.

[keystroke]

Knowing how steep the exponential growth will be in this regime is a matter of reading the minds of the larger population, which is easy, and reading the minds of those at the very top of the distribution curve, which is hard.

What does that distribution curve look like and how many BTC are at the top? Why is it easy to read the minds of the larger population?

[Impaler]

In the end, Litecoin will have 4x the supply

All things being equal this still means more like 1/(e^4). Not 1/4.

Ok so your admitting you were confusing inflation rates with nominal supply numbers.  This is a really naive mistake to make, after all "1" BTC is a completely arbitrary unit and it's only relevance is to how many units exist or will exist and what the valuation of the total market cap is.  People have been spinning off all kinds of alt-coins with crazy high or crazy low nominal unit counts and people have recognized for ages now that all that matters is valuation of total market cap, inflation rates relative to ultimate max coin base and the rate that you can acquire a portion of that market cap.

Also I see nothing that justifies 1/(e^4) as a formula for the value of 1 LTC relative to a BTC and I think your either trying to Bullshit people with fancy numbers or you have grossly misapplied a formula you found somewhere.  LTC and BTC are separate goods, though their may be a substitution effect in which the broader consumer need for 'crypto-currency' can be satisfied by one or the other, presumably with BTC as the superior good because of it's wider usage.  But ultimately demand will be the determining factor with the coin buyer choosing between an ASIC network and a GPU network which is the main factor differentiating them.  I can't say what people are going to prefer but it sure can't be expressed as an equation like that.

[Impaler]

LTC is hardly illiquid, if you define liquidity as ability to convert to USD then LTC is no different from BTC.  If you define it as being able to spend it directly with online merchants it's certainly behind BTC but not by the absurd orders of magnitude that your claiming.  It is also IN NO WAY FIXED and it is not at all clear how its going to change in the future.

Also your mistaken to think that usage is actually what supports the price of ANY of these coins, their values are still massively speculative and the actual commerce volumes can't support prices when all goods are de-factor priced in dollars.

And they can always pull those changes even if they haven't written them, that's basically what every alt-coin dose when its created, copying is always easier then originating.  And frankly BTC developers are being far more conservative in what they will do and what idea spaces they will explore then are alt-coin developers, Sunny King is an example of someone doing stuff that would never done by BTC.

[Chang Hum]

Just to clarify can you confirm if e is the speed of light or not in your formula?

[Chang Hum]

Thanks for the link how did you work out that equation?

[ElectricMucus]

You are doing a great job providing blinders to folks.

[Chang Hum]

Thanks for the link how did you work out that equation?

Really, just go back through the thread. There are some other good links to look at.

The bottom line is, that as long as the system holds up under a Price Elasticity of Supply regime we can expect an exponential price increase with each halving of the amount of new Bitcoin for a given unit of time. Demand will continue to be erratic and so we will continue to see tremendous volatility. This is exactly what one would expect to see for a supply-inelastic asset class.

Yes Really, you've written an equation describing the relationship between Litecoin and Bitcoin and can't show how you derived it. Makes you look un-credible and I'm calling shenanigans on you!!

[vokain]

i don't even know why we're having this discussion, seeing as bitcoin isn't parallel to litecoin, the reason being that supply of these coins will not be what determines the price ratio.

The worth of a coin depends on what you can do with it. Bitcoin is worth $98.9 (or $92) because of the economy underlying bitcoin. The litecoin economy is less comparable. How i see it is that people will likely fork towards the best economy because it makes sense. Why would you choose a smaller economy over a larger one? and as such, bitcoin wlll grow and grow, at a rate much faster than ltc.

[Chang Hum]

i don't even know why we're having this discussion, seeing as bitcoin isn't parallel to litecoin, the reason being that supply of these coins will not be what determines the price ratio.

The worth of a coin depends on what you can do with it. Bitcoin is worth $98.9 (or $92) because of the economy underlying bitcoin. The litecoin economy is less comparable. How i see it is that people will likely fork towards the best economy because it makes sense. Why would you choose a smaller economy over a larger one? and as such, bitcoin wlll grow and grow, at a rate much faster than ltc.

