rpietila Wall Observer - the Quality TA Thread ;)

[Biodom]

I think that the main force preventing the widespread adoption of bitcoin is that elites don't have much inducement to use bitcoin.
The majority of bitcoins ever existing were already mined and are in possession of early adopters (mostly) and I don't see how current paper billionaires can redistribute btc toward themselves.
Current billionaires are unable to accumulate any decent % of their wealth (6.5 trillion) in bitcoin. Just 1% of 6.5 trillion is 65 billion, which is more than ten times BTC market cap.
Billionaires might be tempted if major currencies would be failing, but all major currencies are quite stable with benign inflation in most parts of the industrialized world.
This (transition from fiat to crypto) might take longer than I envisioned last year, maybe 50-100 years.

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[aminorex]

I think that the main force preventing the widespread adoption of bitcoin is that elites don't have much inducement to use bitcoin.
The majority of bitcoins ever existing were already mined and are in possession of early adopters (mostly) and I don't see how current paper billionaires can redistribute btc toward themselves.
Current billionaires are unable to accumulate any decent % of their wealth (6.5 trillion) in bitcoin. Just 1% of 6.5 trillion is 65 billion, which is more than ten times BTC market cap.
Billionaires might be tempted if major currencies would be failing, but all major currencies are quite stable with benign inflation in most parts of the industrialized world.
This (transition from fiat to crypto) might take longer than I envisioned last year, maybe 50-100 years.

Adoption S curve.  We are in the foothills.  The cliff will come.

Money printers have negative motivation to use bitcoin.  Everyone else has substantial motivation.  Even wealthy slaves are still slaves.

[molecular]

I agree with you. There have been lengthy arguments about "hashrate follows price" or "price follows hashrate" for years now. I'm in the former camp.

Also: supply is not a function of price and cost in the case of bitcoin mining. Supply is pretty much constant, miners just fight among each others over the fixed-sized cake. So only way in which mining influences price is by one variable: the percentage of coins sold by miners into the market.

I think this percentage is increasing with falling price, up to some point... some miners will reach > 100% and switch off. If they want BTC they'll buy instead. Mining efficiency (of the remaining miners) increases and cost decreases. Their selling-percentage decreases. All this has positive effect on price, further decreasing the percentage that has to be sold to cover cost. I'm not sure we've reached low enough price (or competitive enough mining landscape) for this to play out to a meaningful extent.

If the price drops so that the increased portion of the cake they earn is worth less in fiat terms, then would they not need to sell a larger percentage of coins to cover costs?

Yes, at first. What I meant was when inefficient miners start to drop out, the collective selling-percentage would decrease again.

Well, I see two counteractive forces at work - each remaining miner will solve more blocks and at a lower cost collectively, yet the reward from each block is shrinking in terms of fiat. Therefore, to lower the selling-percentage, the benefit of the former must outweigh the latter for a given price drop. Maybe this is what you're saying however.

Kind of.

My thinking was that the first force (miners have to sell more due to falling price) would be active first. At some point the second force would come into play (increase of overall efficiency causes miners to be able to keep more coins) which would have a positive effect on price and could tip the scale towards an upward movement, which would in turn reverse the effect of the first force and result in a rally. As said, I don't think we're at that point yet, though.

[Peter R]

I think that the main force preventing the widespread adoption of bitcoin is that elites don't have much inducement to use bitcoin.
The majority of bitcoins ever existing were already mined and are in possession of early adopters (mostly) and I don't see how current paper billionaires can redistribute btc toward themselves.
Current billionaires are unable to accumulate any decent % of their wealth (6.5 trillion) in bitcoin. Just 1% of 6.5 trillion is 65 billion, which is more than ten times BTC market cap.
Billionaires might be tempted if major currencies would be failing, but all major currencies are quite stable with benign inflation in most parts of the industrialized world.
This (transition from fiat to crypto) might take longer than I envisioned last year, maybe 50-100 years.

