So in light of the recent viral post by Balaji about his $1million bitcion prediciton, I see lots of people saying there are 2 million bitcoin on exchanges. But what does this exactly mean?
Does this mean that known addresses to be crypto exchanges have a combined balance of 2 million? Big deal.... most of those are probably a liability of the exchange because they actually belong to customers. Of course if customers don't withdraw, then too bad for them. But there is no way exchanges have this many bitcoin as assets of the exchange without matches liabilities. (Its kind of like the banks. SVB had assets of maybe 210 billion, but liabilities of 190 billion that was the depositors' cash. Of course the MTM value of those assets was less than even the 190 billion, but that's a whole other story)
So how much is on an exchange to purchase, which isn't already spoken for, and when does an exchange have to buy more so they can resell it?
I see lots of smart people going against this $1M prediciton, and of course its outlandish, but the more I think about it, the more plausible it becomes.
First of all, there isn't going to be 7% up or down halt with bitcoin like there would be if you're trading equity futures. This would give the market 15 minutes to pause. At 13% I believe, the market shuts down for the day. Not so with bitcoin of course. So when people think about the types of moves possible if they are coming from the equity markets, the rules won't exactly transfer over.
Second, as I point out above, what is the status of actual supply? I saw people calculating how much money needs to come into bitcoin in order to push the price up this high. But how on earth can you calculate this? Lets say you have 10 bitcoin on offer to sell at 30k and that gets taken out. So you need $300k in order to take out this price level. But what if after seeing this there isn't a single offer until the 35k price, and even that is for only 1 bitcoin. This means that to get to $35k bitcoin price, you will only need US$35k dollars. If there are no other transactions, hypothetically of course, then it won't take much for all bitcoins to be prices much higher. All you have to do is run out of sellers.
In the traditional financial markets, you have all these rules about the dealers which have to always post bids and offers and banks have to always be willing to buy or you have the FED that will come in and buy up bonds or god knows what else. But with bitcoin, where are the rules about who will sell you bitcoin if the seller knows that they will need to produce it because you will instantly want to take it to cold storage?
At some point, all the employees of the exchanges will hoard whatever is available and not even offer it to the public except for some insane premium.
Furthermore, everyone keeps saying that funds won't enter bitcoin until they can move 5 or 10 billion worth of dollars without moving the price much. At a $500B market cap, this might not be easy, but at a $5T market cap, much easier. So bitcoin goes to $270k, and then even more funds get involved!
Lastly, until a week ago, there really was no reason to not hold money in a bank. But now clearly, the tune has changed. And sure, you can say just put it in a big bank that the FED will protect, but I think people are starting to realize that if its so easy to change the rules in order to make people happy, its also very easy to selectively make them unhappy.
So we have a catalyst, and once this rally really gets going, I don't understand how it doesn't go parabolic and not come down. This might not retrace like everyone expects since this type of price action comes from traditional finance. Lets not forget that adoption curves of technology that go parabolic don't retrace.
In conclusion, to assume that this bet cannot win only uses thinking from how things worked before. Now I don't think its probable, because for something to be probable it maybe has to have a 30% or higher chance, but this playing out in 90 days is also not within the realm of impossible, and there is no technical reason for why this couldn't happen. There will be no governing body that steps in and shuts the market down if it goes up too high. Its a totally different type of market than what we are used to.
Does this mean that known addresses to be crypto exchanges have a combined balance of 2 million? Big deal.... most of those are probably a liability of the exchange because they actually belong to customers. Of course if customers don't withdraw, then too bad for them. But there is no way exchanges have this many bitcoin as assets of the exchange without matches liabilities. (Its kind of like the banks. SVB had assets of maybe 210 billion, but liabilities of 190 billion that was the depositors' cash. Of course the MTM value of those assets was less than even the 190 billion, but that's a whole other story)
So how much is on an exchange to purchase, which isn't already spoken for, and when does an exchange have to buy more so they can resell it?
I see lots of smart people going against this $1M prediciton, and of course its outlandish, but the more I think about it, the more plausible it becomes.
First of all, there isn't going to be 7% up or down halt with bitcoin like there would be if you're trading equity futures. This would give the market 15 minutes to pause. At 13% I believe, the market shuts down for the day. Not so with bitcoin of course. So when people think about the types of moves possible if they are coming from the equity markets, the rules won't exactly transfer over.
Second, as I point out above, what is the status of actual supply? I saw people calculating how much money needs to come into bitcoin in order to push the price up this high. But how on earth can you calculate this? Lets say you have 10 bitcoin on offer to sell at 30k and that gets taken out. So you need $300k in order to take out this price level. But what if after seeing this there isn't a single offer until the 35k price, and even that is for only 1 bitcoin. This means that to get to $35k bitcoin price, you will only need US$35k dollars. If there are no other transactions, hypothetically of course, then it won't take much for all bitcoins to be prices much higher. All you have to do is run out of sellers.
In the traditional financial markets, you have all these rules about the dealers which have to always post bids and offers and banks have to always be willing to buy or you have the FED that will come in and buy up bonds or god knows what else. But with bitcoin, where are the rules about who will sell you bitcoin if the seller knows that they will need to produce it because you will instantly want to take it to cold storage?
At some point, all the employees of the exchanges will hoard whatever is available and not even offer it to the public except for some insane premium.
Furthermore, everyone keeps saying that funds won't enter bitcoin until they can move 5 or 10 billion worth of dollars without moving the price much. At a $500B market cap, this might not be easy, but at a $5T market cap, much easier. So bitcoin goes to $270k, and then even more funds get involved!
Lastly, until a week ago, there really was no reason to not hold money in a bank. But now clearly, the tune has changed. And sure, you can say just put it in a big bank that the FED will protect, but I think people are starting to realize that if its so easy to change the rules in order to make people happy, its also very easy to selectively make them unhappy.
So we have a catalyst, and once this rally really gets going, I don't understand how it doesn't go parabolic and not come down. This might not retrace like everyone expects since this type of price action comes from traditional finance. Lets not forget that adoption curves of technology that go parabolic don't retrace.
In conclusion, to assume that this bet cannot win only uses thinking from how things worked before. Now I don't think its probable, because for something to be probable it maybe has to have a 30% or higher chance, but this playing out in 90 days is also not within the realm of impossible, and there is no technical reason for why this couldn't happen. There will be no governing body that steps in and shuts the market down if it goes up too high. Its a totally different type of market than what we are used to.
