Key Post Bitcoin is a clearly identifiable economic bubble

But even when having a punt on crypto more money will choose bitcoin than any other crypto, because it's effectively the Schelling Point of crypto, in large part because of the network effects. The same as why there are more posts on here about bitcoin than all other cryptos combined.
 
DazedInPontoon said:
But even when having a punt on crypto more money will choose bitcoin than any other crypto, because it's effectively the Schelling Point of crypto, in large part because of the network effects. The same as why there are more posts on here about bitcoin than all other cryptos combined.
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The Lindy Effect is also relevant in this context.

"The Lindy effect proposes the longer a period something has survived to exist or be used in the present, the longer its remaining life expectancy".
 
Certainly I only ever had one punt on crypto and that was on bitcoin and it was absolutely just a punt, not in the least interested in its use as a currency or its network effect. I only look at one crypto price. Bitcoin is the queen of the cryptos and no doubt about it. But network effect suggests something somewhat grander than being the most held or known. But if you just mean it's the most well known and most held we could have avoided the last few posts - my fault if that was all you meant.
 
I can see some reasons that Lindy Effect would apply tecate. Anecdotally, there were definitely a lot of people whose original reaction to Bitcoin was "I'm not going to even bother spending time understanding this because it's probably a fad. Come back to me if it still exists after 5 or 10 years". And people who originally dimissed it but came back confused when it continued to grow and put more effort in to understand why - most notably Michael Saylor - from sceptic to owning 0.6%.
 
tecate said:
The Lindy Effect is also relevant in this context.

"The Lindy effect proposes the longer a period something has survived to exist or be used in the present, the longer its remaining life expectancy".
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Bitcoin has lasted 13 years and will I am sure outlive most of the 10,000 kopykats. The US$ has lasted 250 years.
 
Duke of Marmalade said:
Certainly I only ever had one punt on crypto and that was on bitcoin and it was absolutely just a punt, not in the least interested in its use as a currency or its network effect.
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Hype cycles are ugly but they do catch peoples attention. I've come across countless stories of folks who bought $50 worth of Bitcoin upon hearing of it - due to a bit of curiosity as to what it was all about - only to delve deeper into it - and reach the conclusion that there was something of substance to it. You're the exception to that rule Duke - as there's no doubt that you've gone down the Bitcoin rabbit hole. However, you also belong to a demographic that statistically is far less likely to appreciate the value/use case.

DazedInPontoon said:
I can see some reasons that Lindy Effect would apply tecate. Anecdotally, there were definitely a lot of people whose original reaction to Bitcoin was "I'm not going to even bother spending time understanding this because it's probably a fad. Come back to me if it still exists after 5 or 10 years". And people who originally dimissed it but came back confused when it continued to grow and put more effort in to understand why - most notably Michael Saylor - from sceptic to owning 0.6%.
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Related to that, Anthony Scaramucci often makes the point that once Bitcoin had reached a higher unit price/market cap, it meant that over the longer term, it represents a lesser risk - as it has demonstrated a certain level of staying power, meaning that it has past the 'fad' stage.

Duke of Marmalade said:
The US$ has lasted 250 years.
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Well, technically it has. In reality, pre-'71 USD is a completely different currency to post '71 USD. GBP is the oldest currency. It was supposed to represent 12 ounces of silver. It represents less than 0.5% of that value now. The same deal with the USD. These are outliers though. There have been many other fiat currencies that have failed over a much shorter timeframe.
 
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DazedInPontoon said:
I think it is something more, it's positive feedback loops that lead to the network growing because it's already the biggest.
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Maybe 70% falls triggered some negative feedback loops. You make it sound like a service - Ryanair passengers giving positive feedback. The only thing the vast majority of bitcoin holders want, is not an alternative way to buy latte in El Salvador, but a windfall profit.
 
Duke of Marmalade said:
Maybe 70% falls triggered some negative feedback loops.
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I guess so, or rather that some negative feedback loops cause the 70% drop. I've been thinking a lot lately about the this drop, as I didn't expect it to be so much considering not much has changed fundamentally, and 'the cult', as you would put it, by and large don't seem to be capitulating. There's not a lot of evidence that recent large new holders have sold, for example MicroStrategy and Tesla haven't.

So why is the price down? Who is selling or declining to buy when they otherwise would, and why? So far I think of it in four categories:

1) Because bitcoin is to some extent a veblen/giffen good which manifests as some people wanting it more when it's expensive than when it's cheap, which is indeed a negative feedback loop.

2) Temporary selling because it's a bear market and they think they will be able to buy back at cheaper prices in the short term and increase their stack.

