Bitcoin reminds me a lot of monetarism, where the thinking goes to increase the money supply at the same rate as that of productivity: <a href="https://en.wikipedia.org/wiki/Monetarism" rel="nofollow">https://en.wikipedia.org/wiki/Monetarism</a><p>I'm not a huge believer in monetarism. It pretty much precludes all aspects of monetary policy save growing the money supply to influence the economy. I think Bernanke and the policy of quantitative easing played a crucial role during the 2008 financial crisis, along with TARP and ARRA, and that would not have been possible if the U.S. dollar physically obeyed the properties of Bitcoin.<p>A thought experiment: how would an economy run solely on a Bitcoin-like currency behave? And how would it respond to business cycles?
The price consolidates over long periods of time to establish an equilibrium with demand. The network then shocks the supply side by halving newly created coins every 4 years. The price starts to move and then human nature takes over and runs the price well past previous highs. During this run, new adopters form the base to support the inevitable decline. Repeat until the market learns to price this in. Third time's a charm? We'll find out soon.
It looks like the Gompertz function is asymptotic... i wonder about how they fit that model to the price spikes.<p>Also, stupid question: what's the expected price then, given that the infection nears that asymptote by say, 90%?
> number of users (proxied as active addresses)<p>New wallets cost nothing to create and manipulation in this sector is rife.<p>The assumptions are flawed from the start.
I see a few problems:<p>1. The author claims the lower bound is above 0 because "Bitcoin offers people a money storage and transfer system with two key properties: (i) permissionless access and (ii) decentralized database management." That might be true if Bitcoin were the <i>only</i> technology that offered those features, but it isn't. Cash is the most notable competitor, but there are also dozens of other cryptocurrencies which are drop-in replacements for Bitcoin.<p>2. The number of Bitcoin users has a hard cap because the technology is not scalable. It is just plain impossible for a large number of people to use it. This is not like Facebook, where the system is scalable and user growth is determined almost entirely by user interest.<p>Also, those graphs make me nervous. Fitting a line to a log-(log-square-root) graph using linear regression sounds awfully fishy to me. Would anyone with a better grasp of the statistics care to chime in?
I am the author of "Bitcoin Spreads Like a Virus" and "Metcalfe's Law as a Model for Bitcoin's Value." I will be releasing an explanatory video next week (tentatively Wednesday, March 27th.) The video will incorporate an AMA at the end. Send your questions to BTCAMA@caneislandcrypto.com. You can also visit caneislandcrypto.com/learn for more information.
Bitcoin was a great experiment... but it arguably failed.<p>Nobody really ever used it for normal things.<p>The one attempt at actually attempting to take a first step to fix scaling issues collapsed due to governance issues.<p>It never worked as a reliable store of value or means of reasonably transferring funds.<p>Really cool project but it was an experiment. We can still learn from failed experiments to make even better new ones...
I think the analogy with FB might be interesting, but intrinsically inaccurate.<p>The value people get from FB is related to the value of other people being on the network, but there is an intrinsic value drived from the different use cases on the platform - photos, messaging, likes, fomo and what not. Which has directly been monetized using advertising.<p>The value you get from other people using Bitcoin is that the price goes up, without any other intrinsic value aside from "Maybe my investment grows" - in effect following the 'greater fool' theory (Buffett), or the 'castle in the air' theory (Malkiel et al).