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Author Topic: Hypothesis: Land values versus Bitcoin values and their relation  (Read 849 times)
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September 17, 2014, 12:23:08 PM

I have been studying land values lately and I came up with the following hypothesis: land values in big cities can give us more understanding of what is currently happening to the Bitcoin value.

p.s. When you don't agree, please elaborate why. I think it can be a nice discussion.
p.p.s. Of course land values are depending on way more things than just accessibility, just as Bitcoin does, but for this example we take this important factor as similarity and driver of growth/decline.

Just imagine we consider the total land value of all the land of one city. Increases in this land values are inversely related to transportation improvements according to a study of Mike Goldberg. What this means, is that historically technologies that reduce costs of accessibility have been forces that lead decentralization and dispersal of economic activity. Part of core businesses that were located in certain nuclei of commercial activity, are moved towards transportation hubs outside the center, or from a big city such as New York to smaller cities such as Houston or Miami. This affects the land values of a city as demand in the center declines and therefore negatively influences the land values, although land values in certain spots around the nucleus will rise. On the short term, this can lead to an overall decline in land values or a slower increase in land values for the city as a whole, compared to a city/nucleus where all economic activity remains clustered. On the long term this can lead to a more diverse city with better developed infrastructure and thus to greater economic success, which will reinforce land values and will push them to higher numbers than similar cities with worse infrastructures.

The bridge I want to make to Bitcoin is the following. Imagine, that all Bitcoins currently holded by a small group of people is the nucleus of a city. The entire Bitcoin economy represents the entire city. the Bitcoin value equals in this example the entire land value of the city. As soon as transportation possibilities increase, the possibility to move in and out of the nucleus to more decentralized location increases. This leads to (relative) lower land values in the overall city on the short term. Compare this with the current Bitcoin community. The infrastructure which is currently developed and rolled out enables the Bitcoin community (the nucleus), to transfer their Bitcoins to other places in the Bitcoin economy (other parts of the city).  Since these organizations often sell these Bitcoins directly, this inhibits current rapid price growth and currently actually leads to a value decline. But more important, the entire economy (the city), becomes more attractive on the long term. There are possibilities to travel quickly and with ease from A to B (spending Bitcoins) and the city offers certain advantages over other cities (fiat economies). This will attract people from outside the city to come and live in the city and in the example of the Bitcoin economy, these are potential new buyers. And just like in a city where not everyone travels non-stop from A-B, some of these buyers will not (immediately) spend their Bitcoins, which will have a positive effect on the value.

In other words, with the rolling out of all the current infrastructure that revolves around Bitcoin, it is pretty normal that the value drops on the short term. However this same infrastructure, is one of the foundations of future success of the city, the Bitcoin economy. This infrastructure will attract new investors and merchants, necessary for a vital economy. On the long term, this city will therefore outcompete others (fiat economy) and this consequently leads to an increase in value.

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September 17, 2014, 04:29:59 PM

This is futile. The main difference between land and money, is that land is directly useful (to some degree also used as monetary inflation hedge). The value of the money and the value of the land has a different source in peoples minds. The money value comes from peoples need to have value in reserve (for a long time, or just to complete two trades with different persons). Land is like other useful things, but since it can not move, it has value sometimes, sometimes not.

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September 17, 2014, 05:33:24 PM

I think this is one of the reasons bitcoin is slow this year,

we are just laying the foundation to build upon for the coming years.
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September 18, 2014, 04:34:57 AM

I disagree with your conclusion. Your assumptions are not correct. The vast majority of the people in any given city do not use bitcoin. Also the value of land varies very widely from city to city, and it could be increasing in one city and decreasing in another.
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