I don't like the idea of governments holding millions of Bitcoins.

[Satofan44]

• Gold supply is elastic. As the price increases this incentivizes miners to bring new supply to the market (I've given some examples already). This acts as a "brake" on rapid price increases.
• Bitcoin supply is perfectly inelastic. As the price increases no new supply can be brought to the market. This acts as an accelerator for price increases.

This is what I mention as an "advantage" of Bitcoin countered by different demand dynamics which may favour gold. I looked at the supply/demand equilibrium, and for me, the difference isn't as massive and thus IMO it's legit to bring up both points ("advantage" in supply-side market dynamic vs. advantage in demand-side dynamic) in a comparison Bitcoin <-> Gold.

I'm not much a fan of gold by the way, only that my understanding of the situation is that the "perfect" inelasticity does not necessarily make that much of a difference, an imperfect inelasticity with some potential low supply increase (as an effect of a price increase -> incentive increase for gold miners) may be simply good enough to ensure a similar "scarcity potential". In the case of gold, mining-added supply is already quite low, around 1% per year if I take the first Google hits, and that's at record price highs.

Fair enough, but we were comparing the price impact and capitalization assuming a similar reserve status as gold? If not then I got a bit of age-related memory loss and the longer time intervals for posting do not help. I am not trying to say the supply inelasticity makes that much of a difference on its own, you can make things that have a supply of 1 and which will never have a price of anything significant. However, in a reserve status of a similar magnitude such as gold the inelasticity would have a massive impact on the price and total market capitalization of Bitcoin. The reason why gold's marketcap is "this low" is because any significant price increase is followed by the issuance of more supply that works as a dampener.

This is by the way also one point why I would not be 100% opposed to a Bitcoin tail emission if it is low enough (similar to Monero's, for example) and it is really necessary to ensure a stable security budget (I would still prefer to keep the 21 million limit). I'm sure we'd disagree in this point, judging by your last post here, but that's ok.

That's right, I defend the limit as my life.  

I had some discussions about that in the early altcoin era, when some people argued that a cryptocurrency where 100% of the supply is distributed at the start and then it has 0% supply inflation and miners are incentived only by transaction fees, would lead to even more scarcity than Bitcoin's (where the supply is limited but there's still [decreasing] emission until ~2140) and thus to a even a higher valuation. The reality is different: today, none of the 100% distributed coins is even in the top 20 altcoins afaik, maybe not even in the top 100.

I would call that artificial scarcity though and anyway scarcity alone is not enough to create value and thus demand. Therefore, the data you bring up is not surprising. On the other hand, in the world of Bitcoin I love to see someone turn into a diamond HODLer.

My own understanding of that situation is that perfectly inelastic assets tend to be more volatile, but not necessarily higher priced. If they experience that parabolic price increase when scarcity increases a lot and only few people want to sell and also no new supply is added (or only a tinly bit), then at some point there will be also massive profit taking just because the profit is as high, until a point everybody wants to anticipate that sell move. We've seen that with BTC and several altcoins, several times, and I don't think strategic reserves change that dynamic.

Correct, the profit taking is a necessary consequence of such large price increases. It simply is not possible to have one without the other. I'm not so sure on the last point about the reserve. I think I've said it somewhere before, a real reserve for me is one where a government or company does not sell unless they absolutely have to. Perhaps Bukele's reserve will be like that but it has yet to stand the test of time. Such real reserves would change that dynamic as it would reduce the quantity  of supply that would come to the market for these cyclic sells offs.

I finally remembered what exactly our original starting point that led to this sub discussion was. To conclude, I see the potential price impact of your scenario of massive government buying a bit more optimistic than you do due to the supply inelasticity of Bitcoin and the massive money printer. I think it is a good point to finish this discussion as we have understood our positions adequately. We can resume if someone else brings in new quality points.

I need time to respond to the other discussions that we are having too.  

[d5000]

Fair enough, but we were comparing the price impact and capitalization assuming a similar reserve status as gold?

