pull down to refresh
27 sats \ 19 replies \ @Undisciplined 9h \ parent \ on: Dumping a fork coin doesn't crash its price bitcoin
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).
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
reply
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.
reply
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.
reply
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?
reply
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.
reply
I agree. If people don't know something exists it doesn't affect the market. If a bug exists in software, it isn't all that relevant until somebody finds it and exploits it or fixes it.
It's because that new money is used to bid up prices
Another way to say "bid up prices" is to say people have less demand for the money.
I agree that the cantillonaires will get the newly printed monetary units first. However, in a world like most central banking systems we have today, the populace learns about monetary inflation (the creation of new monetary units) as it happens.
What role do you see a decreased desire to hold cash balances playing in price inflation?
Sorry for my delay in responding. Was offline for a few hours.
reply
Another way to say "bid up prices" is to say people have less demand for the money.
Medium of exchange status makes this a lot harder to think about with money than it is with other goods.
However, the expanded money supply (which I realized from this conversation is a confusing term), immediately alters the holder-of-the-new-money's willingness to spend it. Essentially, it's just an expansion of their budget, since prices haven't responded yet.
Their increased willingness to part with the new money is likely accompanied by a reduced desire to acquire more, but strictly speaking these are separate things and don't have to go together. There would be nothing logically inconsistent about being more willing to spend money, while not changing what you'd do to acquire it.
reply
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.
reply
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.
reply
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.
reply
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.
reply
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.
reply
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.
reply
I'm not talking about hoarding and it doesn't matter what the buyers want the bitcoin for.
The point is that someone with a big stack, who makes small purchases, has more ability to move supply than demand.
If I have thousands of bitcoin and I'm only currently purchasing thousands of sats, I can increase supply by orders of magnitude more than I can decrease demand.
reply
Hodl = hoard
If I have thousands of bitcoin and I'm only currently purchasing thousands of sats, I can increase supply by orders of magnitude more than I can decrease demand.
You can't do either.
If you decide to sell your thousands of btc, the coins end up being held by somebody else. If they don't, it's because nobody wanted them, not because you decided to sell them.
reply
Again, supply isn't about the actual transaction that clears the market. It's the entire set of price-quantity pairs that exist.
I can absolutely move the supply curve by changing my mind about what I'd be willing to sell for. That's exactly what supply shifts are: changes in the quantities available at each price.
The point is that my hypothetical demand decrease was smaller than my hypothetical supply increase. You're only confusing things by also changing other people's preferences at the same time.
"Hoarding" is not a meaningful economic category. People have inventories and willingnesses to sell, as well as willingnesses to buy.