An interesting case of a widespread misconception

[deisik]

Here I want to discuss a rather popular misconception that many still seem to have as revealed in this Reddit thread where I stumbled upon this post:

So when bitcoin goes up and people get rich by holding, who pays for that? Those who bet against bitcoin. Completely fair

The point is, those who actively bet against Bitcoin cannot pay for people getting rich by holding because they are actually dragging the price down. Betting against Bitcoin assumes selling it, probably on margin (i.e. without first buying the cryptocurrency). Conversely, it is those buying bitcoins who drive the price up, and through this making holders richer. It is an interesting case because a plausible and convincing explanation is in fact absolutely wrong, and as such could lead to ruinous decisions if taken into consideration without much thought

[1714977032]

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[1714977032]

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[lionheart78]

It is possible that those who bet against Bitcoin was hit by FOMO and started buying.  This thing happens, when people were hesitant at first then when the price starts to pump, they are the ones to jump on the train last and start panic buying.

[amishmanish]

Misconception or not, this debate about "getting rich by hodling" sees a lot of virtue signalling by people who get salty that they weren't there earlier. Heck, I bet everyone from 2017 onwards has felt that once. It is hard to accept the someone like the MtGox scammer should be sitting on a billion dollar stash.

I wish that the wealthy elites who once frequented the forum much more than they do now were here to assuage the newcomers that they are actually getting together to build a seastead, end poverty, find a cure to cancer and give employment opportunities to the poorest. (Although, Thanks for the Sig campaigns fellas..LOL) I hope they have a secret society of the sorts that geeks and cypherpunks have always accused the "powers that be" to have. I would be very surprised if an early group of cypherpunks haven't formed such a secret society of super-rich bitcoiners.

Although, now that i think of it, i doubt if they are up to any good. We hit the ATH in 2018. Those guys supposedly got rich. and then 2 years later, you give us fucking 2020??!!

[gentlemand]

I wish that the wealthy elites who once frequented the forum much more than they do now were here to assuage the newcomers that they are actually getting together to build a seastead, end poverty, find a cure to cancer and give employment opportunities to the poorest.

One of the more prevalent OG Bitcoiner attitudes is extreme libertarianism which means overwhelming selfishness. Benevolence is not a trait that shines through many of their proclamations. The best you'll get is 'we helped nurture this to let you help yourself.'

If you were sitting at home going over your seed and one passed by they'd kick the door in, stamp on your neck, have your coins away and tell you to take it as a lesson in personal responsibility.

[deisik]

It is possible that those who bet against Bitcoin was hit by FOMO and started buying.  This thing happens, when people were hesitant at first then when the price starts to pump, they are the ones to jump on the train last and start panic buying

Then they are no longer betting against Bitcoin

There is only one way holders can become richer in case of a purely speculative asset (just in case, I don't necessarily refer to Bitcoin here), and this is when someone buys it. When someone sells the asset, this adds to the sell pressure, which ultimately forces the prices down. So, holders cannot become richer because of someone betting against the hoarded asset

Misconception or not, this debate about "getting rich by hodling" sees a lot of virtue signalling by people who get salty that they weren't there earlier

Every bull run ends with a bull trap

[kryptqnick]

Yes, I don't even understand the logic behind the misconception. If by betting against Bitcoin it is meant that people sell BTC, this is indeed can only be driving the price down. If it means something else, such as literally betting on Bitcoin going down on websites that allow such bets and then losing the bet when Bitcoin goes up, the money still does not go to hodlers. It goes to the owners of the place where people decided to bet on low price. Alternatively, it goes to those who were betting on Bitcoin price increasing if we're talking about player vs player version, but it's still within the limits of one 'casino' where people are placing their bets.

[Wexnident]

Bitcoin hodlers get richer by the second because of others trying to buy Bitcoin and join in on the hodl gang is it not? I don't actually understand how they mistake the idea that Rich people get rich because of those that are against them. It's not like hodlers are making non-hodlers work for them like how a landowner makes others work for him. Even if we assume that the word "against" means something else other than selling, anything closely synonymous to against would still not make sense imo.