3) Forced selling by people who do not want to sell but were either a victim of using too much leverage and are now being liquidated, and/or have suffered non-bitcoin losses due to the overall macro environment.

4) No longer care about bitcoin. Often their first rodeo, often had a bad experience for various reasons - can't stomach volatility, lost the farm on alt-coins, got scammed etc and/or didn't understand it in the first place and have little conviction. Not sure how many of these tend to even buy much bitcoin these days, it was probably NFTs or Dogecoin.

Categories 1) and 2) will return en mass when we change to a bull market. Some of 3) will be back if they have the funds again, some won't. Some of 4) will be back, many won't.

I also don't think any of this is specific to this bear market, it was the same categories in the previous ones too, but I've no idea how to estimate what proportion of the selling each of the categories accounts for.

Duke of Marmalade said:
You make it sound like a service - Ryanair passengers giving positive feedback. The only thing the vast majority of bitcoin holders want, is not an alternative way to buy latte in El Salvador, but a windfall profit.
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yes, we at a minimum want it to be a successful long term store of value, but we won't say no to a windfall profit either - the reward for the risk we take as early adopters. Would also be pleased for bitcoin to succeed because competition is good pressure for keeping the legacy system honest.
 
I just can’t accept that the price of bitcoin is the ebb and flow of its demand as a utility (supply is determined so that doesn’t enter the equation).
It seems to me purely as a game where people are trying to guess what other folk will pay for it, not having a clue themselves how to value it. In Schelling terminology they are all level-n players.
 
Above I tried to categorise who sellers are. But you can also attempt to categorise the different types of demand, again I've come up with 4 that I consider finding different utility in bitcoin.

1) Medium of exchange - remittances, cross border transactions, black/grey market, privacy-sensitive purchases. I'm lumping it all in together here because I think it's negligible. A lot of it may involve the users on each end holding bitcoin for only short periods of time.

2) Long term hodlers with no plans to sell e.g. Saylor (or so he says.)

3) Short term hodlers, holding for a few months or years but with an end goal in sight, perhaps saving for a house or car. This is a risky usage (I wouldn't do it) and therefore a lot of the people doing it may be weak hands who sell in a bear market for reason 4) in my previous post.

4) Traders, playing the game, may hold a lot or none from one day to the next, may even be net short. Some will over-leverage and get wiped out during the quickest parts of bull and bear markets. In my experience a lot (probably most) of the people who are most interested in trading bitcoin also tend to be a long term hodler with some of their stack, but some will also be weak hands who disappear in bear markets as mentioned in 3) above.

I agree with you that people have difficulty in valuing it. Not only is there a large variance in how people value it, but many people with low conviction will change their own opinion depending on what direction the price is moving. These people are usually in the short term hodler and trader categories.

It might be possible to somewhat estimate the proportion of the categories above based on exchange trading volumes and analysing the blockchain. For example I remember in the past seeing that +60% of bitcoin had not moved for at least one year. That points to most usage being 2) and 3) rather than 1) and 4). A more recent example of chain analysis looks like this: https://insights.glassnode.com/the-week-onchain-week-22-2022/ I don't care enough to dive deep into that, but I find it interesting that it can be done since the blockchain data is public.

You're right that supply doesn't enter the equation, which means that if you are a trader you only have half the job of trying to predict some other market, get the demand right and you'll profit.
 
DazedInPontoon said:
It depends on the size of the network. The fact that people are members of the network implies it has use to them, or else why are they members of it?

You can tell me bitcoin serves no use to me, and I can tell you it does, and we'll just go around in circles. But ultimately I consider myself the sole judge of what I find utility in and not you.
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Do you find utility in tulip bulbs?
 
Anyone who bought the bottom in the past 2 months or so has almost doubled their money on alts but most people here are still adamant crypto has no place in a person's portfolio

As always make sure you get your initial out as quickly as possible
 
CuriousGeorge11 said:
Anyone who bought the bottom in the past 2 months or so has almost doubled their money on alts but most people here are still adamant crypto has no place in a person's portfolio

As always make sure you get your initial out as quickly as possible
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Don't think anyone is arguing that you can't make money.
However, treat it as 'gambling' and not as investment. More like an online Poker Game.
 
CuriousGeorge11 said:
Anyone who bought the bottom in the past 2 months or so has almost doubled their money on alts but most people here are still adamant crypto has no place in a person's portfolio

As always make sure you get your initial out as quickly as possible
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George Mallory came in at 12/1 at the 1:35 at Uttoxeter, but most people are still adamant that betting slips have no place in a person's portfolio.
 
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