An interesting case of a widespread misconception

[HeRetiK]

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.

OTC trading still relieves buying / selling pressure, even if it's not visible to the other market participants. I fully agree that margin trading is a wholly different beast though, which is why I chickened out at assessing its market impact.

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

I wouldn't say that the disadvantaged group is directly the source of the holders' wealth, but purchasing power doesn't exist in a vacuum. If you visit a poorer country than your own the same amount of absolute wealth has increased purchasing power by merit of everyone else being poor alone.

But who am I kidding, that reddit point is close to impossible to hold.

[deisik]

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

I wouldn't say that the disadvantaged group is directly the source of the holders' wealth, but purchasing power doesn't exist in a vacuum. If you visit a poorer country than your own the same amount of absolute wealth has increased purchasing power by merit of everyone else being poor alone

Well, we are not talking about purchasing power itself

Rather, we are discussing changes in it, and these are different things (e.g. a function and its derivative are typically, nay, typically different functions). Moreover, we are talking about the sources of this change. If you visit a poorer country, you may feel wealthy indeed but your wealth didn't increase at the expense of the poor population (though they may still suffer from your relentless expenditures). However, you make it look like people in the "against" group who got there solely by virtue of losing their purchasing power are the source and cause of this increase for some (i.e. holders) in the first place. They are not even if they get affected (become poorer) as a side effect of such an increase

[amishmanish]

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.

I am hoping someone would counter this view. Not many benevolent OGs around to do that i guess. Apart from libertarians, i was putting my bet on those geeks and cypherpunks. People into software and high-end technology are generally kind. At least to begin with. The "take it and use it" deal isn't too bad either if they were actually building something. One thing i do understand from your in-your-face explanation though, is that one should stop being emotional about it all.

[jakkk]

the price will only go up if bitcoin is bought massively, also when massive buying occur more people do not sell so that they can sell at higher prices so sell wall decease and pice go even more up

[Lorence.xD]

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).

That is kind of confusing because that is not how prices work, to make it all simple, the price goes up just like a normal currency. This kind of misconception is very prevalent, good thing about that is there are people who are going to refute this idea to make something better out of it.

[deisik]

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

That's how things stand with respect to purely speculative assets

If you buy an asset with the sole intention of selling it later at a higher price (the process quite adequately characterized by calling it speculation), you get richer when the price goes up. But how can it go up? Right, when other people buy after you. And if they are like you (read, profiteers and speculators), it is very well along the lines "he has to do it at the expense of someone else" ("throw that person down" is your invention, so I leave it out)

When someone 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

If he intends on selling this artifact at a higher price later, but the price goes down for whatever reason, he will lose money

[Finestream]

That's a very good point, we holders will not get rich because of those who bet against bitcoin, it should be from those who buy bitcoin as they drive the price up, just like the last bull run, it was the FOMO that makes bitcoin reach its ATH and as we can see it was the entire market of crypto were in bull run and those buyers keep coming because of FOMO, and I guess we will not gonna see that same scenario again, lucky are those who held their bitcoin and sold at peak.

[20kevin20]

So is this basically a "I ain't buying BTC no more because I'm paying for the rich" attitude? It won't work.

It's not even like Bitcoin is the first one to come up with the "hodl and get rich" possibility. Take penny stocks from decades ago and you'd find out there are a lot of people who turned rich by doing nothing. This is how the trading system works. This is how the world works.

Weak hands will buy & sell at the worst times. There'll always be weak hands in the market. By holding, you're just placing more coins in the scarcity bag and you are fixing a certain goal: "I won't sell before <insertsomethinghere>". That is much more helpful than having no holders. In fact, without the holders, markets wouldn't even work. It'd be just a mixture of crazy nonsense trades.

In the end, you trade Bitcoin for something which means that, if you don't hold Bitcoin, you'd hold .. say USD. Well, then following the same logic, those trading USD would pay for you to become rich?! What do you do now, buy BTC again in order to be fair with everyone else? But you can't hold BTC because then you'd help ... you get it now. An infinite cycle of nothing.

There could be a teen out there who mined back in 2010 when he was a little kid & knew nothing about money/crypto, but today he is a millionaire. 100% fairness in markets only exists in fairy tales.

If I'm holding $100k in BTC for 10 years, it's literally the same risk I'm taking as those who trade actively. In fact, it might be even worse: I could set a tx locktime for approximately 10 years and while active traders make a profit, when my Bitcoins are finally unlocked I might have nothing left - Bitcoin could be dead by then. In that case, who recovers my loss? Well, by holding $100k worth of BTC, I made the coin scarcer so everyone who traded before me basically traded a rarer cryptocurrency thanks to me.

By purchasing or selling BTC, you assume risks. If you don't agree with that, then trading or investing isn't your thing.