Of course, but I don't see that much of a big difference for the evaluation of the potential price upside. Let's speculate BTC becomes a massive reserve asset (e.g. 20% of all BTC held in "national reserves" and 20% in corporate reserves) and goes to 500k-1M BTC in the next 10 years or so. This means we'll have a massively higher potential volume of sellers/buyers at this level. There may be less BTC to buy, but the value in USD and purchasing power wil lbe much higher. But at all levels there will be people willing to sell, because they made a decent profit, for example they were able to buy a house or a car, or companies that were able to invest in an expansion. So we will at all levels always have some kind of minimum number of sellers.

The exact dynamics have to be seen (this is also a response to your last paragraph). For example it could be possible that if e.g. Lummins' US reserve project is approved and other important countries also make similar moves, we could see BTC skyrocket with a x2 or x3 instantly (in a few weeks/months) due to anticipation. But that at the same time would again trigger profit taking, and perhaps the buys for the reserve would not trigger the market to the upside that much (Saylor's buys for example don't really move the market.) So I expect ups and downs even in this phase which would be the "mother of all bubbles" some are dreaming with

But then there is another reason why I think that a massive reserve would have a price ceiling: the expectation of an "endgame". The endgame for Bitcoin would be a relatively stable price, when all buyers who wanted BTC already had bought (e.g. several big countries have already an advanced BTC reserve), and there are few potential buyers left. Once for example the US reserve is close to completion, people will probably expect that this endgame is near, and could be tempted to sell. This would not mean necessarily a big crash but simply a situation where the scarcity equation becomes different again.

Anyway, who knows. Perhaps you're correct, the endgame could be so far ahead that it's not relevant for the discussion, and a lot of all this dynamic is mass psychology, and thus it's difficult to predict. We can close this point of the discussion.

The reason why gold's marketcap is "this low" is because any significant price increase is followed by the issuance of more supply that works as a dampener.

I don't think it's really low and thus I disagree. For an asset which isn't that productive and only speculative it's quite high. There will be imo always a ceiling for those "unproductive" assets because there is also a floor for "productive" assets like stocks. There will be always people willing to invest in something more closely connected to the economy's wellbeing. and that's also a good thing And there is only a limited market for assets meant for saving, due to the time preference (people like to enjoy their life and not only think about the future).

I would call that artificial scarcity though and anyway scarcity alone is not enough to create value and thus demand.

Of course it's artificial, but there's no difference with Bitcoin (let's ignore premined scams). The challenge is to create genuine demand, and most altcoins fail terribly at that, while Bitcoin does a lot better. But in the end this artificial scarcity is determining a part of the supply dynamic, and thus I think we can compare altcoins with Bitcoins here. IMO the difference is the price level.

I think it is a good point to finish this discussion as we have understood our positions adequately. We can resume if someone else brings in new quality points.

I agree, I only wanted to clarify some points, but I think we simply disagree in some details.

[Publictalk792]

This bull-run is 100% sponsored by Bitcoin ETF purchases.

While I am of course enthusiastic about the price going up, it does come at the added risk that if most Bitcoins fall into the hands of the governments and corporations of the world, some knucklehead somewhere, maybe from the ECB, might try to make a whitelist of Bitcoin addresses and then ban everything else just out of pure hatred.

Exactly I also think current Bitcoin bull run is heavily influenced by new Bitcoin ETFs which are bringing much of new money from big investors into market. However you also raised important concern that many people in crypto world share if few big players like governments or corporations end up owning most of Bitcoin they could try to control it. Like you said European Central Bank could try to create rules about who can use it which would go against Bitcoin original idea of being free and open system. Big question for future of crypto is how to get more people to use it without losing its decentralized nature.

[Synchronice]

This bull-run is 100% sponsored by Bitcoin ETF purchases.

While I am of course enthusiastic about the price going up, it does come at the added risk that if most Bitcoins fall into the hands of the governments and corporations of the world, some knucklehead somewhere, maybe from the ECB, might try to make a whitelist of Bitcoin addresses and then ban everything else just out of pure hatred.

Correct! But it's not a risk, it's a plan. Most Bitcoins will fall into the hands of the governments, which means that they'll have control over it. With many coins in their hands, they'll be able to take major decision. They'll be able to manipulate the price and get more coins from people, especially form those who FOMO and 99% probably do. In the end, everything has its pros and cons. But the good thing is that they exist for both sides. They'll pay the price for centralizing Bitcoin too.

