RT @100trillionUSD: Bitcoin risk & return last 11 years was better than EMH/non arbitrage/CAPM expectation based on 50 yrs bond, gold, stocks data. What do you think? Not enough data? Market overestimates risk (btc dies, govt ban etc)? Taleb's turkey (tail risk / fat tails)?
RT @100trillionUSD: My second #bitcoin article! "Efficient Market Hypothesis and Bitcoin Stock-to-Flow Model". Looking at arbitrage, risk & return models and derivative markets.
RT @adam3us: I've been advocating for creation a capital guaranteed Bitcoin structured product, where say 10% of capital goes in bitcoin and the 90% compounds to recover capital over the term. and get retail users thinking about buying that, less risky and still good upside. https://t.co/38PPlNKCuB
I've been advocating for creation a capital guaranteed Bitcoin structured product, where say 10% of capital goes in bitcoin and the 90% compounds to recover capital over the term. and get retail users thinking about buying that, less risky and still good upside. https://t.co/38PPlNKCuB
RT @100trillionUSD: My second #bitcoin article! "Efficient Market Hypothesis and Bitcoin Stock-to-Flow Model". Looking at arbitrage, risk & return models and derivative markets.
Do you understand that you are literally mentally retarded if you think everyone in the world wants to get rich on gambling just like you tried (and failed) ( , and that everyone, like you, thinks it's both ethical and possible). The very definition of a degenerate. Everyone here thinks people like you are literal pieces of dog shit, we don't actually even care that much about cryptocurrencies in general other than to laugh at deranged retards like yourself.
of course. However it really depends on who is the majority. if one day the number of people you call retarded is more, then you are retarded. And the retarded people is growing since 2011 at this rate you will turn retarded by 2032
sure man, if you had spent long enough time in this space you would have realized by now that those people who are up on top, buy first, read later. By the time you've finished researching, analyzing, arguing, most of the time that ship has sailed, then you turn salty become butter, face laughing crying within.
I really wish people would stop making this argument this way. It's not exactly wrong, but as stated it's pretty damn unconvincing.
What gives any online project value - open source or closed source - isn't the code. It's the people attached to the project. Does it have an active development team? Are there a lot of people using it? Is there an active community to provide technical support and advice? Put it this way: I could, perfectly legally, make a clone of Wikipedia within a day or two, complete with web hosting and DNS pointers. I bet you that Microsoft or Amazon would pay billions of dollars to acquire the actual Wikipedia. They wouldn't give me a red cent for my clone of it.
No, the danger with cryptos - and why their claims to scarcity are overrated - is that the community could fracture. These are a bunch of criminals looking to buy illegal shit untraceably, scammers looking to fleece their latest marks, and idiots looking to get rich quick. In other words, these aren't people who are invested in Bitcoin itself, but rather see it as a means to an end. If something that seems like a better means to that end (getting drugs or getting rich, basically) comes along, they could indeed jump ship.
However, I will point out: that's true whether or not it's open source. Despite what some people (even here) seem to think, cryptocurrencies are not rocket science. Your average software developer could probably hack one up from scratch in just a couple weeks. No, the barrier is not the code - it's actually attracting a significant part of the community. As I say, I think this fragmentation is a lot more likely in the crypto sphere than it is in say, social media or web browsers, but it's still a barrier. But it really is facile to say that because Bitcoin is open source, anyone can clone it, and therefore it's not scarce. That's just not why its scarcity is overrated.
the community could fracture? thats not the problem. the problem is that blockchain is useless. worlds already decentralized. you always have the oracle problem so you cant eliminate trust. its just a useless item.
however, if we are moving past that. the community fracturing? really? wtf are you talking about? you mean getting new bagholders to buy in under you? yea. thats a problem. its the problem with any pyramid scheme. whats your point
Yes, blockchains are useless. They are useless because they are incredibly inefficient, and don't solve any real-world problem that wasn't already solved decades ago. My point is that brilliantly pointing out that code and data can be copied is a stupid argument for why they are useless.
What I'm saying is that code is only a small part of the value proposition of any computing project - be it a glorified Excel spreadsheet, an operating system, a website, or fucking Candy Crush. Just because I can copy the code of an open source project doesn't mean I can magically clone all the non-code parts of that project - like the userbase and developers. This is just as true for legitimate projects like Wikipedia and Chromium as it is for bullshit cancers on our society like Bitcoin.