[deisik]

So is this basically a "I ain't buying BTC no more because I'm paying for the rich" attitude? It won't work

I'm not sure if the matter in question has anything to do with that

As I got it, you are trying to somehow justify the rich and wealthy who got there by simple holding. But this is not what the topic is dedicated to. For starters, it is definitely not about how fair or unfair the world is, Bitcoin or otherwise, so I'm not going deeper into your post. If anything, it is oriented more toward exploring the mechanism with which people get rich by holding Bitcoin, its inner workings and particular details, as well as processes involved, without making any moral judgment about any of these

[20kevin20]

But this is not what the topic is dedicated to. For starters, it is definitely not about how fair or unfair the world is, Bitcoin or otherwise, so I'm not going deeper into your post. If anything, it is oriented more toward exploring the mechanism with which people get rich by holding Bitcoin, its inner workings and particular details, as well as processes involved, without making any moral judgment about any of these

I might've completely misunderstood the OP and the reddit post you've linked us to - my mistake. Hopefully I get it this time. If "how do hodlers get rich?" is your main question, then I got it right so continue reading below.


Don't you think everything is actually just inside your mind? Like a psychological game?

When you buy & hold, you fix a goal in your mind. Will take it from my last post: "I won't sell before <insertsomethinghere>". If you replace the <> with "$1M", I'll have to guess you probably really think it'll be worth more in the future. That's why we also have a lot of wealthy holders.

The fact that you know exactly by how much the Bitcoin supply changes with every block and that it's a deflationary currency, you just think it should be worth more as time goes on - hence, you hold it. Having enough people thinking positively just like you, as time goes on and the price increases, you'll want less and less to sell at earlier prices. You're waiting to hit the goal you've set in your mind. Times like 2015 and the beginning of 2019 (or whenever Bitcoin dropped from $20k to $3k) has shown us that the opposite is possible too. The decline could've never stopped and today Bitcoin could've been dead if negativity stayed.

Logically, when you buy at $1k, you want to sell higher. But how higher? If BTC drops to $200, do you sell?

Yes => then you don't think the future looks good for Bitcoin so you're helping the price drop. If enough people think just like you, it declines sharply.
No => you will not help the price decline.

In other words, it all really goes down to the market sentiment. And because Bitcoin's evolving, halving & growing up, the market sentiment has almost always been "limited supply, deflationary, scarcity. => will cost higher in the future".

"Those who bet against Bitcoin" are just sellers. They don't have an infinite balance. The faster they go, the quicker the market recovers. So.. if a higher % of them gets out of the market, there'll be more positivity => they indeed help the hodlers out.

There will be a time when the hodlers might want to sell too. At that point, they become "those who bet against BTC" themselves but will help the remaining hodlers on the long term only if the market turns positive after his sale: if everyone who set their goal as "selling after $1M" gets out at $1M, it means that if & when the market turns positive, it becomes harder and harder to stop an increase past $1M the more sellers there are.

And then, there's another factor in play: In the past 24h there has been 1.35 BTC traded every 68 milliseconds. That's about $12k. Well, as the price increases, 1.35BTC will have a harder & harder impact on the market. So this is basically my answer: without the psychological game of negativity and positivity in the market & if we never really knew exactly whether Bitcoin will turn deflationary or inflationary within an year, the "hodl & get rich" thing wouldn't have worked at all.

Sorry for the very long post. I spent an hour and a half trying to shorten it (edit: now I have removed & moved a few paragraphs) but I honestly have no idea how to do so without missing anything I've mentioned above.

[deisik]

"Those who bet against Bitcoin" are just sellers. They don't have an infinite balance. The faster they go, the quicker the market recovers. So.. if a higher % of them gets out of the market, there'll be more positivity => they indeed help the hodlers out

I even created a topic around this idea in the past

But now you go beyond what was stated in the OP as you seem to agree that it is Bitcoin sellers who are betting against it, while buyers betting in favor of it. Regardless, the problem is that with more accumulation Bitcoin becomes less useful. Seriously, of what use will it be if all coins are in the hands of a single individual? But this is what follows as you implicitly assume more coins get stashed away at the end of the day (otherwise there is no push for next rise in price)

Indeed, it is an extreme case but it still clearly demonstrates that holders are shooting themselves in the foot as it more and more becomes a game of musical chairs with fewer and fewer chairs at each iteration (price rise). If holders don't sell (in terms of coins stashed) what is left to buy there (in terms of liquidity)? And now this is the case for the subject matter of this highly disconcerting thread (read, we will get stopped halfway as in more like already)

[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

That's how things stand with respect to purely speculative assets

If you buy an asset with the sole intention of selling it later at a higher price (the process quite adequately characterized by calling it speculation), you get richer when the price goes up.

