SeekerErebus on Nostr: Things Many Bitcoiners Get Wrong Pt 1 Myth: Bitcoin increases in value forever ...
Things Many Bitcoiners Get Wrong Pt 1
Myth: Bitcoin increases in value forever
Reality: Bitcoin is subject to the same value law behind all monetary assets. Here's a formula that can help conceptualize that:
V(mx, t) = [mx / m(t)] * [m(t) / Gm(t)] * W(t)
Where:
V(mx, t) = Value (purchasing power) of a specific amount of a monetary asset at time t
mx = Specific amount of a monetary asset (assumed constant for simplicity)
m(t) = Total amount of the specific monetary asset at time t
Gm(t) = Global Money (all monetary assets) at time t
W(t) = Wealth (all purchasable goods and services) at time t
t = Time
This cannot actually be calculated, since you would need to know all of the monetary assets in the world and all the wealth and that's impossible. It's also a lagging effect, where the current value is chasing this equation. But I am confident this is close enough to Reality to be useful.
The purchasing power of 1 BTC goes up if the total Wealth increases, if the ratio of economic energy in bitcoin compared to the total goes up, or if the amount of accessible bitcoin goes down. The inverse is also true.
Bitcoin could go down to $6,000 per coin and still have the same purchasing power it did at $60,000, if the amount of dollars and dollar derivatives dropped by 10x. Bitcoin could go to $1m per coin and be able to buy less per coin, if the production of goods and services fell by 90% and USD heavily inflated. Both of these are entirely possible, and the latter is currently likely.
The best way by far to increase the value of held bitcoin is to go produce wealth that trades directly with BTC. The best way to decrease it, is to borrow fiat against bitcoin and live on the fiat while you produce nothing. The former directly enhances the purchasing power of BTC. The latter is a parasitic transaction that pressures the sale of bitcoin to make up the imbalance.
Myth: Bitcoin increases in value forever
Reality: Bitcoin is subject to the same value law behind all monetary assets. Here's a formula that can help conceptualize that:
V(mx, t) = [mx / m(t)] * [m(t) / Gm(t)] * W(t)
Where:
V(mx, t) = Value (purchasing power) of a specific amount of a monetary asset at time t
mx = Specific amount of a monetary asset (assumed constant for simplicity)
m(t) = Total amount of the specific monetary asset at time t
Gm(t) = Global Money (all monetary assets) at time t
W(t) = Wealth (all purchasable goods and services) at time t
t = Time
This cannot actually be calculated, since you would need to know all of the monetary assets in the world and all the wealth and that's impossible. It's also a lagging effect, where the current value is chasing this equation. But I am confident this is close enough to Reality to be useful.
The purchasing power of 1 BTC goes up if the total Wealth increases, if the ratio of economic energy in bitcoin compared to the total goes up, or if the amount of accessible bitcoin goes down. The inverse is also true.
Bitcoin could go down to $6,000 per coin and still have the same purchasing power it did at $60,000, if the amount of dollars and dollar derivatives dropped by 10x. Bitcoin could go to $1m per coin and be able to buy less per coin, if the production of goods and services fell by 90% and USD heavily inflated. Both of these are entirely possible, and the latter is currently likely.
The best way by far to increase the value of held bitcoin is to go produce wealth that trades directly with BTC. The best way to decrease it, is to borrow fiat against bitcoin and live on the fiat while you produce nothing. The former directly enhances the purchasing power of BTC. The latter is a parasitic transaction that pressures the sale of bitcoin to make up the imbalance.