Negation on Nostr: Using marginal theory, how Bitcoin's exponentially decreasing supply could affect its ...
Using marginal theory, how Bitcoin's exponentially decreasing supply could affect its marginal value, demand, and overall market dynamics, one scenario:
1. Decreasing Supply and Scarcity
- Every four years, the amount of new bitcoins released into circulation gets cut in half due to the halving events.
- This systematically reduces the supply of new bitcoins over time, making the asset exponentially scarcer relative to demand.
2. Marginal Value
- According to the marginal theory of value, when supply is restricted or becomes scarcer, the value placed on each additional (marginal) unit increases.
- As bitcoins become exponentially harder to obtain due to reduced supply, their marginal value and price should rise over time, all else being equal.
3. Demand Effects
- With fixed or rising demand for bitcoins, decreasing supply raises the asset's marginal utility and value to those looking to acquire it.
- Perceptions of scarcity can actually increase speculative demand itself, as people bid up the price of the more limited supply.
4. Self-Reinforcing Scarcity
- As the price rises from scarcity, it signals even greater perceived value, potentially attracting more demand from investors/speculators.
- Rising demand against a constricted and exponentially decreasing supply schedule can create a self-reinforcing scarcity spiral.
It's not just the static level of scarcity, but the dynamic process of Bitcoin becoming increasingly scarcer over time that theoretically elevates its marginal value and utility to market participants. The continuous reduction in supply is what drives up the value placed on each individual bitcoin, rather than any fixed condition of scarcity.
1. Decreasing Supply and Scarcity
- Every four years, the amount of new bitcoins released into circulation gets cut in half due to the halving events.
- This systematically reduces the supply of new bitcoins over time, making the asset exponentially scarcer relative to demand.
2. Marginal Value
- According to the marginal theory of value, when supply is restricted or becomes scarcer, the value placed on each additional (marginal) unit increases.
- As bitcoins become exponentially harder to obtain due to reduced supply, their marginal value and price should rise over time, all else being equal.
3. Demand Effects
- With fixed or rising demand for bitcoins, decreasing supply raises the asset's marginal utility and value to those looking to acquire it.
- Perceptions of scarcity can actually increase speculative demand itself, as people bid up the price of the more limited supply.
4. Self-Reinforcing Scarcity
- As the price rises from scarcity, it signals even greater perceived value, potentially attracting more demand from investors/speculators.
- Rising demand against a constricted and exponentially decreasing supply schedule can create a self-reinforcing scarcity spiral.
It's not just the static level of scarcity, but the dynamic process of Bitcoin becoming increasingly scarcer over time that theoretically elevates its marginal value and utility to market participants. The continuous reduction in supply is what drives up the value placed on each individual bitcoin, rather than any fixed condition of scarcity.