So… During the week, Arthur Hayes, Former BitMEX CEO, doubled down on previous statements he made about Bitcoin going to $1m.
Balaji Srinivasan is a respected ‘investor’ in Crypto circles He was the co-founder of Counsyl, the Chief Technology Officer (CTO) of Coinbase, and former general partner at the venture capital firm Andreessen Horowitz.
He went one better and said it would happen in 90 days.
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A lot of questions on LinkedIn came over the week focusing on whether this will happen or not.
Now, predicting any value instrument will go up (against the dollar), is just people using a smoke and mirrors trick to convince an audience they have some expertise they do not.
It’s a conjurors trick. a bit like being a stage magician. Let me explain.
There are only two ways one instrument (in this case Bitcoin) can go against another (in this case $USD) – Up or Down. So statistically, the so-called guru already has a 50% statistical likelihood of being right if left to chance. It is the toss of a coin.
If they have a small bit of subject matter information, even if logically it isn’t 100% sound, then that pushes the likelihood over the 50/50 line in the direction of their thesis. Even if the margin changes to 53% v 47% , they are going to end up being right more than 53% of the time, because each new toss is slanted in their favour.. that’s sort of how ‘probability’ works.
Moreover – they have kept back copies of their predictions, and over time, they will bring you ‘Throwback’ references from past content to reinforce their credentials for a new prediction, but they will never make references to past examples of when it went wrong.
Statistical Airbrushing in play!
Srinivasan has gone one better, because he has actually put himself on the line to say it will happen in 90 days.
Anybody who has bet on Football or Boxing ( I don’t), knows the odds given by simply predicting the winner are way too low to benefit from. A reasonable return is only possible by predicting things like ‘who will score the first goal’ or ‘which minute the first goal will be scored in’ or predicting not only the victorious boxer, but in what round the match was won.
This introduces other variables into the prediction that moves it from being a binary one, making the outcome much harder to get correct.
There is no skill in predicting any fluctuating 2 directional variable will reach a specific milestone ‘sometime’ and in real terms, the condition being met can be meaningless – If you have a bitcoin that is valued at $25k which can buy 4 plots of land somewhere, then keeping the bitcoin until it reaches $1m is pointless if by that time $1m cannot buy more than 4 of those same plots of land.
Claiming to be a guru and celebrating ‘I told you Bitcoin would go to $1m’ in context is deceitful.
But Balaji Srinivasan has been very specific, and said it will happen in 90 days.
Will he be shown to be right?
Well, I won’t answer that, but I will provide you with the arguments to help you decide that for yourself!
The fundamentals –
Bitcoin is a value instrument. I talk frequently about blockchains being ‘sovereign’. Each one having their own currency. The Bitcoin cryptocurrency is the sovereign currency of the Blockchain Republic of Bitcoin just like the dollar is the sovereign currency of the US and the Naira is the sovereign currency of Nigeria.
Bitcoin price is driven by Supply and Demand.
What defines Supply?
‘Miners’ (computers programmed to solve cryptographic puzzles on the blockchain) add new blocks to the blockchain and get rewarded for work with Bitcoin. The total supply of BTC is limited and pre-defined in the Bitcoin protocol at 21 million, with the mining reward (how Bitcoins are created) decreasing over time. Roughly every 4 years, an event ‘the halving’ happens. Beyond this point, mining reward per block will be half what it was before.
Bitcoins can never really be ‘destroyed’ but they can be put permanently beyond use, through someone losing keys to access solutions such as wallets. There are also some wallets, or transfer conditions under which transferred bitcoin will neither give a send error from the sending app, nor arrive at the intended recipient. This also puts Bitcoin out of supply.
What creates Demand?
I’ve previously written on the importance of blockchains having utility. As ‘the Blockchain Republic of Bitcoin’ I call this the blockchain’s GDP. Just like a country in the real world. The more being generated inside the blockchain, and the more internal assets are traded through its coin, to internally active actors, the more robust it will be in the face of outside influences.
For such a huge market cap – $469,522,992,501 USD .. there isn’t a huge lot going on inside the ‘Republic of Bitcoin’. Its got the Lightning Network, and its got Ordinal, but if we look at the value being generated, then inside the BTC ecosystem, that market cap isn’t getting a lot done.
This means Bitcoin (at least for now) can’t be credited with its own value. It’s a mirror of things happening somewhere else.
And what is that somewhere else?
That somewhere else is the US Dollar! – the instrument which is more traded with Bitcoin than any other! BTC rises or falls based purely on sentiment and mechanics of what’s happening in value instruments outside blockchain as a whole, particularly the $USD and its keepers.
So to anticipate what will happen to the Dollar, examine the US economy, examine in particular the mood of the US Government and the FED and their plans. Examine the impact of US International Trade and Foreign policy.
As the USD$ weakens, the value of Bitcoin in USD will strengthen and vice versa. DYOR. Keep watching. Forget about any charts about Bitcoin people display in online platform posts. This is only about the fortunes of the dollar and nothing else.
This is the key dynamic that drives speculative behaviour.
Watch the US Economy and other things that impact on the dollar and you will find your answer!
I’m more interested in blockchains whose coins have much smaller market caps, and have different utility going on in them, which makes their ‘GDP’. These are impervious to speculators because liquidity at any time is limited and its very difficult to buy or sell a holding substantial enough to make speculation worthwhile.
The increments over which coin value in USD rises or falls are much smaller than a speculative holding. But they are fine for the needs of those active in things that generate the blockchain’s ‘GDP’… which is well… sort of the idea!
So does that mean it is impossible to speculate on them? No. How is that possible? Maybe I will reveal it in another article! .. or maybe not!
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All reference sites accessed 25-26/03/2023
fool.com/investing/2023/02/14/cathie-wood-still-sees-bitcoin-reaching-1-million/
u.today/arthur-hayes-predicts-bitcoin-may-reach-1-million
en.wikipedia.org/wiki/Arthur_Hayes_(banker)
en.wikipedia.org/wiki/Balaji_Srinivasan
headtopics.com/us/who-is-balaji-srinivasan-and-why-should-we-care-about-his-1-million-bitcoin-prediction-36924681