[deisik]

If it means something else, such as literally betting on Bitcoin going down on websites that allow such bets and then losing the bet when Bitcoin goes up, the money still does not go to hodlers. It goes to the owners of the place where people decided to bet on low price. Alternatively, it goes to those who were betting on Bitcoin price increasing if we're talking about player vs player version, but it's still within the limits of one 'casino' where people are placing their bets

And even in this case it remains a misconception or fallacy

If you literally bet against Bitcoin, there necessarily should be the other party which holds their end of the bet, wagering in favor of Bitcoin. In this way, it is "a zero-sum game" in terms of how it affects the price as all gains are balanced out by losses in the same currency (dollars, bitcoins, etc). Put differently, such bets can't change the price because the wagered amounts are equal and offsetting each other (in a real trading environment it is not so), so the market impact is nonexistent. No amount of such betting can change that, much less enrich holders

[djcaoile1205]

Who pays for this? Thats how market works, money from air, hah. People should understand this

[Gambushe0708]

Here I want to discuss a rather popular misconception that many still seem to have as revealed in this Reddit thread where I stumbled upon this post:

So when bitcoin goes up and people get rich by holding, who pays for that? Those who bet against bitcoin. Completely fair

The point is, those who actively bet against Bitcoin cannot pay for people getting rich by holding because they are actually dragging the price down. Betting against Bitcoin assumes selling it, probably on margin (i.e. without first buying the cryptocurrency). Conversely, it is those buying bitcoins who drive the price up, and through this making holders richer. It is an interesting case because a plausible and convincing explanation is in fact absolutely wrong, and as such could lead to ruinous decisions if taken into consideration without much thought

[HeRetiK]

So when bitcoin goes up and people get rich by holding, who pays for that? Those who bet against bitcoin. Completely fair

The point is, those who actively bet against Bitcoin cannot pay for people getting rich by holding because they are actually dragging the price down. Betting against Bitcoin assumes selling it, probably on margin (i.e. without first buying the cryptocurrency). Conversely, it is those buying bitcoins who drive the price up, and through this making holders richer. It is an interesting case because a plausible and convincing explanation is in fact absolutely wrong, and as such could lead to ruinous decisions if taken into consideration without much thought

Depends a bit on how you read it. If you take "those who bet against Bitcoin" as no-coiners they are not entirely wrong. Holding coins in a bull market increases your purchasing power over those that don't, so relatively speaking they lose purchasing power ie. "pay for it".

Note that actively betting against Bitcoin requires to have bitcoin to sell in the first place either by (a) having it bought before or by (b) borrowing it in the case of margin trading. In case of (a) that means you can't drag the price down without having it pulled up first; additionally you presumably bet on Bitcoin at least one point in the past. In case of (b) you presumably have a counterparty taking the opposite position.

So the only move to actually "bet against Bitcoin" is by not participating in the market at all, ie. being a no-coiner as mentioned above. At least in case of (a), in the case of (b) I'm not so sure.



I guess I now ended up arguing in favor of the reddit post, which is not what I intended, since it's still a silly argument. In the end I mostly take issue with the "completely fair" bit that triggered the reddit response in the first place:

Individuals still getting rich doing nothing... where has that wealth come from? How is that fair.

There's no fairness to any of it.

(And I mean, any, not just Bitcoin)

Arguing that "those who bet against bitcoin" are "paying for it" as per the reddit post is just trying to rationalize the inherent randomness of the world. It gives people an illusion of control, an entitlement based on a perceived "fairness" whatever that may be. "If I get rich I must be in the right."

Just accept that sometimes you get lucky and sometimes you don't. Fairness has nothing to do with it.

[davis196]

Here I want to discuss a rather popular misconception that many still seem to have as revealed in this Reddit thread where I stumbled upon this post:

So when bitcoin goes up and people get rich by holding, who pays for that? Those who bet against bitcoin. Completely fair

The point is, those who actively bet against Bitcoin cannot pay for people getting rich by holding because they are actually dragging the price down. Betting against Bitcoin assumes selling it, probably on margin (i.e. without first buying the cryptocurrency). Conversely, it is those buying bitcoins who drive the price up, and through this making holders richer. It is an interesting case because a plausible and convincing explanation is in fact absolutely wrong, and as such could lead to ruinous decisions if taken into consideration without much thought

Yeah,the statement is wrong,but I get where the author of that statement is going.He wants to say the profits that HODLers make are coming from the naive Bitcoin buyers,who are pumping the price.
Every financial market is a zero sum game.The profits of the winners are the losses of the losers.If everybody wins,the profits would be zero,so actually nobody wins and nobody loses anything.
He's wrong about "betting against Bitcoin" and yet he wants to FUD with a little bit of sarcasm(by saying "completely fair").

