investors. Of course there are. But relying on that for an argument that therefore, markets are predictable, takes more work. IMHO, the longer term success of some investors comes down to quite a bit more than predicting markets.

That is just nicely shaped fog. The bitcoin market is at certain times easier to predict than other markets, because so many players follow the same simple, but wrong mantra. It is therefore also a systematically bubble-producing market. It is also a market whose basics are, to a sufficient extent, knowable. Several indirect mood indicators are also available.

Of course there is always an element of luck in speculation, but if you have a significant gain after dozens of trades, the likelihood of that being sheer luck is practically zero. The coin toss example does not mirror the real world.

[DrGregMulhauser]

That is just nicely shaped fog.

Why thank you -- all the best fog is shapely.

The bitcoin market is at certain times easier to predict than other markets, because so many players follow the same simple, but wrong mantra. It is therefore also a systematically bubble-producing market. It is also a market whose basics are, to a sufficient extent, knowable. Several indirect mood indicators are also available.

This has nothing to do with the original argument, which does not seem to be valid. You've now given many additional reasons to believe the Bitcoin market is predictable. Originally, the reason you gave was that it must be predictable, because otherwise there would be no successful speculators. Throwing out that original argument and switching to a different one does not make the original argument any more valid or sound.

I am not arguing that the Bitcoin market is or is not predictable, and in fact there are good information theoretic grounds for believing it is relatively inefficient. Nor am I arguing whether there are or are not successful investors. Rather, I am pointing out that the original argument was not a good argument: speculative success does not imply predictability, although obviously it is entirely consistent with it.

[Zaih]

I guess people tend to sometimes forget we're not going to see a viable 'non inflationary' bitcoin model for a long time to come..

[xxjs]

Of course there is always an element of luck in speculation, but if you have a significant gain after dozens of trades, the likelihood of that being sheer luck is practically zero. The coin toss example does not mirror the real world.

Not at all true. There is a 1/n chance to randomly guess right a dozen times, and you therefore need only n peple to produce one lucky guy.

On the other hand, on a backdrop of an increasing valuation, daytraders going in an out randomly will probably gain, but probably no more than people that just buy and hold.

[Viscera]

Nice.

I think it would be useful a more detailed chart, from the beginning until 2014

I agree, the drop at the end of 2013 looks frighteningly fast. I'd like to learn more about when this big change will occur. Thanks to the OP for sharing these charts.

[whitslack]

I agree, the drop at the end of 2013 looks frighteningly fast. I'd like to learn more about when this big change will occur. Thanks to the OP for sharing these charts.

The big drop was at the beginning of 2013, and it actually occurred a few months ahead of schedule. It was when the block subsidy dropped from 50 BTC to 25 BTC.

[KonstantinosM]

I agree, the drop at the end of 2013 looks frighteningly fast. I'd like to learn more about when this big change will occur. Thanks to the OP for sharing these charts.

The big drop was at the beginning of 2013, and it actually occurred a few months ahead of schedule. It was when the block subsidy dropped from 50 BTC to 25 BTC.

Right after the reward drops from 25 to 12.5 the price movement will most definitely be felt....

Any such events will have an impact on the currency.... The next 2 ones will be the remaining biggest halving events....

After that halving isn't really going to affect the market in any serious way since most BTC will be out there trading instead of waiting to be mined!

Is there a clock to the next halving set up already?

[whitslack]

Well, when the block halves again, Bitcoin might not be so valuable to mine anymore. Unless Bitcoin somehow gets saved (which it won't) the next halves will deter new users......

Could you explain your reasoning for your second sentence? Why would a reduction in the profitability of mining deter new users? The overwhelming majority of Bitcoin users do not mine, nor should they. Are you presupposing that the subsidy halving will cause a hike in transaction fees? I do not see a connection. The transaction fees are purely a function of the on-chain transaction load and the maximum block size limit. They are the "price of real estate in the block chain." You pay a transaction fee in order to secure a place for your transaction in the block chain. The price you must pay varies only as the transaction load varies or if the maximum block size limit is altered. Changes in the profitability of mining (such as due to varying difficulty, varying energy costs, block subsidy halving, etc.) do not affect the supply or demand of space in the block chain, so they do not affect the price of space in the block chain (i.e., the transaction fees).

[mangox]

https://sphotos-b-ams.xx.fbcdn.net/hphotos-frc3/1835_464155803692233_1923019074_n.jpg

[nuffsaid420]

Eventually that little line on your graph will level out. Once all BTC are mined and in the hands of bearers, inflation will be impossible because the amount of BTC is FINITE!

True, but since that is approximately 127 years away, can we assume that the bitcoin supply will be inflationary for the entire lifetime of anyone alive today?

I suppose it depends on whether you count "lost coins" as a reduction in supply against the generation of new coins, and how high the rate of lost coins is in any given year.

So you think it will take another 127 years to mine?? Let's revisit this statement in another year shall we?

What makes you think it will take another 127 years to mine the rest of the bitcoins?

I agree with the rest of your post. And like some one else has already stated "lost coins" aren't truly lost, we just don't care or have the technology yet to recover them.


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