[WhoYouCantKill]

This is a valid concern here. The strength of Bitcoin comes from decentralization without a particular group having any influence to force it against it's broader network will, so if the government holds 25-35% of the total supply, it could be a balanced tilt.

It is true that Bitcoin makes direct control hard, but miners, nodes, and users internationally may have to accept any change, concentrated ownership by powerful actors might affect incentives and raise fear, though technical attack may fali, but threats can damage market confidence and price stability.

It is less risky when small states holds hundreds of thousands of Bitcoin, it could add legitimacy and prove institutional adoption without overtaking supply. Rather when larger government pursue to acquire millions,then grows the risk of coordinated influence.

[Satofan44]

This is a valid concern here. The strength of Bitcoin comes from decentralization without a particular group having any influence to force it against it's broader network will, so if the government holds 25-35% of the total supply, it could be a balanced tilt.

It is true that Bitcoin makes direct control hard, but miners, nodes, and users internationally may have to accept any change, concentrated ownership by powerful actors might affect incentives and raise fear, though technical attack may fali, but threats can damage market confidence and price stability.

Owning Bitcoin does not give you power over the network, this is a misconception on how things work. No amount of purchasing of Bitcoin will give an entity power to change it. Threatening to manipulate and actually crashing the market does not someone you any real power over it other than imaginary fiat-social power. You are confusing POS networks with POW networks. In POS networks ownership of coin gives you direct power, this is not the case with Bitcoin.

It is less risky when small states holds hundreds of thousands of Bitcoin, it could add legitimacy and prove institutional adoption without overtaking supply. Rather when larger government pursue to acquire millions,then grows the risk of coordinated influence.

While there is some risk of coordinate influence, it is much less than it is usually portrayed. Most governments can't agree on anything sensible within themselves or across countries. The times where they actually agree fully on something complex is rare.

[Satofan44]

We talked about FATF and potential future dangers. I believe this news is relevant for this sub topic.

https://cryptodnes.bg/en/bis-proposes-aml-compliance-scoring-to-target-illicit-crypto-transactions/
https://www.bis.org/publ/bisbull111.pdf

This is nothing short of going towards a totalitarian nightmare. We are doomed to repeat the past, nothing has been learned from history. This is just the beginning. Attempts to suppress freedom are always happening. It is simply an attack on crypto and has nothing to do with money laundering. If you get "tainted" dollar bills in real life, you can spend them how you want and you won't even know they were tainted. It is not your fault, you should not be punished for that.

[Outhue]

My own kinda crazy feeling about Bitcoin

Call me crazy but something inside me isn't happy about Bitcoin anymore, I can get alot of insult because of this and believe me It won't affect me, because I don't care.

I don't feel the same way that I used to feel about Bitcoin anymore, I guess this is because the government is all over it right now, the massive adoption from the government instead of the retails and normal people like us hurts my guts. The decentralisation is no more, this is how I feel, now with the amount of Bitcoin on these powerful people's hand I feel that they will be able to manipulate the market even more.

We all know Blackrock, if you don't know please do your research, this people are one of the most powerful in the world, and they are well known for one thing, whatever they touches always go to shroud. Don't get me all wrong, Bitcoin have a great future ahead but we are all here for a reason, what caught my attention for becoming a Bitcoin fan was the available power out of the governments reach.

[Satofan44]

My own kinda crazy feeling about Bitcoin

Call me crazy but something inside me isn't happy about Bitcoin anymore, I can get alot of insult because of this and believe me It won't affect me, because I don't care.

I don't feel the same way that I used to feel about Bitcoin anymore, I guess this is because the government is all over it right now, the massive adoption from the government instead of the retails and normal people like us hurts my guts. The decentralisation is no more, this is how I feel, now with the amount of Bitcoin on these powerful people's hand I feel that they will be able to manipulate the market even more.

We all know Blackrock, if you don't know please do your research, this people are one of the most powerful in the world, and they are well known for one thing, whatever they touches always go to shroud.

No, you are mistaken. These things should not be evaluated with "gut feelings" but analyzed in an objective way. Bitcoin has never been harder to manipulate than it is today. The belief that this is not so comes from a combination of lack of knowledge and improper thinking regarding these things. The ownership distribution is not relevant as many believe.

