Gold collapsing. Bitcoin UP.

[BlindMayorBitcorn]

LOL...

I haet ugaise. Srsly.

[79b79aa8d5047da6d3XX]

Here's some thoughts about how long a long-term investor should expect to HODL, all fairly obvious.  

I look at matters from the perspective of BTC buyers, excluding from consideration early individual miners. The possibility to mint your own money was an anomaly, never to be repeated, perhaps comparable only to striking easily extractable gold.

1. At present block height (~350k), BTC inflation rate is at about 10%/year.  From standard monetary perspective this is untenably high. From the perspective of bitcoin, this is a necessary evil, as a condition for network effect to take hold is for the coin to be distributed as widely as possible, which requires high emission.

2. Long-term investors should thus expect to hold not just until the next halving (~block 420k, inflation < 5%, 2016), but the one after that (~block 630k, inflation < 3%, 2021). By then the block reward will be 6.25 BTC and total mining output 900 BTC/day.

3. The reward for early investors is to have had to wait for only one halving period for large returns (those who waited significantly less before cashing out big simply got lucky). Their risk was to lose all. By this point, that risk has diminished vastly, but expected waiting time for realizing large returns has increased accordingly.

4.  At the time of the first halving, price did not immediately increase. With demand slowly rising, the slack in supply was initially met from early accumulators partially cashing out. But eventually price had to pick up. We should expect a similar dynamic next time around.

5. By the same basic supply/demand considerations, price would pick up faster if adoption rate increased. This is indeed expected: if things continue on track, the network effect will kick in and we will hit the high slope section of the adoption S-curve. However, I see no immediate reason to suppose that this will happen before that third halving (ca. 2021).

6. Thus HODLers who have yet to cash out may keep watching news/price daily to satisfy their addiction, but should plan on waiting around five years before expecting to reap large rewards (e.g., >10x their DCA).

[Trader Steve]

Imho there is no jump to be expected until next halving. Everything else happening is just noise.

I've never seen the halving-drives-bubbles argument fully explained. It seems to me that since we are talking about CCMF price jumps of at least tenfold, and the inflation rate is nowhere near that, then either most bitcoins are immovable or the halving isn't in fact that important.

For example, if we have an inflation rate of 10% per year but investment increases tenfold during the year, then we still get roughly a 9x increase in price. Now if half the coins are immovable, either because they are lost or because for some reason the holders refuse to cash any out, then the effective inflation rate looks more like 20%. If 3/4 of the coins are immobile, then 40%. And if investment only increases by say 4x per year, then I think that's only like a 2.5x price increase during the non-halving years. But 4x vs. 2.5x is still not that much of a difference.

If the halving does make a huge difference, I would have to conclude that it's because few bitcoins actually make it to market for whatever reason. Perhaps it's the Bitcoin Baron's Paradox: "After the first few million dollars, why cash out any more? Fiat currency is a downright dangerous place to park your money!" (It could get frozen, banks could fail, dollar could collapse, etc. Gold has jurisdictional risks. Bitcoin is the ideal place for savings, so even if the price rises there is no reason to cash out very much more.)

I believe the halfing will have strong impact and I think you answered your own question (why?) at least partly: a lot of coins are immobile.

You're looking at inflation rate. Let me offer another way to look at this:

(I'm assuming miners are selling 100% of mined coins for simplicity, the argument works with less)

3600 BTC are mined each day. At current market price that's $900,000 worth. These BTC are being bought every day by demand. Now this selling pressure halves and the demand stays the same. Surely what will happen is the price will rise. In case of constant demand of $900k/day it should rise to 500 USD/BTC (merely double). But neither supply nor demand stay constant in such a scenario: supply is likely to decrease, because miners get to hoard more and most importantly demand will rise. Yes, I know, economic theory says demand should drop with a higher price,... but that's forgetting human psychology and the hype a 100% price rise will cause. In other words: the halving (reduction of supply) itself is just the ignition, the real momentum comes from increase of supply.