This is the thing, I don't.
I buy Bitcoin for 2 reasons. One of them is safekeeping. I don't trust my local fiat currency enough to bet all my savings on it. Being in Bitcoin seems more logical.
The second reson is spending it. I don't want the whole world to know what I bought and how much money I have, so I'm planning to at some point turn my Bitcoins into real world goods, skipping the exchanges and fiat money completely.

But how can it go up? Right, when other people buy after you.

Somebody will of course have to buy my Bitcoin at some point. This is how money circulate, but they don't have to pay much more than it is worth today. It depends on the situation.
What's important is here and now. If the price is 10k USD and you buy for 10k, will you feel bad knowing the seller bought it for 9k? Will you feel good knowing the seller bought it in 2017 for 19k? Does it really matter? Remember that there's still a lot of coins in circulation that at some point in time were bought for much more than toiday's price.
Most people don't think about it.

Some of the Dollars you trade your Bitcoins for used to be worth 2x more than they are today 20 years ago.

[deisik]

Some of the Dollars you trade your Bitcoins for used to be worth 2x more than they are today 20 years ago

This logic is flawed on so many levels. First and foremost, you should evaluate things as they relate to other things and circumstances, not on their own. So, unless you mean a particular asset, and assess the value of the dollar against it, all in all the dollar was not worth twice as much some 20 years ago. Okay, you are going to say that it was 50 years ago

And then, that's where you make the same mistake as all other people coming up with this reasoning. They don't account for how much wages rose during exactly that time. If they rose faster, then the dollar inflation in this frame of reference (the only one making sense as far as real increase in wealth is concerned) may turn out negative, i.e. effectively deflation

And while we are at it, Bitcoin was worth 2 times more some 3 years ago

[20kevin20]

But now you go beyond what was stated in the OP as you seem to agree that it is Bitcoin sellers who are betting against it, while buyers betting in favor of it.

It depends on what the market does after a seller/buyer comes in. (edit: and on a LOT of things)

As a seller, you could sell it to a weak hand. If you do so, maybe after your sale the price will drop even more and the weak hand you sold to will sell to someone else too. In that case, it's a negative influence over the price.

On the other hand, you could sell it to a holder so your very short negative influence will only have a short term impact. In this case, you're helping Bitcoin's price grow as the coins are moving from a trader willing to sale to a holder willing to buy, but this again depends on what the buyer does with his coin as in if he is truly going to hold for long term.

In the second case of you selling to a holder, your action of selling might not even impact the markets by much if at all.

I sometimes sold after a long time of holding in order to buy even lower and hold. I've also sold and bought through face-to-face transactions. There are probably way too many factors and possible outcomes to decide how everyone's actions influence the market overall.

Regardless, the problem is that with more accumulation Bitcoin becomes less useful. Seriously, of what use will it be if all coins are in the hands of a single individual?

None; the more individuals hold coins, the more decentralized & distributed the existing supply is, obviously.

But isn't that what we are basically doing when we buy too? In order not to help with that, you should stop accumulating any satoshi and constantly keep it into circulation. Every time the market declines and you buy to hold, you will most likely accumulate from different sellers. Keep in mind that even the money you get from signature campaigns comes from multiple people, so it's the same thing: you're helping with the accumulation of coins from more people's wallets into yours. In order not to help with it, we'd all have to continuously circulate BTC around.

Now to do that and also profit off BTC's price rise is probably an impossible thing because you'd have to convince first the richlist to start circulating their BTC too - just you doing that will not help, especially as as we speak there are whales accumulating more Bitcoin than we both probably ever had in a wallet so our little change does nothing really. And then you'd have a negative sentiment because dormant (or "lost") wallets are waking up.

But this is what follows as you implicitly assume more coins get stashed away at the end of the day (otherwise there is no push for next rise in price)

Well, assuming there are a lot of weak traders out there, that may or may not be the case.

If a market has a total of 100 BTC trading under 24h, let's say 2 BTC go into wallets of holders. That means 98 BTC will continue trading. Over the next 30 days, out of the 98 BTC, how many will go inside wallets of holders or move again at all? And then how many other BTC will come in? And how many of the dormant wallets wake up and start circulating?


This is a very very complex, constantly changing situation and there are so many possibilities it's actually quite impossible to determine a proper and 100% accurate answer..

[figmentofmyass]

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.

whether they drag the price down is actually dependent on underlying supply and demand. a simple example is that of a "short squeeze":

A short squeeze can occur when there is a lack of supply and an excess of demand for the stock due to short sellers covering (liquidating) their positions.