>brilliantly pointing out that code and data can be copied is a stupid argument for why they are useless.
Never said that's why they are useless. I said that's why scarcity claims are utter bullshit. It can be copied and reproduced infinitely.
And the community argument is facile. Anyone can get a community behind any crypto - pay some crypto influencers, have some air drops, give away a few million tokens for free, get a bunch of people in, do a PUMP so they all think they are going to the moon, and presto you have a community.
The crypto "community" is bullshit. They'll turn on you in a second to make a quick buck. There is no community. Your claim that the community has great value is wrong.
> No, the danger with cryptos - and why their claims to scarcity are overrated - is that the community could fracture.
You state this as a hypothetical, but it's reality. Just look at all the bitcoin forks, and even forks of forks.
Yes, I was going to add something about how the forks that have gained some degree of traction (BCH, Litecoin, etc) did so because they were able to draw away a good amount of the Bitcoin community, often due to the presence of prominent ~~con artists~~ crypto evangelists. I just thought my comment was already overlong.
I will say that the existing forks, while they have fragmented the community, haven't reached the level of "existential threat to bitcoin". But I definitely believe that it's a possibility that one will in the future.
Stock-to-flow theory applies to commodities that have both production and consumption. If there is no hoarding or speculative trading, the theory says that the market price and the production volume (the "flow") will be where the price x production curve crosses the price x consumption curve.
Hoarding and speculaive trading (the "stock") complicates that theory because some production may go to the "stock" and some consumprion may be satisfied by the "stock". As the "stock" increases relative to the "flow", it makes the price more volatile and unpredictable.
Bitcoin has no consumption: all the coins that are printed by the miners go into hoarding or trading. Thus its "flow" is zero, and its "stock" is all the coins that exist, and the stock-to-flow ratio is infinite. In that case, the theory says that the market price will be zero divided by zero -- that is, it has nothing to say.
But of course nothing will shake your faith in your Orange God (not Trump, the other one)...
Also your 'definition' does not appear to tally with conventionals definition of S2F:
"**Stock to Flow Ratio** is the amount of a commodity held in inventories divided by the amount produced annually. It is a measure of abundance. Gold has the highest stock to flow ratio of all commodities and as a result it should never normally remain in [backwardation](https://monetary-metals.com/gold-economics/lexicon/#backwardation) as there is no shortage of gold."
'Consumption' is not a requisite.
> 'Consumption' is not a requisite.
It is implicit in the definition of commodity. It is assumed that, in the long run, consumption = production. Note that the conclusion you quoted
> Gold has the highest stock to flow ratio of all commodities and as a result it should never normally remain in backwardation as there is no shortage of gold
refers implicitly to it: if there is no consumption, there cannot ever be shortage.
For most commodities, the "stock" is at most a couple of times the "flow", and thus production must match consumption when averaged over a few years. Gold is an extreme case where the stock may be more than 100'000 tons, production is maybe 5000 tons/year, and consumption maybe 3000 tons/year. Unlike most commodities, many people and institutions buy gold specifically for long-term holding. Thus the stock not only is maybe 30 times the yearly consumption, but is constantly growing. Therefore, the only thing that "stock to flow" theory says about gold is that it makes no sense to apply commodity theory (production vs consumption) to it.
And for bitcoin it is the same, but with infinity instead of "30".
>criminals looking to buy illegal shit untraceably, scammers looking to fleece their latest marks, an
If that argument is true, why have we seen the level of cointegration (price/S2F) so constant to date?
Would the same arguments around hoarding and speculation apply to gold (ignoring consumption)?
> why have we seen the level of cointegration (price/S2F) so constant to date?
The proposed formula is
> 0\. price = A x S2F ^ B. In log scale, that is log(price) = log(A) + B x log(S2F); that is, choosing A and B means vertically shifting and scaling the graph.
At the largest scale, smoothed over several years, the bitcoin price grew quickly at first and then gradually slowed down. The S2F ratio grew quickly at first, then gradually slowed down. Thus, by adjusting A and B, it is not surprising that one can get match that looks good by eyeball.
But an equally good match can be obtained with almost any other function that grows quickly at first and gradually slows down.