[deisik]

So when bitcoin goes up and people get rich by holding, who pays for that? Those who bet against bitcoin. Completely fair

The point is, those who actively bet against Bitcoin cannot pay for people getting rich by holding because they are actually dragging the price down. Betting against Bitcoin assumes selling it, probably on margin (i.e. without first buying the cryptocurrency). Conversely, it is those buying bitcoins who drive the price up, and through this making holders richer. It is an interesting case because a plausible and convincing explanation is in fact absolutely wrong, and as such could lead to ruinous decisions if taken into consideration without much thought

Depends a bit on how you read it. If you take "those who bet against Bitcoin" as no-coiners they are not entirely wrong. Holding coins in a bull market increases your purchasing power over those that don't, so relatively speaking they lose purchasing power ie. "pay for it"

I don't think we can say so

Even in the sense you mean it. No-coiners are not losing their purchasing power because there's none unless and until you liquidate your stash. Okay, you bought your bitcoins cheap and sold them dear, so your purchasing power did in fact rise. However, it rose thanks to someone buying from you and not because of someone who doesn't or didn't have any coins, to begin with. Similarly, you can't say that no-coiners are betting against Bitcoin for the simple reason they are not betting at all, either in favor or against it

So the only move to actually "bet against Bitcoin" is by not participating in the market at all, ie. being a no-coiner as mentioned above. At least in case of (a), in the case of (b) I'm not so sure

It is more complicated than that

For example, miners are not buying any bitcoins but they are still selling them. I see you are going to claim that they effectively buy bitcoins by paying for their mining rigs, rent, electricity, whatever, but that would be a faulty logic anyway, even if we accepted this assumption. How come? Because their "purchases" don't contribute to the price growth as they don't "buy" these bitcoins in the open market. Then, you could just assume that by selling their rewards they are in fact betting against Bitcoin, which is the case in real life as their sells do indeed move the price down. It is hard to get around this

[ChiBitCTy]

I don't understand how this is such a hard concept to get.  This is how markets work, this is how the share price of any sort of stock, mutual fund, ETF, cryptocurrency, etc.  It's buys vs sells.  Market Maker matches the buy and sell orders and whomever has more win the number whether that be higher or lower.  Simple math.

[deisik]

I don't understand how this is such a hard concept to get.  This is how markets work, this is how the share price of any sort of stock, mutual fund, ETF, cryptocurrency, etc.  It's buys vs sells.  Market Maker matches the buy and sell orders and whomever has more win the number whether that be higher or lower.  Simple math

And what are we to make of this?

The question raised in the OP goes well beyond simple math. In fact, the so-called simple math can be quite confusing, misleading, and distracting. Ultimately, it is whether the long term growth (as this is what holders are hoping for, and can derive or obtain their profits from) comes from the people investing their money in Bitcoin (that should count as betting in its favor) or the people investing their shekels in something else instead (that should count as betting against Bitcoin)

[HeRetiK]

No-coiners are not losing their purchasing power because there's none unless and until you liquidate your stash.

That's if you view Bitcoin as a commodity that needs to be liquidated (ie. exchanged into a fiat currency) before using it to spend on goods and services. Since you can use Bitcoin as a currency this line of thinking doesn't fully apply in my opinion. Of course one may argue that someone somewhere down the line will have to exchange Bitcoin into their local fiat currency but then again this applies to international trade with foreign currencies as well.

Okay, you bought your bitcoins cheap and sold them dear, so your purchasing power did in fact rise. However, it rose thanks to someone buying from you and not because of someone who doesn't or didn't have any coins, to begin with.

The (relative) rise of purchasing power is twofold: First, due to the rise in price of course. Second, however, because the rise of wealth in a group of people often leads to goods and services becoming more expensive for those outside this group. Most commonly you'll see this when cities or city districts go through a process of gentrification -- In absolute terms the purchasing power of the disadvantaged group might be unchanged but in relative terms they are pushed down. In a way you could see this as realized opportunity cost.

Now the severity of this secondary effect is of course debatable and will largely depend on each individual situation (ie. how strong your local currency and how wealthy your country is). And its impact is likely limited unless Bitcoin pulls a McAfee for whatever inconceivable reason. However I would not completely dismiss its significance.