It worked last time, I think the Q1 2013 rally was caused (or at least substantially contributed to) by the halfing.

Does this make sense at all or is it wishful thinking?

Well, the halving is public knowledge so I would argue that this knowledge is already priced into the market. Other factors will drive the ebb and flow in price. In other words: supply is increasing at a fixed and known rate; demand will continue to fluctuate.

EDIT: clarity.

[electerium]

my bit of contribution to this thread


Commodities all around the world: e.g. gold, iron, steel have been in a bear market for about 5-8 years now.

[molecular]

date=1427467580]
but that's forgetting human psychology and the hype a 100% price rise will cause. In other words: the halving (reduction of supply) itself is just the ignition, the real momentum comes from increase decrease of supply increase of demand.

is what I meant to say.

corrected my post above.

[smooth]

its all about the hoarding anyway:


http://nakamotoinstitute.org/mempool/end-the-fed-hoard-bitcoins/

https://bitcointalk.org/index.php?topic=144911.0

1. Silly conclusion from that diagram. Rotate it 90 degree clockwise and all the sudden it is "all about" miner profitability.

2. That diagram is a train wreck. I don't even know where to start.

[smooth]

Imho there is no jump to be expected until next halving. Everything else happening is just noise.

I've never seen the halving-drives-bubbles argument fully explained. It seems to me that since we are talking about CCMF price jumps of at least tenfold, and the inflation rate is nowhere near that, then either most bitcoins are immovable or the halving isn't in fact that important.

For example, if we have an inflation rate of 10% per year but investment increases tenfold during the year, then we still get roughly a 9x increase in price. Now if half the coins are immovable, either because they are lost or because for some reason the holders refuse to cash any out, then the effective inflation rate looks more like 20%. If 3/4 of the coins are immobile, then 40%. And if investment only increases by say 4x per year, then I think that's only like a 2.5x price increase during the non-halving years. But 4x vs. 2.5x is still not that much of a difference.

If the halving does make a huge difference, I would have to conclude that it's because few bitcoins actually make it to market for whatever reason. Perhaps it's the Bitcoin Baron's Paradox: "After the first few million dollars, why cash out any more? Fiat currency is a downright dangerous place to park your money!" (It could get frozen, banks could fail, dollar could collapse, etc. Gold has jurisdictional risks. Bitcoin is the ideal place for savings, so even if the price rises there is no reason to cash out very much more.)

I believe the halfing will have strong impact and I think you answered your own question (why?) at least partly: a lot of coins are immobile.

You're looking at inflation rate. Let me offer another way to look at this:

(I'm assuming miners are selling 100% of mined coins for simplicity, the argument works with less)

3600 BTC are mined each day. At current market price that's $900,000 worth. These BTC are being bought every day by demand. Now this selling pressure halves and the demand stays the same. Surely what will happen is the price will rise. In case of constant demand of $900k/day it should rise to 500 USD/BTC (merely double). But neither supply nor demand stay constant in such a scenario: supply is likely to decrease, because miners get to hoard more and most importantly demand will rise. Yes, I know, economic theory says demand should drop with a higher price,... but that's forgetting human psychology and the hype a 100% price rise will cause. In other words: the halving (reduction of supply) itself is just the ignition, the real momentum comes from increase of demand.

It worked last time, I think the Q1 2013 rally was caused (or at least substantially contributed to) by the halfing.

Does this make sense at all or is it wishful thinking?

Demand should be expected to drop for two reasons:

1. If people expect the price to go up shortly before, at, or shortly after the halving then that is more reason to buy before and less reason to buy after. Demand induced by this effect will then remain low until close to the next halving.

2. Whether or not people expect the price to go up, if you are considering buying it is likely that liquidity to a buyer will decrease after the supply is cut in half (less miner selling) and you will face more slippage. So again it makes sense to buy before rather than after.

Both effects cause a pulling forward of demand, not unlike a temporary tax credit for say solar power.