Short squeezes result when short sellers of a stock move to cover their positions, purchasing large volumes of stock relative to the market volume. Since covering their positions involves buying shares, the short squeeze causes a further rise in the stock's price. This newly increased price can in-turn trigger additional margin calls and short covering, which in turn may drive up the price further still in a vicious feedback loop.

https://en.wikipedia.org/wiki/Short_squeeze

let's apply this to bitcoin. let's say that $9k is being majorly shorted right now---and has been for the last month. then let's say there is a major technical breakout above $10k. all those shorters will have their stop losses triggered (buying back), get margin called (buying back), or otherwise will get "squeezed" into buying back because of the mounting losses.

you see how all those shorters at $9k are actually dragging the price up now? when the market moves against them, they act as fuel for further increases in price.

[deisik]

But now you go beyond what was stated in the OP as you seem to agree that it is Bitcoin sellers who are betting against it, while buyers betting in favor of it.

It depends on what the market does after a seller/buyer comes in. (edit: and on a LOT of things)

As a seller, you could sell it to a weak hand. If you do so, maybe after your sale the price will drop even more and the weak hand you sold to will sell to someone else too. In that case, it's a negative influence over the price

A sell is a sell, no matter how you look at it

Whether its effect is short-lived or otherwise doesn't take anything from the essence of it. When you are actively selling, i.e. you are being the agent, you fill someone's buy order and that drives the price down by eating away at the support wall or outright bringing it down

you see how all those shorters at $9k are actually dragging the price up now? when the market moves against them, they act as fuel for further increases in price

If you think about it, there's no contradiction

You don't even need to bring up the example of a short squeeze. When the price just goes down, the shorters start closing their positions by buying back what they sold on margin at a higher price, and that props up the price. So how is this different from someone first selling high and then buying back low? No difference, other than shorters having to close their positions. To sum it up, when people sell they are betting against Bitcoin, when they buy, they are betting in favor of it, and the order of these transactions, i.e. what comes first, a buy or a sell, is irrelevant

[figmentofmyass]

you see how all those shorters at $9k are actually dragging the price up now? when the market moves against them, they act as fuel for further increases in price

If you think about it, there's no contradiction

You don't even need to bring up the example of a short squeeze. When the price just goes down, the shorters start closing their positions by buying back what they sold on margin.

that's the point---shorters represent latent buying pressure, not selling pressure. a short squeeze is just a vivid example that illustrates that dynamic.

And how is that different from someone first selling high and then buying back low? No difference.

it makes a world of difference.

when the market is majorly short then moves up (causing would be sellers to pull asks) shorts are a powerful bullish force---big demand meets small supply. on the other hand when it moves down, technical selling pressure (outside of leveraged markets) dampens that effect.

long squeezes and short squeezes are just the easiest way to show the counter-intuitive reality that high levels of margin longs can be bearish, and high levels of margin shorts can be bullish.

[deisik]

And how is that different from someone first selling high and then buying back low? No difference.

it makes a world of difference

when the market is majorly short then moves up (causing would be sellers to pull asks) shorts are a powerful bullish force---big demand meets small supply. on the other hand when it moves down, technical selling pressure (outside of leveraged markets) dampens that effect

Shorts don't appear out of nowhere

As a shorter, you have to buy back absolutely the same amount that you have sold earlier. So it is essentially a "zero-sum game" as far as the net effect is concerned. However, you make it look like there is only side of the coin or one side to the equation. Put differently, marginal positions are as bearish as they are bullish, while effectively they are net neutral in and by themselves. It is a simple accounting identity that anyone familiar with margin trading will instantly point at. If anything, margin trading, on its own, adds to volatility

[coolcoinz]

This logic is flawed on so many levels.

I seeyou've only explained one, so you must've been using those many levels figuratively.

First and foremost, you should evaluate things as they relate to other things and circumstances, not on their own. So, unless you mean a particular asset, and assess the value of the dollar against it, all in all the dollar was not worth twice as much some 20 years ago. Okay, you are going to say that it was 50 years ago

What I meant when I said that it used to be worth more was the purchasing power of the dollar. It wendt down by about 50% in the last 20 years.

[deisik]

This logic is flawed on so many levels.

I seeyou've only explained one, so you must've been using those many levels figuratively

I've actually given at least two different explanations

First, you should specify what goods and services make up "the purchasing power of the dollar". For example, I could easily prove that the dollar purchasing power rose a few hundred times during the last 30 years if we gauge it in, say, processing power or storage capacity of modern computers

Then, you should necessarily examine the change in the dollar value in terms of wages and their dynamic. Without setting an appropriate frame of reference (wages), all this whining about dollar losing its purchasing power is meaningless. But if you don't understand it and don't want to, I can’t force it unto you

What I meant when I said that it used to be worth more was the purchasing power of the dollar. It wendt down by about 50% in the last 20 years

Do you have any stats to prove this claim?