Eurozone shenanigans and Bitcoin

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Cubee Offline
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Re: Eurozone shenanigans and Bitcoin

Posted: Tue Dec 10, 2013 5:56 pm



tommyservo7 wrote:
Cubee wrote: If feel like that guy just made an excellent argument against bitcoin. Even if you follow the assumption that an individual company's growth slows down after a certain period of exponential growth (which is bogus, but that's an entirely different discussion), that doesn't change the fact that the economy, on aggregate, is expanding. When the economy produces more, people have more to spend their money on, and demand for real money goes up. There's my biggest problem with bitcoin: the supply is fixed, so a rise in demand can only serve to inflate the value. If bitcoin becomes widely accepted, there is no way it could follow the graphs he is presenting. The value will keep climbing, and people will want to hold bitcoins as assets rather than spend them like a currency. After all, why would I spend a dollar if I know it's going to be worth double tomorrow? What happens next is anyone's guess, but I imagine that at some point people will realize that the growth is being driven entirely by speculation, and the whole thing will come crashing down.

I think bitcoin is an awesome concept and I'd really like to see it succeed, but I've yet to see someone adequately address the problem of fixed supply.
I have not watched the video, but why do you refute that the growth of a company slows down over time? After they are accepted by the market, a company's sales growth usually declines fairly quickly.

I agree though, that no one knows what is going to happen. Its pretty neat experiment, I think, and should provide some interesting data for investors and economists.
I'm mostly objecting to the way he makes the argument, which essentially boils down a lot of pretty words, cherry-picked data, and implied correlation without even making an attempt to establish causation.

He basically sets up a graph, where time is on the horizontal axis starting at t0. Then he puts Te (end time) on the vertical axis (???). Then he puts Facebook's market cap at IPO the vertical axis (which is still labeled Te), and starts talking about how user adoption rate has followed an exponential growth curve, and draws that graph. So, right now we've got time on the horizontal access, and end time, market cap at IPO, and users all on the vertical axis. Obviously the Te thing was a mistake, but even still we have market cap and user count on the same axis, which is just a basket of bad statistics in and of itself. How is he defining users? How is he converting users to market value? Not even a cursory effect at explaining that relationship. Oh, and all the graphs are hand drawn and there's no ACTUAL data (hell, he doesn't even cite any real statistics. I think at one point he actually said "FB grew about 1000%-2000% at this time"; everything else is just as fluffy) .

So he's basically drawing this poorly illustrated relationship with made up numbers and saying "See! It's normal!". And besides THAT problem, he's also just flat out wrong. A quick look at FB's market cap since their IPO shows growth, rather than the steady near-horizontal line that he shows. But then again, I can't even tell if he was wrong in that regard because I have no idea what the hell the vertical axis is trying to show. I honestly don't know what happens to a company's growth rate after an IPO as I've never studied that field of finance... but even if he was factually right on that point, the whole way he presented his argument was a load of *beep*.

I was going to type all that up for my original post, but then I realized it wasn't even relevant. Even if you accept ex ante that everything in his analysis is valid (and good luck with that), there's still no attempt to explain why we should want to see this sort of growth, and what it means for the future of bitcoin.

edit: .... that might have been a bit excessive, but implying causation through correlation and bad statistics really makes my blood boil.
Q


tommyservo7 Offline
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Re: Eurozone shenanigans and Bitcoin

Posted: Tue Dec 10, 2013 6:21 pm



Cubee wrote:
tommyservo7 wrote:
Cubee wrote: If feel like that guy just made an excellent argument against bitcoin. Even if you follow the assumption that an individual company's growth slows down after a certain period of exponential growth (which is bogus, but that's an entirely different discussion), that doesn't change the fact that the economy, on aggregate, is expanding. When the economy produces more, people have more to spend their money on, and demand for real money goes up. There's my biggest problem with bitcoin: the supply is fixed, so a rise in demand can only serve to inflate the value. If bitcoin becomes widely accepted, there is no way it could follow the graphs he is presenting. The value will keep climbing, and people will want to hold bitcoins as assets rather than spend them like a currency. After all, why would I spend a dollar if I know it's going to be worth double tomorrow? What happens next is anyone's guess, but I imagine that at some point people will realize that the growth is being driven entirely by speculation, and the whole thing will come crashing down.