[inca]

my bit of contribution to this thread


Commodities all around the world: e.g. gold, iron, steel have been in a bear market for about 5-8 years now.

In economic recession that makes sense. Gold's bear market is induced by central bankers.

[inca]

Imho there is no jump to be expected until next halving. Everything else happening is just noise.

I've never seen the halving-drives-bubbles argument fully explained. It seems to me that since we are talking about CCMF price jumps of at least tenfold, and the inflation rate is nowhere near that, then either most bitcoins are immovable or the halving isn't in fact that important.

For example, if we have an inflation rate of 10% per year but investment increases tenfold during the year, then we still get roughly a 9x increase in price. Now if half the coins are immovable, either because they are lost or because for some reason the holders refuse to cash any out, then the effective inflation rate looks more like 20%. If 3/4 of the coins are immobile, then 40%. And if investment only increases by say 4x per year, then I think that's only like a 2.5x price increase during the non-halving years. But 4x vs. 2.5x is still not that much of a difference.

If the halving does make a huge difference, I would have to conclude that it's because few bitcoins actually make it to market for whatever reason. Perhaps it's the Bitcoin Baron's Paradox: "After the first few million dollars, why cash out any more? Fiat currency is a downright dangerous place to park your money!" (It could get frozen, banks could fail, dollar could collapse, etc. Gold has jurisdictional risks. Bitcoin is the ideal place for savings, so even if the price rises there is no reason to cash out very much more.)

I believe the halfing will have strong impact and I think you answered your own question (why?) at least partly: a lot of coins are immobile.

You're looking at inflation rate. Let me offer another way to look at this:

(I'm assuming miners are selling 100% of mined coins for simplicity, the argument works with less)

3600 BTC are mined each day. At current market price that's $900,000 worth. These BTC are being bought every day by demand. Now this selling pressure halves and the demand stays the same. Surely what will happen is the price will rise. In case of constant demand of $900k/day it should rise to 500 USD/BTC (merely double). But neither supply nor demand stay constant in such a scenario: supply is likely to decrease, because miners get to hoard more and most importantly demand will rise. Yes, I know, economic theory says demand should drop with a higher price,... but that's forgetting human psychology and the hype a 100% price rise will cause. In other words: the halving (reduction of supply) itself is just the ignition, the real momentum comes from increase of demand.

It worked last time, I think the Q1 2013 rally was caused (or at least substantially contributed to) by the halfing.

Does this make sense at all or is it wishful thinking?

Demand should be expected to drop for two reasons:

1. If people expect the price to go up shortly before, at, or shortly after the halving then that is more reason to buy before and less reason to buy after. Demand induced by this effect will then remain low until close to the next halving.

2. Whether or not people expect the price to go up, if you are considering buying it is likely that liquidity to a buyer will decrease after the supply is cut in half (less miner selling) and you will face more slippage. So again it makes sense to buy before rather than after.

Both effects cause a pulling forward of demand, not unlike a temporary tax credit for say solar power.

1.Do new entrants to bitcoin buy because they understand concepts like halvings? No. They buy because there is positive price momentum.

2.liquidity on exchanges is somewhat irrelevent to mining supply.

[hdbuck]

its all about the hoarding anyway:


http://nakamotoinstitute.org/mempool/end-the-fed-hoard-bitcoins/

https://bitcointalk.org/index.php?topic=144911.0

1. Silly conclusion from that diagram. Rotate it 90 degree clockwise and all the sudden it is "all about" miner profitability.

2. That diagram is a train wreck. I don't even know where to start.

you disagree bitcoin is about people hoarding it - hence attaching value to it?

[smooth]

its all about the hoarding anyway:


http://nakamotoinstitute.org/mempool/end-the-fed-hoard-bitcoins/

https://bitcointalk.org/index.php?topic=144911.0

1. Silly conclusion from that diagram. Rotate it 90 degree clockwise and all the sudden it is "all about" miner profitability.

2. That diagram is a train wreck. I don't even know where to start.

you disagree bitcoin is about people hoarding it - hence attaching value to it?