+1

[JimboToronto]

Bitcoin must be upgraded or it could die

The only upgrade it really needs is Zerocoin.

[Le Happy Merchant]

But I would look for it to be an event that would trigger a rotation that will dwarf all prior transfers.

I know what you mean, but you said it so subtly I felt that it needed a quote.

Edit: found something else.

For a supply-inelastic asset class this relationship will be exponential. Not linear. That is not my idea, it is something that is known about Price elasticity of Supply.

In relation to this, how do you take account of lost Bitcoins? (I assume that you can't, which is fair.)

[Le Happy Merchant]

Which is still years away.

Maybe.

[Le Happy Merchant]

We are currently in a deflationary environment. My expectation is that this will remain the case for at least the next decade—if it can ever be remedied.

By 'We' you mean Bitcoin right?

[Le Happy Merchant]

No, I mean the global economy.

I'm willing to believe that, but the statistics I have access to say otherwise.

I will agree that in terms of goods being produced we are currently experiencing deflation, but the inflation rate of the CB currencies outstrips it as far as I can see.
 

[TraderTimm]

Don't know why it took me so long to notice this thread, I like your analysis and meticulous methods, chodpaba.

I'm just going to put this here before the next wave up happens. (No, I don't know the timing, just saying it will happen eventually...)

If you take the prior traded extreme to the next traded extreme, the high of 31 to 266 was approximately ~758%.

If you use this as a general guide (and it could be utterly wrong in terms of magnitude - as in, not high enough) projection would say from 266 to our next theoretical oh-no-that-is-impossible-high would equal: 2,283

Crazy? Perhaps not. Our original rise from the first 'tick' of when bitcoin traded was ~3,000%+ to the 31 high. Maybe I'll come back later and find out that even extrapolating that lofty number wasn't enough. Or, as some cynics believe, it will be worth zero - but I highly doubt it.

[Swordsoffreedom]

This was an interesting speculative post thanks for posting 

[byronbb]

Well we have approached the 0.0183 LTC/BTC as predicted by chodpapa the oracle.

[geofflosophy]

Please explain to me what I'm missing:

Most people, myself included, are hoarding coins unwilling to sell, so the supply is really only a small fraction of the coins in existence in the world at current prices. With that said, if the price climbs substantially, the supply of coins that people are willing to sell will grow; I certainly have a couple of coins sitting around waiting for the $200 price point.

So are you claiming that new coins come into the market at a rate of the log of the price, and thus the supply grows much slower rate than the price? Or are you assuming that the supply is relatively fixed because of the controlled release schedule of mining? If it's the latter, I think you're very wrong.

[geofflosophy]

Please explain to me what I'm missing:

Most people, myself included, are hoarding coins unwilling to sell, so the supply is really only a small fraction of the coins in existence in the world at current prices. With that said, if the price climbs substantially, the supply of coins that people are willing to sell will grow; I certainly have a couple of coins sitting around waiting for the $200 price point.

So are you claiming that new coins come into the market at a rate of the log of the price, and thus the supply grows much slower rate than the price? Or are you assuming that the supply is relatively fixed because of the controlled release schedule of mining? If it's the latter, I think you're very wrong.

It goes like this.

Litecoin is a clone of Bitcoin.

Litecoin has an ultimate inflation rate of 4x Bitcoin.

They are both exreamely supply inelastic subject to the rules of Demand Pull Inflation.

As such the response to demand will relate to the exponent of the inflation rate and Litecoin can expect to approach a value in the order of 1/e^4 that of Bitcoin due to that exponential (not linear) relationship. That is: 1/e^4 NOT 1/4.

That part I get, it's the inelasticity of supply of either bitcoin or litecoin (but particularly bitcoin) that I'm curious about.

[SheHadMANHands]

Thought provoking thread.  Thanks for sharing chodpaba.  Is there a solution to this volatility "problem", or will it forever be a crutch, of sorts (even if we imagine a perfect world where everyone is using bitcoin for everything)?  

Economic n00b here.  Please be nice.