What is harder to manipulate?

• An asset with a $2 million market cap.
• An asset with a $2 billion market cap.
• An asset with a $2 trillion market cap.

Obviously the larger the market cap, the harder it is to manipulate it. You perhaps were not in Bitcoin land that early, but there were times you could crash Bitcoin 10-20% or even more by issuing 1 fake news article. That's right, a single article by a random source could manipulate it deeply. Is this what you call harder to manipulate than today?   A lot of people can manipulate the assets in the first two groups, but very few entities can even make a small dent in the $2 trillion asset.

Don't get me all wrong, Bitcoin have a great future ahead but we are all here for a reason, what caught my attention for becoming a Bitcoin fan was the available power out of the governments reach.

Nothing has changed about this. If you believe that it has, you should stop posting and get back to studying.

Correct your gut feeling, Bitcoin is as great as it has always been. Bitcoin does not care. Bitcoin has given everyone time to adopt it. Those from retail that didn't adopt it yet, it is their own fault. Bitcoin remains pure.  

[d5000]

We talked about FATF and potential future dangers. I believe this news is relevant for this sub topic.

It is relevant as it shows what certain organizations are thinking and planning, but it still is a (big) step away from the scenarios which could become relevant if Bitcoin becomes really dominated by governments and big corporations. The "score" they are proposing would be basically an unified intergubernamental variant of AMLbot and friends, but it would be outside of Bitcoin's technical consensus.

If Cross-Input Signature Aggregation became reality and most people would transact via CoinJoins it could be very difficult for this score to give any meaningful result. And if they started blocking exchange inflows of all CoinJoins, then people would probably resort massively to P2P. And to forbid that, much more massive BigBrother-style measures would have to be enacted, which I doubt would be accepted by voters. Trump probably won also because of the unclear statements of the Democrat camp in regard to privacy.

I don't feel the same way that I used to feel about Bitcoin anymore, I guess this is because the government is all over it right now, the massive adoption from the government instead of the retails and normal people like us hurts my guts.

I'm still not worried at the current level of reserves (less than 500,000 if we only take governments, less than 2 million if we also take into account corporations, excluding ETFs and exchanges which aren't legally "holders"), even if they were 3-4 times higher or so the rest of the Bitcoin hodlers would still be dominant enough to reject any consensus changes proposed by a "FATF lobbyist group" or so. I also expect the ETFs to not grow that much more, at most doubling (and I believe in the upcoming bear they will lose some importance again).

[OgNasty]

You don't get to pick who accumulates Bitcoin.  Governments, terrorists, criminals, charities...  All of them are able to stack Bitcoin.  The only defense you really have to make sure they don't stack too much is to stack some yourself so that they can't.  Just like the old saying, 'if you can't beat them, join them.'

If we really are watching the death of fiat currency, it isn't a matter of if you are going to be stacking Bitcoin or not.  It is just a question of when.  Those who stack early will be rewarded, while those who refuse until it is too late will certainly be punished.  Hopefully if this is the future for currency on this planet, someone looks out for those without the technical skills to have gotten in before the big crash of fiat.

[Smartvirus]

We obviously wanted the government to in some way come in. These guys presence did brought encouragement to some investors today whom didn’t have the courage to invest yesterday.
Even then, majority of Bitcoin in the hands of the government doesn’t feel right. We just know these guys wouldn’t mean well and can lead to sabotage should they see a possibility. It’s a sentiment we can all entertain but, one that wouldn’t last as the market would always open and swallow all these speculations over time.

[Alpha Marine]

I don't feel the same way that I used to feel about Bitcoin anymore, I guess this is because the government is all over it right now, the massive adoption from the government instead of the retails and normal people like us hurts my guts. The decentralisation is no more, this is how I feel, now with the amount of Bitcoin on these powerful people's hand I feel that they will be able to manipulate the market even more.