No I don't disagree that hoarding adds value (short term at least), just that "its all about hoarding" is a silly view of something that looks like a diagram of a complex system with feedback loops. Hoarding being at the top is arbitrary. The structure is the same (one arrow in, one out) if you put miner profitability at the top. I don't think it can be considered "all about" any of these.

I could pick apart the structure of the diagram all day long too. How someone thinks that the main factor that drives hoarding is user adoption is beyond me, for example. The original hand-written diagram on which it was based was better.

[smooth]

Imho there is no jump to be expected until next halving. Everything else happening is just noise.

I've never seen the halving-drives-bubbles argument fully explained. It seems to me that since we are talking about CCMF price jumps of at least tenfold, and the inflation rate is nowhere near that, then either most bitcoins are immovable or the halving isn't in fact that important.

For example, if we have an inflation rate of 10% per year but investment increases tenfold during the year, then we still get roughly a 9x increase in price. Now if half the coins are immovable, either because they are lost or because for some reason the holders refuse to cash any out, then the effective inflation rate looks more like 20%. If 3/4 of the coins are immobile, then 40%. And if investment only increases by say 4x per year, then I think that's only like a 2.5x price increase during the non-halving years. But 4x vs. 2.5x is still not that much of a difference.

If the halving does make a huge difference, I would have to conclude that it's because few bitcoins actually make it to market for whatever reason. Perhaps it's the Bitcoin Baron's Paradox: "After the first few million dollars, why cash out any more? Fiat currency is a downright dangerous place to park your money!" (It could get frozen, banks could fail, dollar could collapse, etc. Gold has jurisdictional risks. Bitcoin is the ideal place for savings, so even if the price rises there is no reason to cash out very much more.)

I believe the halfing will have strong impact and I think you answered your own question (why?) at least partly: a lot of coins are immobile.

You're looking at inflation rate. Let me offer another way to look at this:

(I'm assuming miners are selling 100% of mined coins for simplicity, the argument works with less)

3600 BTC are mined each day. At current market price that's $900,000 worth. These BTC are being bought every day by demand. Now this selling pressure halves and the demand stays the same. Surely what will happen is the price will rise. In case of constant demand of $900k/day it should rise to 500 USD/BTC (merely double). But neither supply nor demand stay constant in such a scenario: supply is likely to decrease, because miners get to hoard more and most importantly demand will rise. Yes, I know, economic theory says demand should drop with a higher price,... but that's forgetting human psychology and the hype a 100% price rise will cause. In other words: the halving (reduction of supply) itself is just the ignition, the real momentum comes from increase of demand.

It worked last time, I think the Q1 2013 rally was caused (or at least substantially contributed to) by the halfing.

Does this make sense at all or is it wishful thinking?

Demand should be expected to drop for two reasons:

1. If people expect the price to go up shortly before, at, or shortly after the halving then that is more reason to buy before and less reason to buy after. Demand induced by this effect will then remain low until close to the next halving.

2. Whether or not people expect the price to go up, if you are considering buying it is likely that liquidity to a buyer will decrease after the supply is cut in half (less miner selling) and you will face more slippage. So again it makes sense to buy before rather than after.

Both effects cause a pulling forward of demand, not unlike a temporary tax credit for say solar power.

1.Do new entrants to bitcoin buy because they understand concepts like halvings? No. They buy because there is positive price momentum.

2.liquidity on exchanges is somewhat irrelevent to mining supply.

1. Sure that's probably a factor. To the extent that people expect the halving to increase price they will greedily buy ahead of the halving, which then leeds to positive price momentum, again ahead of the halving, so demand pulled forward.

2. We just disagree on this. Mined coins either get sold on exchanges, held by miners (likely not so much at industrial scale), or sold off-exchange. If sold off-market they absorb demand that would otherwise compete for liquidity on exchange.

