## The Bullish Case for Bitcoin. UPDATE The Bullish Case for Bitcoin… by Vijay Boyapati Medium ### The Bullish Case for Bitcoin. UPDATE: The Bullish Case for Bitcoin… | by Vijay Boyapati | Medium  #### Metadata * Author: [[Nash Equilibrium]] * Full Title: The Bullish Case for Bitcoin. UPDATE: The Bullish Case for Bitcoin… | by Vijay Boyapati | Medium * Category: #articles * URL: <https://vijayboyapati.medium.com/the-bullish-case-for-bitcoin-6ecc8bdecc1?cmdid=OB801QK0UH6H6S> #### Highlights * Unlike stocks, bonds, real-estate or even commodities such as oil and wheat, bitcoins cannot be valued using standard discounted cash flow analysis or by demand for their use in the production of higher order goods. * In the earliest human societies, trade between groups of people occurred through barter. The incredible inefficiencies inherent to barter trade drastically limited the scale and geographical scope at which trade could occur. A major disadvantage with barter based trade is the double coincidence of wants problem. An apple grower may desire trade with a fisherman, for example, but if the fisherman does not desire apples at the same moment, the trade will not take place. * Two societies converging on a single store of value would see a substantial decrease in the cost of completing trade with each other and an attendant increase in trade-based wealth. * Gold is the undisputed King of durability. The vast majority of gold that has ever been mined or minted, including the gold of the Pharaohs, remains extant today and will likely be available a thousand years hence. Gold coins that were used as money in antiquity still maintain significant value today. * The Papiermark, Rentenmark and Reichsmark of the Weimar Republic no longer have value because the institution that issued them no longer exists. * Bitcoins can be divided down to a hundred millionth of a bitcoin and transmitted at such infinitesimal amounts (network fees can, however, make transmission of tiny amounts uneconomic). Fiat currencies are typically divisible down to pocket change, which has little purchasing power, making fiat divisible enough in practice. * The key attribute that makes Bitcoin valuable for proscribed activities is that it is "permissionless" at the network level. When bitcoins are transmitted on the Bitcoin network, there is no human intervention deciding whether the transaction should be allowed. As a distributed peer-to-peer network, Bitcoin is, by its very nature, designed to be censorship-resistant. * his article on the Speculative Bitcoin Adoption/Price Theory, Michael Casey posits that the expanding Gartner hype cycles represent phases of a standard S-curve of adoption that was followed by many transformative technologies as they become commonly used in society. * There is a great irony that the US is currently one of the nations most open in its regulatory position toward Bitcoin, while China and Russia are the most hostile. The US risks the greatest downside to its geopolitical position if Bitcoin were to supplant the dollar as the world's reserve currency. * Eventually, when faith is completely lost during a hyperinflation, a sovereign money will no longer be accepted by anyone, and the society will either devolve to barter or the monetary unit will be completely replaced as a medium of exchange. An example of this process was the replacement of the Zimbabwe dollar with the US dollar. The replacement of a sovereign money with a foreign one is made more difficult by the scarcity of the foreign money and the absence of foreign banking institutions to provide liquidity. * Bitcoin's price volatility is a function of its nascency. In the first few years of its existence, Bitcoin behaved like a penny-stock, and any large buyer — such as the Winklevoss twins — could cause a large spike in its price. As adoption and liquidity have increased over the years, Bitcoin's volatility has decreased commensurately. When Bitcoin achieves the market capitalization of gold, it will display a similar level of volatility. As Bitcoin surpasses the market capitalization of gold, its volatility will decrease to a level that will make it suitable as a widely used medium of exchange. As previously noted, the monetization of Bitcoin occurs in a series of Gartner hype cycles. Volatility is lowest during the plateau phase of the hype cycle, while it is highest during the peak and crash phases of the cycle. Each hype cycle has lower volatility than the previous ones because the liquidity of the market has increased. * Tags: [[favorite]] * The specious root of the criticism of Bitcoin's "high" transaction fees is the belief that Bitcoin should be a payment system first and a store of value later. As we have seen with the origins of money, this belief puts the cart before the horse. Only when Bitcoin has become a deeply established store of value will it become suitable as a medium of exchange. * The network effect for Bitcoin encompasses the liquidity of its market, the number of people who own it, and the community of developers maintaining and improving upon its software and its brand awareness * Owning bitcoins is one of the few asymmetric bets that people across the entire world can participate in. Much like a call option, an investor's downside is limited to 1x, while their potential upside is still 100x or more. Bitcoin is the first truly global bubble whose size and scope is limited only by the desire of the world's citizenry to protect their savings from