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148 sats \ 24 replies \ @tomlaies 9h \ on: Dumping a fork coin doesn't crash its price bitcoin
Demand and supply work both in the same way. Boiling down the market dynamics to "Supply doesn't matter only demand matters" or vice versa are tremendously stupid.
I agree with you, except that in the case of bitcoin there is a fixed supply. You can't change it. So all that changes is demand.
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Incorrect. Supply isn't 21m, supply is whatever is currently ready for sale at which price.
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I think the word "supply" is causing the mixup. What there are 21M of is Bitcoin "stock" (although, that's confusing too, because "stock" has a more common meaning elsewhere in finance).
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The english language has many of these intricacies. Another one is a "public company" can either be a publicly owned company meaning it's a government institution or a publicly traded company meaning it's a private sector traded on the stock market.
These mixups don't happen in german because they have different words. On the other hand we have other words that get mixed up all the time :D
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Yes, English is horrible language. Words get messy.
You still haven't responded to my statements that in the case of bitcoin supply should be treated as total amount in existence.
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Yes, English is horrible language. Words get messy.
German has its problems too :)
You still haven't responded to my statements that in the case of bitcoin supply should be treated as total amount in existence.
I can't answer that because the premise is a fundamental misunderstanding of what "supply and demand" even is. It's not two numbers.
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Think about it this way:
Do you believe monetary inflation can cause price inflation?
If so, why? I believe it is because there was an increase in total number of monetary units in existence.
If this is true, supply has to be equal to total units in existence.
How could it be otherwise?
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It's because that new money is used to bid up prices. If it were printed in secret and kept in a safe, it wouldn't do anything to prices.
But if you say it is two levels, then you are saying how much people are willing to exchange for a thing is all that matters.
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Supply in the sense you all are using it is a level, not a quantity.
It's the level of demand for coins at a given price.
But if you want to talk about changing the price of something by increasing supply, you actually have to change how many of the thing there are to bid on.
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The Laws of Supply and Demand that we use to determine prices are based on our usage of the words. If you want to understand prices, you need to use the concepts in the relevant way.
Supply isn't one level. It's the whole set of price-quantity pairs that exist in the economy. How much is available at each price. That's what supply curves show.
Demand curves show how much is desired at each price. Where they cross is the point where quantity desired matches quantity supplied. That gives us the market clearing price.
It is not determined by the total stock of the commodity in existence. It is based on human subjective valuations of their own resources. If HODL'ers all had a change of heart and dumped their stacks, that would be an increase in supply.
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There it is:
If HODL'ers all had a change of heart and dumped their stacks, that would be an increase in supply.
What happens first? The holders have to decide not to want it (change their demand).
So the increase in supply as you are defining it can't happen unless there is first a change in demand.
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This does get confusing, because with bitcoin the potential suppliers are also often the current demanders.
To make this clear, let's just think about people who are HODL'ing, but not buying more. If that (possibly hypothetical) group of people had a change of heart, then supply of bitcoin increases.
In the messier general case, both supply increases and demand decreases, but the group we're talking about has more ability to drive supply, because they are the major holders of the inventory.
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You're describing a hoarding problem. But you are assuming that whoever buys from the hodlers will not also hoard. You can't make this assumption.
Maybe they will hodl, maybe they will try to sell for more than they paid. Maybe they will born the coins or give them as a gift. Who knows?
But if you say the price of a coin will decrease because people were hoarding the coin and now some of those people are no longer hoarding the coin you are first implying that you know that the buyer does not intend to hoard, but rather to sell. You have no way of knowing this, unless you believe demand has decreased.
So supply for someone willing to pay $95k is different than supply for someone willing to pay $50k?
What is the supply for someone willing to pay $10 million per coin?
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Market price is an instance calculation.
instantaneous demand and instantaneous supply.
The conversion of BTC to USD happens at a specific moment in time for a specific quantity of USD and a specific quantity of BTC.
Here's something to think about:
Total supply of BTC can be calculated. Total supply of fiat can not.
And for that reason, BTC's total price = 21M/infinity
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