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538 sats \ 21 replies \ @Undisciplined 15 Jan \ on: Dumping a fork coin doesn't crash its price bitcoin
This is the problem with the argument. "Supply" means how much people are willing to sell at each price. It does not mean how much there is. No one cares how much there is. They care how much is available for purchase.
They care how much is available for purchase.
Don't you mean they care how much is available for purchase at a price they are willing to pay?
I don't magically increase supply if I offer to buy at a higher price. I increase demand if I offer to pay at a higher price.
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Yes, supply (often represented as a supply curve) is the set of prices and quantities that describes how much quantity is available at each price.
If it were not related to price, but only physical quantity, then things like gold would have perfectly fixed supplies.
If most people don't believe in the fork coin, then it's supply increases dramatically as people holding it become willing to part with more of it at lower prices.
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The supply of lithium includes how much lithium we know about on earth.
When people discover new deposits (as they do from time to time) it changes the price.
The supply of lithium does not include lithium we don't know about. How could it?
With bitcoin we know how much there is. There won't be any discoveries of new bitcoin.
Supply takes into account all the it we think is in existence and the various costs that might be associated with accessing different quantities of it.
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Ok, but when technology advances making extraction easier, that increases the supply without discovering more.
The reason discoveries change the price is because market actors are anticipating the price it will enter the market at. Why buy a ton of lithium today at current prices, when more will be available next month at lower prices? If the discovery is prohibitively expensive to develop, there won't be any effect on price (unless it alters beliefs about future discoveries, or something like that).
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Sure, but usually the story people tell is that if more of a thing is found, and the demand stays the same, the price will fall towards cost.
That's the whole reason people think competition is an effective allocator of resources.
With bitcoin, we all know exactly how much there is. What we don't know is how badly other people will want it.
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The story is a short hand that leaves out the mode of action. Demand doesn't stay the same in that scenario. People anticipate the new future supply and forego current purchases. That's how speculators smooth prices over time.
We know neither how badly other people want it nor at what price current holders will part with it.
Again, it doesn't directly matter what the total stock is. What informs prices is what people are willing to sell for.