To maintain their wealth should bitcoin supersede fiat, your hypothetical billionaire would only need to acquire the same % of the bitcoin money supply that he presently controls of the fiat money supply.  Let's consider only the USD.  US M2 is approximately $11.5 trillion, and let's assume billionaire Bob has exactly $1,000,000,000 in USD (we ignore his other assets [companies, real estate, etc] as these aren't directly affected by a transition to bitcoin).  He thus controls 

 $1x10^9 / $11.5x10^12 = 0.0087%

of the USD money supply.  To control the same % of bitcoins (at full issuance), he needs:

  0.000087 x 21,000,000 = 1826 BTC

At $400 / BTC, that would require an investment of just under 3/4 of a million dollars--less than 0.1% of his total USD holdings.  One could purchase this amount of bitcoins very easily without significantly moving the price. 

So that's the amount he needs in order to "hedge."  But our hypothetical billionaire is a billionaire for a reason.  If he believes that his other fellow billionaires will hedge in a similar way, he can see that while his action may not cause much price slippage, the action of everyone hedging like this will cause slippage--a lot of slippage.  So now he has an inducement to actually purchase a speculative position on top of his "hedging" position--and to make those purchases sooner rather than later.   And if he does this, he actually gains in a potentially big way should bitcoin adoption continue. 

[rpietila]

Nice to see that the fundamentals are upheld. I have devoted a little too much time to Monero lately. It is small, and it is easier to make your voice heard even in a global scale. Perhaps you could propose me what I could do for Bitcoin, I have been feeling unemployed. Even my castle is far away for visitors who are suddenly poor because of bitcoin's price falling... Luckily this week we have a conference! 

[JayJuanGee]

I think that the main force preventing the widespread adoption of bitcoin is that elites don't have much inducement to use bitcoin.
The majority of bitcoins ever existing were already mined and are in possession of early adopters (mostly) and I don't see how current paper billionaires can redistribute btc toward themselves.
Current billionaires are unable to accumulate any decent % of their wealth (6.5 trillion) in bitcoin. Just 1% of 6.5 trillion is 65 billion, which is more than ten times BTC market cap.
Billionaires might be tempted if major currencies would be failing, but all major currencies are quite stable with benign inflation in most parts of the industrialized world.
This (transition from fiat to crypto) might take longer than I envisioned last year, maybe 50-100 years.

To maintain their wealth should bitcoin supersede fiat, your hypothetical billionaire would only need to acquire the same % of the bitcoin money supply that he presently controls of the fiat money supply.  Let's consider only the USD.  US M2 is approximately $11.5 trillion, and let's assume billionaire Bob has exactly $1,000,000,000 in USD (we ignore his other assets [companies, real estate, etc] as these aren't directly affected by a transition to bitcoin).  He thus controls 

 $1x10^9 / $11.5x10^12 = 0.0087%

of the USD money supply.  To control the same % of bitcoins (at full issuance), he needs:

  0.000087 x 21,000,000 = 1826 BTC

At $400 / BTC, that would require an investment of just under 3/4 of a million dollars--less than 0.1% of his total USD holdings.  One could purchase this amount of bitcoins very easily without significantly moving the price. 

So that's the amount he needs in order to "hedge."  But our hypothetical billionaire is a billionaire for a reason.  If he believes that his other fellow billionaires will hedge in a similar way, he can see that while his action may not cause much price slippage, the action of everyone hedging like this will cause slippage--a lot of slippage.  So now he has an inducement to actually purchase a speculative position on top of his "hedging" position--and to make those purchases sooner rather than later.   And if he does this, he actually gains in a potentially big way should bitcoin adoption continue. 

That is really great and makes a lot of sense - however, even though there seems to be a lot of very wealthy people out there, it does NOT appear that too many of them are yet taking the hedging (and or speculation) actions that you are describing to be reasonably within their financial interest.

