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21 sats \ 9 replies \ @Scoresby OP 9h \ parent \ on: Dumping a fork coin doesn't crash its price bitcoin
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.
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.
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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.
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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.
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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.
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"Hoarding" is not a meaningful economic category. People have inventories and willingnesses to sell, as well as willingnesses to buy.
Yes! This is why I originally said the supply of a coin is the total amount in existence. With bitcoin, you can't change this, so the only way for price to change is if demand changes.
Do you at least agree with me on that point?