[NotHatinJustTrollin]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

[tabnloz]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

The low fee argument is weakest while Bitcoin is relatively small; that's why exchange fees factor in (people need to buy in and cash out. Volatility, PoW has been done to death). But it is also only weakest in selected areas. I wouldn't say an area that has an average 12% remittance fee is not ripe to be picked by bitcoin remittances (especially if bitcoin operates behind the scenes as company develops their own avenues / relationships at both ends).

This new European cap is good for everyone and high time the financial sector stopped the gouging. But if bitcoin gets a proper foothold, a 2% seawall won't stem the tide. In the upside-happens for bitcoin possibility, btc can limbo lower than the legacy sector. Until then though, your point stands.

As (or perhaps 'if', considering your perspective) bitcoin matures enough that users can stay within a bitcoin economy, then low fees are a positive. So, the more it expands, the more relevant the argument.

[shields]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

The low fee argument is weakest while Bitcoin is relatively small; that's why exchange fees factor in (people need to buy in and cash out. Volatility, PoW has been done to death). But it is also only weakest in selected areas. I wouldn't say an area that has an average 12% remittance fee is not ripe to be picked by bitcoin remittances (especially if bitcoin operates behind the scenes as company develops their own avenues / relationships at both ends).

This new European cap is good for everyone and high time the financial sector stopped the gouging. But if bitcoin gets a proper foothold, a 2% seawall won't stem the tide. In the upside-happens for bitcoin possibility, btc can limbo lower than the legacy sector. Until then though, your point stands.

As (or perhaps 'if', considering your perspective) bitcoin matures enough that users can stay within a bitcoin economy, then low fees are a positive. So, the more it expands, the more relevant the argument.

I would love some clarification on this as I don't think it's as clearcut as it might seem at first. Firstly, does this 0.2% (which is not 2% btw!) only apply to some bank portion of the fee or is it the total credit card fee that a merchant will incur. Secondly, if it is the total fee it means the credit card companies will be taking a MASSIVE hit, going from 2-3% (sometimes more) down to 0.2%? can they survive on 10% of their previous fees? It would effectively mean that there is a level of fraud for which they are no longer profitable as they can't raise the fees. This would be more of a threat to credit cards themselves than bitcoin no?

Seriously, am I missing something here?

[cypherdoc]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

that type of market intervention from on high is probably going to cause all sorts of unwanted side effects like driving some of the payment processors out of business.  the others will find a way to pass on fees to customers in other ways like maybe decreasing service.   in general, it's a good thing however and being driven by alternative systems but mainly by Bitcoin.  these heavily infrastructured companies will never be able to compete in the long run however with Bitcoins low costs and speed.  and they totally ignore the SOV function Bitcoin so beautifully enforces. 

bottom line:  it's a stop gap measure.  they need to do more.

[tabnloz]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

The low fee argument is weakest while Bitcoin is relatively small; that's why exchange fees factor in (people need to buy in and cash out. Volatility, PoW has been done to death). But it is also only weakest in selected areas. I wouldn't say an area that has an average 12% remittance fee is not ripe to be picked by bitcoin remittances (especially if bitcoin operates behind the scenes as company develops their own avenues / relationships at both ends).

This new European cap is good for everyone and high time the financial sector stopped the gouging. But if bitcoin gets a proper foothold, a 2% seawall won't stem the tide. In the upside-happens for bitcoin possibility, btc can limbo lower than the legacy sector. Until then though, your point stands.

As (or perhaps 'if', considering your perspective) bitcoin matures enough that users can stay within a bitcoin economy, then low fees are a positive. So, the more it expands, the more relevant the argument.

I would love some clarification on this as I don't think it's as clearcut as it might seem at first. Firstly, does this 0.2% (which is not 2% btw!) only apply to some bank portion of the fee or is it the total credit card fee that a merchant will incur. Secondly, if it is the total fee it means the credit card companies will be taking a MASSIVE hit, going from 2-3% (sometimes more) down to 0.2%? can they survive on 10% of their previous fees? It would effectively mean that there is a level of fraud for which they are no longer profitable as they can't raise the fees. This would be more of a threat to credit cards themselves than bitcoin no?

