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How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

tonysheng.com

21–30 of 74 posts

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#21

So the article concludes that Bitcoin can gain stability by being anchored to the price of gold. However isn't gold a "Keynesian Beauty Contest"? That is, gold is valuable because other people believe other people believe it is a store of value.

Gold has a 3000+ year track record of being a store of value. Yes, people worldwide could decide that gold was just a fad that we've moved past. But I'd regard it as a pretty safe bet that they won't, at least not in my lifetime. Gold may be a Keynesian Beauty Contest, but it's been winning for long enough that it's almost in a different category by now.

Bitcoin, on the other hand, is still firmly in KBC territory.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#22

So the article concludes that Bitcoin can gain stability by being anchored to the price of gold. However isn't gold a "Keynesian Beauty Contest"? That is, gold is valuable because other people believe other people believe it is a store of value.

Gold has a 3000+ year track record of being a store of value. Yes, people worldwide could decide that gold was just a fad that we've moved past. But I'd regard it as a pretty safe bet that they won't, at least not in my lifetime. Gold may be a Keynesian Beauty Contest, but it's been winning for long enough that it's almost in a different category by now. Bitcoin, on the other hand, is still firmly in KBC territory.

It will eventually come down to the fact whether people feel it is or will end up becoming digital gold. It's very much a binary situation; true or false.

That outcome will likely also result in a further 50x return from here, or a further decline.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#24

So the article concludes that Bitcoin can gain stability by being anchored to the price of gold. However isn't gold a "Keynesian Beauty Contest"? That is, gold is valuable because other people believe other people believe it is a store of value.

Gold also has intrinsic utility to industry. The same cannot be said for Bitcoin.

Gold isn’t valuable because of its utility to industry. It is valuable because of its scarcity.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#25

There is a belief that Bitcoin is following specific pattern [0] and will stabilize in 2030 at ~$1M per coin. So far the model was pretty accurate. [0] https://1nodld1ltmqu3jimmy2xsgcu-wpengine.netdna-ssl.com/wp-... P.S. Dear downvoters, this is not a financial advice!

The data in that "model" appears to stop before the end of 2014. The last year of Bitcoin price breaks that "model". I'm also using scare quotes because those kind of "models" should be scary because they're misleading at best.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#26

Earlier quoted context omitted.

Gold also has intrinsic utility to industry. The same cannot be said for Bitcoin.

Would you say gold priced at, or above its level of utility to industry?

If gold was no longer wanted for investment, its value would go very close to 0, despite utility to industry. Why? Because there's 190,000 tons of it, most of which is being held as an investment. If it wasn't needed for investment any more, then all that becomes available for industry, and now supply absolutely swamps demand.

Jewelry demand wouldn't help, either. If the price of gold went to 0, how much would be used in jewelry? Sure, it's pretty, but being expensive is part of the point.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#27

There is a belief that Bitcoin is following specific pattern [0] and will stabilize in 2030 at ~$1M per coin. So far the model was pretty accurate. [0] https://1nodld1ltmqu3jimmy2xsgcu-wpengine.netdna-ssl.com/wp-... P.S. Dear downvoters, this is not a financial advice!

that chart is currently off by like 100%

This is chart is not off at all. There is, actually, an updated version https://cryptoslate.com/wp-content/uploads/2018/10/chart.png. I have no idea if the trend will continue.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#28
Bitcoin doesn't need to stabilize to be successful. In the same way that the exchange rate of the hyperinflating German Mark and gold didn't need to stabilize. All bitcoin needs to do is continue to operate with it's programmed monetary policy such that its value can't be inflated away through coercion.

Money is a commodity whose goal is to transport value through space and time. We are living through -- in human-species scale -- a brief 90-year experiment in the artificial elimination of a free market of monies by violence of the state (until bitcoin was invented).

Artificially increasing and decreasing the supply of money in an economy has about just as much utility as artificially increasing and decreasing the supply of any other good -- which is none.

Bitcoin's success narrative doesn't depend on the amount of non-scarce dollars the market is willing to trade for it ceasing to change ('stabilize'). The success narrative is: an increasing set of people understanding that the hardest money always wins. Bitcoin is one halvening away from being harder than gold and is _the_ hardest money ever in existance. Those who have taken exposure to bitcoin will have more wealth preserved than those who denominate their value in inflatable dollars. As more people see bitcoin improving the quality of life of individuals they also take exposure to bitcoin. This process doesn't need a planner nor intelligent agents, it just needs bricolage.

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#29

Bitcoin is stable in reference to itself, just as USD is stable in reference to itself.

True, but not relevant. The dollar is relatively stable as measured by everything-in-the-entire-economy-that-is-not-dollars. Bitcoin? Not at all.

"When they measure themselves by themselves and compare themselves with themselves, they are not wise." - 2 Corinthians 10:12 (NIV)

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#30
post #9

Bitcoin is stable in reference to itself, just as USD is stable in reference to itself.

There is a powerful entity (the Fed) focused on keeping it stable in reference to consumer goods and services.

Right, and how is that going for them? The average home cost around $3,400 in 1913 (when the FED was created), and today is around $200,000. And $1 is still worth $1.
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