the vagaries of government economic mismanagement. # The Bullish Case for Bitcoin. UPDATE: The Bullish Case for Bitcoin… | by Vijay Boyapati | Medium  ## Metadata - Author: [[Nash Equilibrium]] - Full Title: The Bullish Case for Bitcoin. UPDATE: The Bullish Case for Bitcoin… | by Vijay Boyapati | Medium - Category: #articles - URL: https://vijayboyapati.medium.com/the-bullish-case-for-bitcoin-6ecc8bdecc1?cmdid=OB801QK0UH6H6S ## Highlights - Unlike stocks, bonds, real-estate or even commodities such as oil and wheat, bitcoins cannot be valued using standard discounted cash flow analysis or by demand for their use in the production of higher order goods. - In the earliest human societies, trade between groups of people occurred through barter. The incredible inefficiencies inherent to barter trade drastically limited the scale and geographical scope at which trade could occur. A major disadvantage with barter based trade is the double coincidence of wants problem. An apple grower may desire trade with a fisherman, for example, but if the fisherman does not desire apples at the same moment, the trade will not take place. - Two societies converging on a single store of value would see a substantial decrease in the cost of completing trade with each other and an attendant increase in trade-based wealth. - Gold is the undisputed King of durability. The vast majority of gold that has ever been mined or minted, including the gold of the Pharaohs, remains extant today and will likely be available a thousand years hence. Gold coins that were used as money in antiquity still maintain significant value today. - The Papiermark, Rentenmark and Reichsmark of the Weimar Republic no longer have value because the institution that issued them no longer exists. - Bitcoins can be divided down to a hundred millionth of a bitcoin and transmitted at such infinitesimal amounts (network fees can, however, make transmission of tiny amounts uneconomic). Fiat currencies are typically divisible down to pocket change, which has little purchasing power, making fiat divisible enough in practice. - The key attribute that makes Bitcoin valuable for proscribed activities is that it is “permissionless” at the network level. When bitcoins are transmitted on the Bitcoin network, there is no human intervention deciding whether the transaction should be allowed. As a distributed peer-to-peer network, Bitcoin is, by its very nature, designed to be censorship-resistant. - his article on the Speculative Bitcoin Adoption/Price Theory, Michael Casey posits that the expanding Gartner hype cycles represent phases of a standard S-curve of adoption that was followed by many transformative technologies as they become commonly used in society. - There is a great irony that the US is currently one of the nations most open in its regulatory position toward Bitcoin, while China and Russia are the most hostile. The US risks the greatest downside to its geopolitical position if Bitcoin were to supplant the dollar as the world’s reserve currency. - Eventually, when faith is completely lost during a hyperinflation, a sovereign money will no longer be accepted by anyone, and the society will either devolve to barter or the monetary unit will be completely replaced as a medium of exchange. An example of this process was the replacement of the Zimbabwe dollar with the US dollar. The replacement of a sovereign money with a foreign one is made more difficult by the scarcity of the foreign money and the absence of foreign banking institutions to provide liquidity. - Bitcoin’s price volatility is a function of its nascency. In the first few years of its existence, Bitcoin behaved like a penny-stock, and any large buyer — such as the Winklevoss twins — could cause a large spike in its price. As adoption and liquidity have increased over the years, Bitcoin’s volatility has decreased commensurately. When Bitcoin achieves the market capitalization of gold, it will display a similar level of volatility. As Bitcoin surpasses the market capitalization of gold, its volatility will decrease to a level that will make it suitable as a widely used medium of exchange. As previously noted, the monetization of Bitcoin occurs in a series of Gartner hype cycles. Volatility is lowest during the plateau phase of the hype cycle, while it is highest during the peak and crash phases of the cycle. Each hype cycle has lower volatility than the previous ones because the liquidity of the market has increased. - Tags: [[favorite]] - The specious root of the criticism of Bitcoin’s “high” transaction fees is the belief that Bitcoin should be a payment system first and a store of value later. As we have seen with the origins of money, this belief puts the cart before the horse. Only when Bitcoin has become a deeply established store of value will it become suitable as a medium of exchange. - The network effect for Bitcoin encompasses the liquidity of its market, the number of people who own it, and the community of developers maintaining and improving upon its software and its brand awareness - Owning bitcoins is one of the few asymmetric bets that people across the entire world can participate in. Much like a call option, an investor’s downside is limited to 1x, while their potential upside is still 100x or more. Bitcoin is the first truly global bubble whose size and scope is limited only by the desire of the world’s citizenry to protect their savings from the vagaries of government economic mismanagement.