[Biodom]

I think that the main force preventing the widespread adoption of bitcoin is that elites don't have much inducement to use bitcoin.
The majority of bitcoins ever existing were already mined and are in possession of early adopters (mostly) and I don't see how current paper billionaires can redistribute btc toward themselves.
Current billionaires are unable to accumulate any decent % of their wealth (6.5 trillion) in bitcoin. Just 1% of 6.5 trillion is 65 billion, which is more than ten times BTC market cap.
Billionaires might be tempted if major currencies would be failing, but all major currencies are quite stable with benign inflation in most parts of the industrialized world.
This (transition from fiat to crypto) might take longer than I envisioned last year, maybe 50-100 years.

To maintain their wealth should bitcoin supersede fiat, your hypothetical billionaire would only need to acquire the same % of the bitcoin money supply that he presently controls of the fiat money supply.  Let's consider only the USD.  US M2 is approximately $11.5 trillion, and let's assume billionaire Bob has exactly $1,000,000,000 in USD (we ignore his other assets [companies, real estate, etc] as these aren't directly affected by a transition to bitcoin).  He thus controls 

 $1x10^9 / $11.5x10^12 = 0.0087%

of the USD money supply.  To control the same % of bitcoins (at full issuance), he needs:

  0.000087 x 21,000,000 = 1826 BTC

At $400 / BTC, that would require an investment of just under 3/4 of a million dollars--less than 0.1% of his total USD holdings.  One could purchase this amount of bitcoins very easily without significantly moving the price. 

So that's the amount he needs in order to "hedge."  But our hypothetical billionaire is a billionaire for a reason.  If he believes that his other fellow billionaires will hedge in a similar way, he can see that while his action may not cause much price slippage, the action of everyone hedging like this will cause slippage--a lot of slippage.  So now he has an inducement to actually purchase a speculative position on top of his "hedging" position--and to make those purchases sooner rather than later.   And if he does this, he actually gains in a potentially big way should bitcoin adoption continue. 

I would suggest that an average billionaire did not take this action...YET, otherwise we would hear much more about how wonderful bitcoin is.
Also, these numbers would simply hedge. Why would an average billionaire be simply consent to equal his bitcoin position to his relative fiat position?
My point is the transition will happen very slowly as to not perturb the elite ranks too much.

[JayJuanGee]

Nice to see that the fundamentals are upheld. I have devoted a little too much time to Monero lately. It is small, and it is easier to make your voice heard even in a global scale. Perhaps you could propose me what I could do for Bitcoin, I have been feeling unemployed. Even my castle is far away for visitors who are suddenly poor because of bitcoin's price falling... Luckily this week we have a conference! 

For one, if you are NOT mostly all in BTC, and you have extra fiat, it would be good to send some to the exchanges to push up the price... but maybe you consider that you are NOT a big enough fiat whale for that kind of pushing? 

I am NOT sure what can be done in mere propaganda terms (rather than actually physically investing).  It seems that we need either vehicles in which people feel comfortable to send fiat to exchanges in order to make btc transactions on exchanges or if some people are losing trust in the current exchanges to establish exchanges in which they will have greater confidence to be able to invest large amounts of fiat on a whim...

IT seems that Circle and COIN could bring this.  In this same line of thought, there was some sense that second market and GABI were going to bring some of ability to bring cash into the system to cause prices to go up, but those kinds of large fiat injections have NOT seemed to materialize to date in order to cause upward trajectories in the price... I mean if we could get into the $60 to 100 billion market cap range, then there will likely be considerable possibiliities for larger transactions (and greater BTC utility).

[Peter R]

I would suggest that an average billionaire did not take this action...YET, otherwise we would hear much more about how wonderful bitcoin is.

I don't disagree.  I was arguing with your statement "elites don't have much inducement to use bitcoin"--I think they do…they just haven't realized that yet.  I was also showing how "current paper billionaires can redistribute btc toward themselves" if you look at each billionaire as an individual investor rather than looking at all billionaires in aggregate.