Seriously, am I missing something here?

Correct, its .2%. My mistake. Debit card transactions. .3% for CC. As per article, its an attempt to combat lack of demand, deflation in EU. Most bitcoin payment processors are already facing margin compression (at or near 0% fees anyway). As Cypher & yourself noted, imaging being a legacy payments processor when this is implemented.

[shields]

Some FUD (Facts U Dislike) for y'all:


http://cointelegraph.com/news/113795/europe-caps-payment-fees-at-02-undermining-bitcoins-appeal


"Low fees" was already a weak pseudo-argument for bitcoin (considering POW, exchange fees, volatility, spread etc), now is even weaker.

The low fee argument is weakest while Bitcoin is relatively small; that's why exchange fees factor in (people need to buy in and cash out. Volatility, PoW has been done to death). But it is also only weakest in selected areas. I wouldn't say an area that has an average 12% remittance fee is not ripe to be picked by bitcoin remittances (especially if bitcoin operates behind the scenes as company develops their own avenues / relationships at both ends).

This new European cap is good for everyone and high time the financial sector stopped the gouging. But if bitcoin gets a proper foothold, a 2% seawall won't stem the tide. In the upside-happens for bitcoin possibility, btc can limbo lower than the legacy sector. Until then though, your point stands.

As (or perhaps 'if', considering your perspective) bitcoin matures enough that users can stay within a bitcoin economy, then low fees are a positive. So, the more it expands, the more relevant the argument.

I would love some clarification on this as I don't think it's as clearcut as it might seem at first. Firstly, does this 0.2% (which is not 2% btw!) only apply to some bank portion of the fee or is it the total credit card fee that a merchant will incur. Secondly, if it is the total fee it means the credit card companies will be taking a MASSIVE hit, going from 2-3% (sometimes more) down to 0.2%? can they survive on 10% of their previous fees? It would effectively mean that there is a level of fraud for which they are no longer profitable as they can't raise the fees. This would be more of a threat to credit cards themselves than bitcoin no?

Seriously, am I missing something here?

Correct, its .2%. My mistake. Debit card transactions. .3% for CC. As per article, its an attempt to combat lack of demand, deflation in EU. Most bitcoin payment processors are already facing margin compression (at or near 0% fees anyway). As Cypher & yourself noted, imaging being a legacy payments processor when this is implemented.

The more important aspect of my post was whether this ruling is actually being interpretted correctly, i.e. does the regulation really cut the credit card processors fee by 90% (seems unlikely, too drastic) or is the fee that is being limited only *part* of the total fee. See http://en.wikipedia.org/wiki/Credit_card#Costs_to_merchants for example of how card fees are not just a simple single fee.

EDIT: either way it's probably good for bitcoin, as it will either not reduce total merchant fees by much, or it will destroy credit card company business models.

[marcus_of_augustus]

More regulation for the legacy payments and banking means more epic failures and unknowable wealth destroying outcomes for them ... go all in bitcoin.

[Erdogan]

Here is my thoughts on bitcoin powered remittance:

Stage 1 is companies in each country cooperating with each other to offer transfer and conversion between two fiats. Each company can be local to a country, does not need license to do foreign exchange. They can be an exchange, or work with a local exchange. They can offer short time fixed exchange rate gurarantee through options, cooperation with someone offering options, or just make a deal with a few individuals who offer to take that exhange rate risk. No single company has to be an international company. They can offer transfer fiat to fiat.

Stage 2 is when one party in the remittance transfer is a bitcoin user. In this case, only one local company need to be involved. For instance, a sender in Europe is a bitcoin user, the receiver somewhere in Asia is a fiat user. The bitcoin user transfers fiat to to a local company in Asia operating as an exchange, who sends fiat to the receiver. For this to work, bitcoin adoption has to increase among the foreign workers.

Stage 3 is of course when both parties are bitcoin users, who do not need to convert to fiat right away, but will do it when they need to.