pull down to refresh
0 sats \ 16 replies \ @Undisciplined 8h \ parent \ on: Dumping a fork coin doesn't crash its price bitcoin
Ok, but when technology advances making extraction easier, that increases the supply without discovering more.
The reason discoveries change the price is because market actors are anticipating the price it will enter the market at. Why buy a ton of lithium today at current prices, when more will be available next month at lower prices? If the discovery is prohibitively expensive to develop, there won't be any effect on price (unless it alters beliefs about future discoveries, or something like that).
Sure, but usually the story people tell is that if more of a thing is found, and the demand stays the same, the price will fall towards cost.
That's the whole reason people think competition is an effective allocator of resources.
With bitcoin, we all know exactly how much there is. What we don't know is how badly other people will want it.
reply
The story is a short hand that leaves out the mode of action. Demand doesn't stay the same in that scenario. People anticipate the new future supply and forego current purchases. That's how speculators smooth prices over time.
We know neither how badly other people want it nor at what price current holders will part with it.
Again, it doesn't directly matter what the total stock is. What informs prices is what people are willing to sell for.
reply
What informs prices is what people are willing to sell for.
Isn't that just another way of saying how much demand there is?
I disagree with the statement anyway, or at least how you phrased it.
What informs price is how much people are willing to pay for the thing.
Since nobody pays more than they have to, we don't know this. We just have to assume that they are at least willing to pay what they offer. If no one will trade with them they will have to increase their offer until someone is willing to make the trade. Presumably, if more of the thing could be produced, whoever produced it would be willing to trade for some amount greater than what it cost to produce.
So, the amount of a thing I'm existence definitely plays a role. Just in bitcoin, you can't change production.
reply
Since we're primarily discussing the supply side of things, I only described the supply side of the exchange. As I described elsewhere, prices are determined by finding the price that matches willingness to sell and willingness to buy: i.e. there's no one left in the market who would buy at a higher price or sell at a lower one.
The amount of a thing can play a role, but only for economically available quantities. If a solid gold planet is discovered 1000 light years away, that won't change the gold price. It's all about the prices that holders of the inventory (don't think about producers) will part with it for. Again, that's just talking about the supply side.
reply
What portion of bitcoin are economically available?
(In the OP I believe I also address the demand side of things. I don't think a trade changes either supply or demand).
reply
Technically, a trade should change supply and demand to the extent that the parties involved have satisfied their desires. The seller now has less inventory and may not be willing to part with it for the same low price, while the purchaser now has more inventory and may not be willing to add to it at the same price. That's very marginal, though.
At the core, what you're missing is that supply and demand are subjective value concepts. They can be informed by physical realities, but they are rooted in subjective preferences. The supply of bitcoin is not principally about there being 21M. It is fundamentally about how valuable the holders of bitcoin think it is.
reply
Demand is subjective (who knows why we want what we want). But supply is not rooted in a subjective preference. There are eggs or there are not. There are this many bitcoin or there are not. If there were a different number of bitcoin, I would expect the price per bitcoin to be different (even if the total market cap remained the same).
reply
Ok, you're just wrong. I don't know what to tell you.
You're talking about "stock" not "supply", which I've already tried to explain.
Supply and demand are about willingness to do things at different price points. Willingness is based in subjective value. That's how prices are formed.
Since we've arrived at the root of the confusion, we can call it good, unless you have a new point to raise.