Thank you Stephen for your insights. I'm a fan and follower.
As monetary value and premium migrates from traditional stores of value, won't there be a compounding deflationary effect or acceleration as those stores of value demonetize? What rational investor will continue to hold bonds or RE and watch economic value melt? I would expect a race to the BTC exit. Is that macro force already inherent as an attribute of the Power Law?
Also trying to understand the effect of BTC as the global unit of account. Will global GDP decline in BTC units and corresponding global M2? Does that decline affect your time projection for HyperBitcoin?
Yes monetary value will flow from bonds and RE but the amount has to continue to rise considerably each year by a large amount just to sustain the power law. Compounding now above 40% and in a decade still 25% or so. It takes time for large amounts of capital to move and there is a lot of inertia with committees of humans. There are also feedback effects as bubbles rise and collapse and as possibly as miners set some floor by cutting back when price falls too low. There are HODLers active at higher BTC volumes for low prices and Whales selling some at higher prices. GDP is declining in BTC units until the power law expected growth is much less. That will happen after global population has already peaked and is falling. Perhaps a non increasing money supply will make a lot of sense late in the century.
Hi … I’ve just today started to follow you - I have to say, you have an impressive body of work!
Regarding this post, I’m a retired ex-banker (a world I hated) but also a very early Bitcoiner (a world I love). I’m currently working on a thesis about money supply - that it’s not linear M2 as you show but also highly volatile but set to significantly increase. I’m looking at potential impacts on Bitcoin and a simple conclusion is that the increasing new money supply will flow into Bitcoin.
I think Saylor is wrong, there’s enough newly created money coming not to impact existing stores of wealth.
Also, there’s a phenomenological, behavioural effect in play that will skew your models. I believe (and am trying to fully prove) new money flows into Bitcoin ETPs (ETFs as most slightly incorrectly label them), along with new treasury-based direct HODLing (Saylor an others directly purchasing bitcoin, Sovereign bitcoin funds, etc). This in no way whatsoever invalidates them, but represents a variable kind of multiplier effect on the BTC to USD trading pair value.
I’ll keep following you and circle back round when my thesis is better developed (when I’m confident it holds water in terms of usual academic rigour).
But for now, perhaps expect ‘unexplained’ volatility, especially price highs that may be outside your range of modelled highs to date - the money supply impacting this doesn’t itself follow any easily modelled trend.
On my work, what I will say is that it’s shocking just how mis-understood money creation and supply is in both the general world of economic theory and in the (central and commercial) banking world.
Glad I’ve found your work - it’s exactly the kind of rigour and explanation of bitcoin that I’ve been looking for for quite a while.
Also Richard, although volatility has decreased in relative terms it continues to rise rapidly in absolute terms, more or less as a lower power law of index 4.8 (index one lower as a time derivative of the main power law) also with some diffusion from prior bubbles. It takes more and more capital of course to stay on the power law trajectory so institutional capital very necessary. - American lived in London/Surrey a couple of years
Thanks, have you seen Michael Howell’s conjecture of a power law relation between Bitcoin and his Global Liquidity index? - very steep around 10th power, although rather noisy.
Thank you Stephen for your insights. I'm a fan and follower.
As monetary value and premium migrates from traditional stores of value, won't there be a compounding deflationary effect or acceleration as those stores of value demonetize? What rational investor will continue to hold bonds or RE and watch economic value melt? I would expect a race to the BTC exit. Is that macro force already inherent as an attribute of the Power Law?
Also trying to understand the effect of BTC as the global unit of account. Will global GDP decline in BTC units and corresponding global M2? Does that decline affect your time projection for HyperBitcoin?
Thank you
Griff
Yes monetary value will flow from bonds and RE but the amount has to continue to rise considerably each year by a large amount just to sustain the power law. Compounding now above 40% and in a decade still 25% or so. It takes time for large amounts of capital to move and there is a lot of inertia with committees of humans. There are also feedback effects as bubbles rise and collapse and as possibly as miners set some floor by cutting back when price falls too low. There are HODLers active at higher BTC volumes for low prices and Whales selling some at higher prices. GDP is declining in BTC units until the power law expected growth is much less. That will happen after global population has already peaked and is falling. Perhaps a non increasing money supply will make a lot of sense late in the century.
Hi … I’ve just today started to follow you - I have to say, you have an impressive body of work!
Regarding this post, I’m a retired ex-banker (a world I hated) but also a very early Bitcoiner (a world I love). I’m currently working on a thesis about money supply - that it’s not linear M2 as you show but also highly volatile but set to significantly increase. I’m looking at potential impacts on Bitcoin and a simple conclusion is that the increasing new money supply will flow into Bitcoin.
I think Saylor is wrong, there’s enough newly created money coming not to impact existing stores of wealth.
Also, there’s a phenomenological, behavioural effect in play that will skew your models. I believe (and am trying to fully prove) new money flows into Bitcoin ETPs (ETFs as most slightly incorrectly label them), along with new treasury-based direct HODLing (Saylor an others directly purchasing bitcoin, Sovereign bitcoin funds, etc). This in no way whatsoever invalidates them, but represents a variable kind of multiplier effect on the BTC to USD trading pair value.
I’ll keep following you and circle back round when my thesis is better developed (when I’m confident it holds water in terms of usual academic rigour).
But for now, perhaps expect ‘unexplained’ volatility, especially price highs that may be outside your range of modelled highs to date - the money supply impacting this doesn’t itself follow any easily modelled trend.
On my work, what I will say is that it’s shocking just how mis-understood money creation and supply is in both the general world of economic theory and in the (central and commercial) banking world.
Glad I’ve found your work - it’s exactly the kind of rigour and explanation of bitcoin that I’ve been looking for for quite a while.
all the very best
Richard
(Northern England)
Also Richard, although volatility has decreased in relative terms it continues to rise rapidly in absolute terms, more or less as a lower power law of index 4.8 (index one lower as a time derivative of the main power law) also with some diffusion from prior bubbles. It takes more and more capital of course to stay on the power law trajectory so institutional capital very necessary. - American lived in London/Surrey a couple of years
Thanks for this - useful insight and fits nicely with increased money supply flowing into Bitcoin.
Thanks also for the heads-up about Michael Howell’s work - i’m heading over to his Substack now!
Richard
Thanks, have you seen Michael Howell’s conjecture of a power law relation between Bitcoin and his Global Liquidity index? - very steep around 10th power, although rather noisy.