I don't see a reason for anybody to be worried about this. Bitcoin is free for anybody to use and own. You can't want a free coin, controlled by no particular entity, owned by no particular person and then turn around and say "No, certain people shouldn't use Bitcoin". It goes against everything Bitcoin stands for.
Bitcoin was created as an alternative currency, and there is nothing that suggests that governments of the world can't own alternative currencies? I am not excited about it, but it's not something I will get worried over. The bitcoin market is not easily manipulated anymore.

I am excited in the sense that I don't see the government as the saviour of bitcoin. I remember how Trump was on the lips of almost everybody talking about Bitcoin immediately after he won the election to his inauguration. I don't see governments like that; I see them as just more people adopting bitcoin.
If for anything, I see there are more advantages of the government being involved in bitcoin than disadvantages.

[d5000]

Bitcoin is free for anybody to use and own. You can't want a free coin, controlled by no particular entity, owned by no particular person and then turn around and say "No, certain people shouldn't use Bitcoin". It goes against everything Bitcoin stands for.

I agree with this and for me this is a classical dilemma. (This is also an answer to @OgNasty.)

Of course, if a government wants to stack Bitcoin, he should not be forbidden to do that. And there is also no way to do that, as long as Bitcoin is censorship resistant.

As long as the governments only stack and don't interfere with development policy, everything is okay, but we can't guarantee that will stay this way all the time.

Some ideas if Bitcoin becomes a bigger than expected reserve currency:

- In many countries, you as a voter can influence what your government does with their stacked BTC. If they engage in something "scary", like a blacklist mechanism, show your opposition and be clear: that is not pro-Bitcoin policy!
- Support the Bitcoin OGs and cypherpunks in all discussions. I feel there are increasing attacks on them. You can of course have a divergent opinion with them, but the no-censorship aspect should be as holy as the 21 million limit.
- If things go terribly wrong, extreme measures like a hard fork could be an option. But of course only the last resort option. And the security of that chain may be a challenge albeit not impossible.

[OcTradism]

Of course, if a government wants to stack Bitcoin, he should not be forbidden to do that. And there is also no way to do that, as long as Bitcoin is censorship resistant.

As long as the governments only stack and don't interfere with development policy, everything is okay, but we can't guarantee that will stay this way all the time.

Bitcoin blockchain is Proof of Work and owning more bitcoins does not make that Bitcoin holder has any power to affect, manipulate or distort Bitcoin technical development- it's very different than Proof of Stake altcoins. The only possible impact is on the market with selling pressure that can trigger market panic sell, and price can be dumped in short term while in long term, people can realize that market dump from someone's sales even a big Bitcoin whale, is good opportunity to buy cheap bitcoins.

Do people many times hope that they can have a time-travelling machine in order to go back to the past and buy cheaper bitcoins?

It's ridiculous if in the present, they have chances and simply don't take advantage of such good opportunities and cheaper entries.

[Taskford]

Bitcoin is free for anybody to use and own. You can't want a free coin, controlled by no particular entity, owned by no particular person and then turn around and say "No, certain people shouldn't use Bitcoin". It goes against everything Bitcoin stands for.

I agree with this and for me this is a classical dilemma. (This is also an answer to @OgNasty.)

Of course, if a government wants to stack Bitcoin, he should not be forbidden to do that. And there is also no way to do that, as long as Bitcoin is censorship resistant.

As long as the governments only stack and don't interfere with development policy, everything is okay, but we can't guarantee that will stay this way all the time.

Some ideas if Bitcoin becomes a bigger than expected reserve currency:

- In many countries, you as a voter can influence what your government does with their stacked BTC. If they engage in something "scary", like a blacklist mechanism, show your opposition and be clear: that is not pro-Bitcoin policy!
- Support the Bitcoin OGs and cypherpunks in all discussions. I feel there are increasing attacks on them. You can of course have a divergent opinion with them, but the no-censorship aspect should be as holy as the 21 million limit.
- If things go terribly wrong, extreme measures like a hard fork could be an option. But of course only the last resort option. And the security of that chain may be a challenge albeit not impossible.

To many concerns regarding on their future actions but I guess people should careless about what's currently happening since what's important is they buy and add for demands on Bitcoin.

If it happens that they are the one who will dump it in future then I guess what we need to do is to be prepared on their future actions. But for now it seems that they don't have plan to sell nor even control Bitcoin on full extent since so far they provably know that they cannot do that.