Also, these numbers would simply hedge. Why would an average billionaire be simply consent to equal his bitcoin position to his relative fiat position?

Right, so our hypothetical billionaire would take on a speculative position on top of his hedge if he actually believed that other wealthy people like him would eventually decide to do the same thing.  I showed how our hypothetical billionaire could hedge for less than 0.1% of his USD holdings--that's cheap insurance against the "what if" scenario.  The crazy thing is that if wealthy investors in aggregate agreed that that's cheap insurance and chose to take it, then the price would rise thereby making the "what if" scenario a self-fulfiling prophecy.  

My point is the transition will happen very slowly as to not perturb the elite ranks too much.

Agreed.

That is really great and makes a lot of sense - however, even though there seems to be a lot of very wealthy people out there, it does NOT appear that too many of them are yet taking the hedging (and or speculation) actions that you are describing to be reasonably within their financial interest.

Agreed: it doesn't appear that too many of them are taking the hedging or speculation actions that I described.  

I think we'd also agree that if they were taking those actions, there'd be another race into bitcoin and the wealthy market participants would attempt to take positions larger than what would be required to simply hedge.  The contradiction is that it's impossible for everyone to take a larger position than what is required to hedge, so the price has to explode upwards.  

So why aren't they presently taking those actions?  

 

[rpietila]

So why aren't they presently taking those actions?  

It is probably not allowed to them.

There are things you cannot do if you are poor. Then there are things you cannot do if you are a billionaire. Both groups intuitively know them. The things are very different.

[Biodom]

So why aren't they presently taking those actions?  

It is probably not allowed to them.

There are things you cannot do if you are poor. Then there are things you cannot do if you are a billionaire. Both groups intuitively know them. The things are very different.

let's focus on millionaires then, as they seem to be more conducive to bitcoin appeal .

[BldSwtTrs]

Richard Branson and Michael Novogratz have stated publicly that they have a BTC position. Ray Dalio said he thinks Bitcoin is interesting, Bill Gates too. Peter Thiel invested in Bitpay.

[JayJuanGee]

So why aren't they presently taking those actions?  

It is probably not allowed to them.

There are things you cannot do if you are poor. Then there are things you cannot do if you are a billionaire. Both groups intuitively know them. The things are very different.

let's focus on millionaires then, as they seem to be more conducive to bitcoin appeal .

Personally, I also believe that millionaires are a lot more interesting than billionaires because 1) there are a lot more of them, 2) in the aggregate they can make a considerable impact on the BTC market, 3) they are more likely (in the Rpietila line of thinking) to be willing to take a position in BTC, and 4) there may be some other reasons that they are an interesting group.. eg they may not be so stuffy and are more connected with world activities, which relates back to point 3.

[smooth]

So why aren't they presently taking those actions?

One possibility is that 0.1% hedges are simply too small to bother. This may happen but only at some 1% or higher level.

[BTCtrader71]

So why aren't they presently taking those actions? 

A good friend of mine serves as a case study. He's a very successful businessman in the multi-millionaire category. I convinced him at the beginning of the run up last fall to buy a sizable chunk of btc, at average buy-in price just below $400. His only bitcoin-related comment to me during 2014 was to take note of the fact that the bitcoin price was "in the shitter." He sold a few months ago (against my advice) at about $600, for better than 50% profit. The timing of the sale had more to do with the fact that he needed the cash for a new business venture than for anything related to bitcoin. But the fact is that despite his favorable experience investing in bitcoin, he still isn't interested enough to dig into bitcoin fundamentals.

It takes a LOT of time, energy, and research to be confident enough that you are a better judge of bitcoin's long term viability than the market. Most people still don't have the incentive to do that; and if they are not tech-savvy, they will continue to doubt bitcoin until the moment they can see it in action, up close and personal.

What would it take for my friend to buy into it again? I'm not sure. But if I could take him and his wife out to dinner and pay for it in bitcoin -- that might do it.