Similarly, you can't say that no-coiners are betting against Bitcoin for the simple reason they are not betting at all, either in favor or against it

Depends on whether you want to account for opportunity cost.

As with most things it's a spectrum, with no-coiners being straight in the center, but some lines of thinking necessitate a binary cut (ie. "if you're not with us, you're against us"). Upon inspection this may be a sign of being on the wrong track though.

For example, miners are not buying any bitcoins but they are still selling them. I see you are going to claim that they effectively buy bitcoins by paying for their mining rigs, rent, electricity, whatever, but that would be a faulty logic anyway, even if we accepted this assumption. How come? Because their "purchases" don't contribute to the price growth as they don't "buy" these bitcoins in the open market. Then, you could just assume that by selling their rewards they are in fact betting against Bitcoin, which is the case in real life as their sells do indeed move the price down. It is hard to get around this

Excellent, excellent point. I'd argue that whether their "purchases" contribute to the price growth depends on whether they are holding or instantly selling to cover running costs and then some.

If they hold, they contribute to price growth in that they are literally withholding supply from the open market (and from other miners that instantly sell). I do concur that the majority of miners is likely "betting against Bitcoin", however it'd still be interesting to see what percentage of coins get immediately sold vs held.

[BrewMaster]

Note that actively betting against Bitcoin requires to have bitcoin to sell in the first place either by (a) having it bought before or by (b) borrowing it in the case of margin trading. In case of (a) that means you can't drag the price down without having it pulled up first; additionally you presumably bet on Bitcoin at least one point in the past. In case of (b) you presumably have a counterparty taking the opposite position.

that's true but things are a lot more complicated than that in the market that we can't say they pulled the price up or down or contributed to it. for example someone who is selling might have bought their coin over the counter which has no effects on the price or could have mined the coins which again has no effects on the rising price. same with margin traders, they may not pull the price down but only provide liquidity for those who want to buy at a certain price but are waiting.

[deisik]

Okay, you bought your bitcoins cheap and sold them dear, so your purchasing power did in fact rise. However, it rose thanks to someone buying from you and not because of someone who doesn't or didn't have any coins, to begin with.

The (relative) rise of purchasing power is twofold: First, due to the rise in price of course. Second, however, because the rise of wealth in a group of people often leads to goods and services becoming more expensive for those outside this group. Most commonly you'll see this when cities or city districts go through a process of gentrification -- In absolute terms the purchasing power of the disadvantaged group might be unchanged but in relative terms they are pushed down. In a way you could see this as realized opportunity cost

I don't instabuy into this line of reasoning

I agree that it often makes perfect sense in real life circumstances, like having more purchasing power leading to grocery prices rising and thus effectively putting those seemingly uninvolved into the "against" group, as far as the effects are concerned. However, this doesn't mean that the disadvantaged group is the source (cause) of the holders' wealth and the increase in their purchasing power. They can be victims (I agree with this), but they are not the source of their victimhood in the sense it is not through them that the growth in the purchasing power of holders becomes possible. In other words, your "inversion" doesn't work here in the way as it follows from that Reddit post. The same with frugal miners

[DarkDays]

Selling something doesn't automatically mean that you're damaging the market. There's a reason why market makers exist, and why liquidity is extremely important for any growing asset.

If everybody was holding, there would be no liquidity, so there always need to be sellers—they're actually helping to fuel the growth by providing liquidity for the active users.

[coolcoinz]

It's actually funny that some people think they're paying for those who get rich. That when someone advances onto another floor of this wealth pyramid he has to do it at the expense of someone else and throw that person down.
When someone values whatever you own higher, you become more wealthy, but it doesn't mean other people's holdings have to lose value. You can have an old war relic lying in the attic and later find out it's worth 100k USD. If someone buys it he will not lose money or literally finance your wealth but simply transfer the ownership of that valuable item. Everything will remain in equilibrium and a new item will enter the market.
Bitcoin wil be that new item ofexchange. Something that will allow people to transfer value, just like when a new fiat currency is created. When a new country was formed and it had its own currency, nobody had to lose for it to go into circulation. It just did.

Don't forget that there's not enough fiat money in the world to buy everything people have to offer (every single car, plane, boat, piece of land).