1. Some people have posted fits of a logarithmic function: log(price) = A x log(time) + B.
2. I bet that one could get a good fit also with the total amount N of coins in existence, log(price) = A x log(N) + B.
3. I posted a [fit with a quadratic](https://www.reddit.com/r/Buttcoin/comments/ehn42b/price_predictions_for_20202021_backed_by_math/), log(price) = A x time ^ 2 + B x time + C.
Yet each of these models will give a very different predictions for future prices.
Butters like the S2F model (0) because the S2F ratio will grows practically exponentially from now on: the S2F double every four years, so, with those fitted parameters, the price should increase 10-fold every 4 years. Thus the S2F model (0) is merely a re-edited and obfuscated version of the old logscale linear trend model, log(price) = A x time + B.
The predictions of the log-log model (1) ~~are similar, but the doubling time may be longer or shorter, depending on the parameter A.~~ [**Correction:**] predicts that it will take increasingly longer intervals for the price to double.
Model (2), based on number of coins in existence, predicts instead that the price will tend to a maximum, maybe $10'000 or $20'000, and never go above that.
My quadratic model (3) -- which has a very good fit, at least as good as the S2F one -- instead says that the price will reach a maximum in the first semester of this year, and then start to decrease, faster and faster.
Take your pick 8-). But, if you are impressed by good fits, have a look at [this one](http://www.ic.unicamp.br/~stolfi/temp/worldcomm-closing-price-log-extrap.png).
A bigger problem with the S2F model is that it lacks a plausible explanation. The size of the "stock" or the "stock to flow ratio" do not increase demand per se. The stock to flow ratio of seawater is huge, but that does not create any demand for seawater. For a normal commodity, an increasing stock with constant production rate should cause the price to drop; but their model says that it should go up.
And, again, if there is no consumption, one cannot use stock and/or production to predict the price. As with gold, the current price of bitcoin is based entirely on irrational expectations by traders and hoarders about the future prices. The price chart is simply a display of their mood over the years...
Thanks for the reply! I think you successfully explain that correlation can be spurious but ignore cointegration?
With regard to consumption/demand it would seem to me that 'store of value' with regard to Gold and Bitcoin and their hardness makes them unique indeed and they are not solely commodities as such and perhaps are special cases with multifaceted properties.
They are both mediums of exchange/money and whilst the stock of USD and others inflates endlessly, constantly depleting purchasing power and every world reserve currency to date has been supplanted at some point -- gold and bitcoin offer an alternative to this -- bitcoin trustlessly. Many central banks recognise this; China and Russia have been de-dollarizing for years and buying gold.
Any price chart of anything tradeable is a display of mood/sentiment over time. Does that matter? That said, if we measure the mood of future generations it's apparent they are far more interested in putting savings into Bitcoin than previous generations (I speak as one of the older generations).
Cointegration is a somewhat obfuscated name for "does the residual (difference between model and data) look like random variation about zero"? The idea being that, if it does, there is no point in adding more simple terms to the model, or changing its formula to another simple formula, because such changes cannot improve the fit. It does not mean "the fitted formula is the right one", much less "the fitted formula is a good predictor for future prices".
I haven't checked with the computer, but by eyeball all four models above have random-looking residuals. Meaning simply that they fit the data about as well as any simple formula could. Yet they give vastly different extrapolations.
In fact, the S2F model has those jumps every 4 years that don't correlate with the bitcoin price (in spite of what the author claims). The fitting between S2F and PAST prices ignores those jumps, which end up in the residual and interpreted as part of the "noise". The fitting effectively uses a smoothed S2F (SS2F) where the reward drops gradually with time, instead of by jumps.
However, the future of the S2F model is dominated by those jumps: they increasingly turn the S2F into an exponential staircase that goes on forever. On the log chart, that is a staircase along a straight line. But past prices definitely don't fit a linear trend. So that analysis essentially fits a curve to the data, then extrapolates the slope at the end with a straight line...
By the way, the block reward is scheduled to eventually become zero (not very small, but exactly zero) in a hundred years time. At that point the S2F will become infinite (not very large, but really infinite). That does not make any sense...
There are plenty of things that have very large or even infinite S2F, and yet have small and decreasing value. Like 5-year-old car models, 500 rupee banknotes, incandescent light bulbs, ... In fact, those things have vanishing value **because** there is a large stock that will never be depleted by consumption...