I guess those policy shift will only happen if there's administration change so its really better for people to choose always those politicians that support Bitcoin and cryptocurrencies so that there's no interference will happen and those things they have done currently will continue.

[hero_the_bossman]

We obviously wanted the government to in some way come in. These guys presence did brought encouragement to some investors today whom didn’t have the courage to invest yesterday.
Even then, majority of Bitcoin in the hands of the government doesn’t feel right. We just know these guys wouldn’t mean well and can lead to sabotage should they see a possibility. It’s a sentiment we can all entertain but, one that wouldn’t last as the market would always open and swallow all these speculations over time.

It's good to push the adoption and knowledge about BTC overall forward, but it will have its consequences later down the line.

Where there is a hand of the gov, there is their need for control. And BTC will be no different, unfortunately.

[d5000]

The only possible impact is on the market with selling pressure that can trigger market panic sell, and price can be dumped in short term while in long term, people can realize that market dump from someone's sales even a big Bitcoin whale, is good opportunity to buy cheap bitcoins.

This is approximately what I was talking about. The concrete scenario is in a situation where there's a controversial feature and some big entity like a government threatens to sell the coins on the chain implementing the feature to pressure the developers. Just read the first page of the thread

To many concerns regarding on their future actions but I guess people should careless about what's currently happening since what's important is they buy and add for demands on Bitcoin.

Depends on what your personal goals with Bitcoin are. If you want to get some bucks more and then sell to a greater fool, then I agree. But in all other scenarios, fighting for BTC staying censorship resistant is the best strategy and will also probably lead to the highest possible market price in the long term. A BTC losing censorship resistance may eventually crash as it would become a slow, inefficient and risky PayPal, to say it bluntly.

If it happens that they are the one who will dump it in future then I guess what we need to do is to be prepared on their future actions. But for now it seems that they don't have plan to sell nor even control Bitcoin on full extent since so far they provably know that they cannot do that.

Currently the coins in governments' hands are too few, and there are also not many governments really stacking. But my concerns are for a future with a race between governments to be first. Not all will have the same goals, some may dump the coins later (and that would be ok), but some would probably like to buy influence on Bitcoin's development. See the OP.

And administration changes with policy shifts are completely normal and should be always expected. It would even be healthier if there was some fluctuation in that regard.

@hero_the_bossman: Agree.

[m2017]

To many concerns regarding on their future actions but I guess people should careless about what's currently happening since what's important is they buy and add for demands on Bitcoin.

I would add that people should not pay attention to things they can't influence (the government's storage of bitcoin).

If it happens that they are the one who will dump it in future then I guess what we need to do is to be prepared on their future actions. But for now it seems that they don't have plan to sell nor even control Bitcoin on full extent since so far they provably know that they cannot do that.

It seems to me that they have chosen a wait-and-see position until they decide on a strategy of behavior.

I guess those policy shift will only happen if there's administration change so its really better for people to choose always those politicians that support Bitcoin and cryptocurrencies so that there's no interference will happen and those things they have done currently will continue.

Politicians have a habit of abruptly changing their promises to the opposite side after their election by the people. Politicians loyal to the bitcoin "today" may turn out to be opponents "tomorrow". These hypocrites always perform only actions that are beneficial to them, hiding behind the words "concern for other citizens". In this case, bitcoiners.

[Pablo-wood]

To many concerns regarding on their future actions but I guess people should careless about what's currently happening since what's important is they buy and add for demands on Bitcoin.

Depends on what your personal goals with Bitcoin are. If you want to get some bucks more and then sell to a greater fool, then I agree. But in all other scenarios, fighting for BTC staying censorship resistant is the best strategy and will also probably lead to the highest possible market price in the long term. A BTC losing censorship resistance may eventually crash as it would become a slow, inefficient and risky PayPal, to say it bluntly.

Tampering with Bitcoin’s censorship resistance would be extremely difficult. It would basically require buying off or influencing a majority of developers and somehow changing the consensus rules or mining algorithm. Considering how decentralized and transparent the system is, that’s almost impossible to achieve. That’s the main reason censorship resistance is one of Bitcoin’s strongest features and why its value and concept is so different from a centralized system like PayPal.