No. of Recommendations: 1
Note that there are really only two reasons anyone holds Bitcoin in this era, if they're honest with themselves.
* One is criminal activity. The most common categories being laundering, coin theft, and tax evasion.
* The other is holding in the hope/expectation that the market price will rise in the short term or long term.
From the woods the weasel looks at the farmer and thinks to himself: why did he put a fence around the chicken coupe? It's criminal he says, and it's selfish, why ... it's a threat to our democracy! The farmer looks back at the weasel and thinks: poor weasel, he blames me for his flawed monetary system ... he should have studied less Keynes and more Friedman.
Since there is no coupon, it's certain that the price can rise on trend only so long as aggregate demand for Bitcoin [at any given price] continues to rise. That requires an increase in one or both of the above reasons to hold among the population at large. I would expect both reasons to run out of runway eventually--there being only so many people on the planet--causing long run price rises to halt. With no up-trend in price, that removes reason #2 entirely after a while. The process might take decades to unfold, of course, but flatlining and boredom and irrelevance seem to be the likely destinations. Which is not necessarily the same as going to zero.
Not correct. In round numbers, the world's assets total $1,000T. Of that there is $100T in "cash." Ten to one ratio. My belief is that the 10 to 1 ratio is currently relatively constant. For example, imagine that the worlds governments printed another $100T tomorrow. Would we now have $1,100T in total assets and $200T in cash? No, asset prices would be bid up quickly until we returned to the 10-1 ratio. That would be $2,000T total assets and $200T in cash. In a Bitcoin world, BTC replaces all cash. That's $100T. Then it starts to eat into other assets people hold in lieu of cash. T-bills, gold, raw land ... any asset that you own in order to escape inflation rather than being excited by the return. When people don't have to invest their "cash" to preserve their wealth, they're happy holding on to more. So, maybe now the ratio goes to 5-1. Total wealth can be $1,000T and cash can be $200T. Then, over time, real wealth goes up as new businesses are built. The value of Bitcoin goes up to maintain the new 5-1 ratio. If BTC replaced all currencies, it could go to $200T. Call it $10MM/BTC. Nothing like the 68,000X return early investors got but still not too bad. Maybe I am a little greedy?
Before you start laughing at the above, one more note. BTC is a good example of The Prisoner's Dilemma from game theory. First to flip wins. Right now the inmates are singing. Two of the US presidential candidates have committed to holding BTC as a strategic national reserve. TO SUPPORT THE USD BY HOLDING RESERVES IN BTC! That's the US govt executing a speculative attack on their own currency. Could be the trigger that causes a lot of other currency holders to flip too.