I think bitcoin is an awesome concept and I'd really like to see it succeed, but I've yet to see someone adequately address the problem of fixed supply.
I have not watched the video, but why do you refute that the growth of a company slows down over time? After they are accepted by the market, a company's sales growth usually declines fairly quickly.

I agree though, that no one knows what is going to happen. Its pretty neat experiment, I think, and should provide some interesting data for investors and economists.
I'm mostly objecting to the way he makes the argument, which essentially boils down a lot of pretty words, cherry-picked data, and implied correlation without even making an attempt to establish causation.

He basically sets up a graph, where time is on the horizontal axis starting at t0. Then he puts Te (end time) on the vertical axis (???). Then he puts Facebook's market cap at IPO the vertical axis (which is still labeled Te), and starts talking about how user adoption rate has followed an exponential growth curve, and draws that graph. So, right now we've got time on the horizontal access, and end time, market cap at IPO, and users all on the vertical axis. Obviously the Te thing was a mistake, but even still we have market cap and user count on the same axis, which is just a basket of bad statistics in and of itself. How is he defining users? How is he converting users to market value? Not even a cursory effect at explaining that relationship. Oh, and all the graphs are hand drawn and there's no ACTUAL data (hell, he doesn't even cite any real statistics. I think at one point he actually said "FB grew about 1000%-2000% at this time"; everything else is just as fluffy) .

So he's basically drawing this poorly illustrated relationship with made up numbers and saying "See! It's normal!". And besides THAT problem, he's also just flat out wrong. A quick look at FB's market cap since their IPO shows growth, rather than the steady near-horizontal line that he shows. But then again, I can't even tell if he was wrong in that regard because I have no idea what the hell the vertical axis is trying to show. I honestly don't know what happens to a company's growth rate after an IPO as I've never studied that field of finance... but even if he was factually right on that point, the whole way he presented his argument was a load of *beep*.

I was going to type all that up for my original post, but then I realized it wasn't even relevant. Even if you accept ex ante that everything in his analysis is valid (and good luck with that), there's still no attempt to explain why we should want to see this sort of growth, and what it means for the future of bitcoin.

edit: .... that might have been a bit excessive, but implying causation through correlation and bad statistics really makes my blood boil.
I'm too busy to watch it right now, but I hope to this weekend. I am interested in hearing what he has to say. Based on the video description I'm not optimistic that I'll like it:
Economists are up in arms, claiming that bitcoin's 1000% annual growth is faster than anything they've ever seen. Because of that, they lash out, calling bitcoin volatile, a bubble, a pyramid scheme, etc. But don't worry, we put on our VC glasses, compare the 4.5-year-old bitcoin to facebook, twitter, google at the same periods in their growth. The result is that Bitcoin's growth is as exponential, as volatile and as normal as any enormous tech giant. And just for fun we threw in a little bit about feral rats reproducing on a desert island.
Economists aren't "up in arms" over bitcoin as far as I can tell. Why would anyone have a vendetta against bitcoin? A lot of economists think it is a bubble, which is a legitimate opinion to have. Some don't think that. Some even like it (Wiki tells me that Francois Velde of the Chicago Fed (aka the body responsible for US monetary policy) seems to like it).

I don't think it is appropriate to compare a currency to a company. I'm not sure if its even fair to compare a commodity to a company. Facebook/Twitter/Google shares are not trying to become a currency. They provide a product and advertising revenue. Bitcoin wants to be the means with which you buy advertising space, or even the means of buying shares of stock. Something about comparing the two seems inherently misleading to me.
Tom

2007-2011 OBFP
2011-2012 College in Indiana

Multi-pitched timp-tom tenor-scaled membranaphone for life.


TVOham Offline
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Re: Eurozone shenanigans and Bitcoin

Posted: Sun Dec 22, 2013 12:31 am



It's those left wing crazy liberals ruining everything.

If everyone had more of Jesus in their life the world would be perfect.
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