But the fees should not count as "production", because they are not new coins.
By the way, the "stock to flow" plots in that article seem far too noisy. Since he is using 1-month intervals, between halvings the "flow" should have been almost constant (4320 times the block reward), and both the "stock" and the S2F ratio should grow linearly.
I was wondering where that noise could come from. If he included the tx fees in the "flow", that could explain it...
See, it doesn't matter what the article says or even if it's right, wrong or just irrelevant. What matters is the narrative, number go up, number always have to go up, all the fluff is just an excuse for number go up mantra.
You flaunt your ignorance like it's some sort of virtue and even unabashedly admit you just copy pasted an article you use as a lever for your idea without even reading 4 lines deep what's inside. Neither here nor in your past interactions you couldn't even conjure a good argument for your opinions and instead offer inspirational quote style vacuous mantras. For the love of god it must take elephant size of ego to be proud of such vast hollowness I almost feel bad.
even zero, it's only 9000 points down, the upside on the other hand is pretty much no limit. Anyone having balls would get some and see what happens, pussy would stay sideline and miss all the actions.
And there's nothing to say you couldn't keep endlessly guessing the next number correctly on a roulette table. You *could* lose your money, or you *could* have infinite wealth. Only a pussy would stay sideline and miss all the action.
Stock-to-Flow only demonstrates historical correlation - it can’t be trusted to forecast into the future since the model breaks after 3-4 halvenings and eventually S2F predicts an infinite price for bitcoin.
Maybe the ‘infinite’ price comes when Bitcoin has become the unit of account for the world and the dollar has hyperinflated into oblivion.
In the model the price of Bitcoin is denominated in dollars, so who knows how accurate that part is ;)
I agree with what you are saying, but the model does give a lot of reasons to be positive about the coming years. It would be a surprise if the model would break in let’s say the next 3 years. Although there is always a chance of that happening.
I get that S2F has some people excited because it gives the comfortable illusion of inevitable price increases.
This distracts from the reality that adoption, and only adoption, will ultimately determine Bitcoin’s fate. There’s legitimate risk and hard work ahead.
And if Bitcoin ever does reach the moon, don’t just credit some pseudoscientific chart theory - give thanks the hands that built Bitcoin; Finney, Andersen, Thad, Ulbricht, Dorsey, Shrem and many many more.
Ofcourse it’s not the model that pushes the price, but the S2F model does describe the valuation of a scarce asset, like gold. And since it seems to fit with all the data since Bitcoin’s inception, it is a reason for people to be optimistic about price.
So when you say adoption, please mind that saving/investing/speculating are also usecases and signs of adoption.
I don’t think Satoshi created Bitcoin to make payments easier, but to offer an alternative to money created by banks and governments. So how people use that money is not part of the philosophy and shouldn’t give you a bad taste. I think crypto will only get adopted if it makes something easier to do or has the potential to make people more money. Otherwise people won’t get interested. Fiat, with it’s debit and credit cards, Apple pay, PayPal etc work just fine for paying at a store.
It’s the true scarcity, or better yet, the inability of governments and banks to create more that makes Bitcoin unique and valuable.
The efficient market hypothesis is bullshit. The data (reality) does not fit the hypothesis, so you have to toss it out, or be an idiot.
Need poof? Bubbles. I'll pick Beanie Babies as an example, but the same can be said (at various times) of stocks, real estate, precious metals (the silver bubble), and Bitcoin. During a bubble the current market price does not accurately reflect actual market value. The end. EMH is toast.
Wow. Here is Mark_Bear of Reddit come to settle the decades long academic debate about EMH with his ground breaking theory of “But what about bubbles?” None of the leading economist who’ve spent entire careers studying EMH had ever thought about that before. Clearly, some Nobel prize worthy research you did there.
EMH theory is controversial and flawed in numerous aspects but accidentally useful for amateur investors where in most cases the wisest investment for most their portfolio are index investments like the SPDR over the long term, 20+ years. even 9.7% average compounded almost always outperforms land (un-utilized) investments historically.
Than again , those that take incredible risks can find far greater alpha like we see in Bitcoin but not every investor should invest so aggressively as we all have different responsibilities and risk tolerances