[Peter R]

So why aren't they presently taking those actions?

One possibility is that 0.1% hedges are simply too small to bother. This may happen but only at some 1% or higher level.

This is a great point too.  0.1% hedges are perhaps too small to bother with; on the other hand, should the market-cap significantly increase, 10% hedges would be painful.  The "hedging dynamics" will get interesting around the 1% level I think (as you implied as well).  

[marcus_of_augustus]

So why aren't they presently taking those actions?

One possibility is that 0.1% hedges are simply too small to bother. This may happen but only at some 1% or higher level.

This is a great point too.  0.1% hedges are perhaps too small to bother with; on the other hand, should the market-cap significantly increase, 10% hedges would be painful.  The "hedging dynamics" will get interesting around the 1% level I think (as you implied as well).  

The bitcoin game has the interesting property that incentivises/allows easier access for smaller (yet more knowledgeable) players to get in first ... the entrance only grows large enough for the next larger level of players at each stage ... the biggest position takers in fiat terms will probably be the last to arrive under this logic.

[molecular]

So why aren't they presently taking those actions?

One possibility is that 0.1% hedges are simply too small to bother. This may happen but only at some 1% or higher level.

This is a great point too.  0.1% hedges are perhaps too small to bother with; on the other hand, should the market-cap significantly increase, 10% hedges would be painful.  The "hedging dynamics" will get interesting around the 1% level I think (as you implied as well).  

The bitcoin game has the interesting property that incentivises/allows easier access for smaller (yet more knowledgeable) players to get in first ... the entrance only grows large enough for the next larger level of players at each stage ... the biggest position takers in fiat terms will probably be the last to arrive under this logic.

Isn't this cool? I like that property. The people have the chance to turn the pyramid upside down in a sense...

I think we need more education, though: a lot of people still seem to think they have to buy a whole bitcoin (who can blame them, the term 'coin' implies this) and the /r/bitcoin crowd happily sends everyone to circle/coinbase.

[600watt]

So why aren't they presently taking those actions? 

A good friend of mine serves as a case study. He's a very successful businessman in the multi-millionaire category. I convinced him at the beginning of the run up last fall to buy a sizable chunk of btc, at average buy-in price just below $400. His only bitcoin-related comment to me during 2014 was to take note of the fact that the bitcoin price was "in the shitter." He sold a few months ago (against my advice) at about $600, for better than 50% profit. The timing of the sale had more to do with the fact that he needed the cash for a new business venture than for anything related to bitcoin. But the fact is that despite his favorable experience investing in bitcoin, he still isn't interested enough to dig into bitcoin fundamentals.

It takes a LOT of time, energy, and research to be confident enough that you are a better judge of bitcoin's long term viability than the market. Most people still don't have the incentive to do that; and if they are not tech-savvy, they will continue to doubt bitcoin until the moment they can see it in action, up close and personal.

What would it take for my friend to buy into it again? I'm not sure. But if I could take him and his wife out to dinner and pay for it in bitcoin -- that might do it.

my landlord is a multi-millionaire. i got her and her sons convinced to invest in btc last may/june. first thing that happened was we were 50% down ( i invested at the same days ) when october came and price went 10% above the price we went in, they wanted to sell. they wanted to sell almost every day through november and i strongly advised them every time to hold.
when their investment had 10-folded they sold. I didn't. they don't care about bitcoin as a technology. it was just a funny investment. I may be too much in love with bitcoin to ever sell, but next run up, i try to perform a little bit better.
There is another friend in the millionaire category that i got interested in. he invested in october/november, average about $ 250, never sold and heute is actually interested in the tech, but even services like bitstamp he cannot comprehend, it is all way too complicated for him.

[devphp]

There is another friend in the millionaire category that i got interested in. he invested in october/november, average about $ 250, never sold and heute is actually interested in the tech, but even services like bitstamp he cannot comprehend, it is all way too complicated for him.

Where did he buy at?