Alright bros, let's do this. I have never and don't usually talk price action, but I want to now because it ties very closely in with the future of Bitcoin and a lot of things I've been talking about over the years with regard to the game theory of bitcoin and it's long term viability.
Bitcoin is headed for a price collapse very soon, but this one is very different from previous bear markets. Here's the timeline that I expect to see:
1) Bitcoin drops below 100k USD by the end of January. The 4 year cycle may be self fulfilling, maybe not, but we are at the end of one already. Expecting such a blatantly apparent pattern to the point that people treat it like terra firma to not happen this time because reasons is as delusional as expecting the price of some shitcoin to go up forever because tokenomics. Even if I'm wrong, it's bad calculus to bet against it.
2) MicroStrategy begins to liquidate to cover investors. MicroStrategy has been leveraging their Bitcoin purchases by selling shares who's valuation is entirely based on their Bitcoin holdings, then buying Bitcoin with them, thus raising the price of their shares, and on and on over and over. This cannot go on forever. They are the largest non-satoshi holder, so expect this to be an earthquake.
3) ETFs begin to see massive outflows. People love to talk about Bitcoin ETFs as if they're guaranteed demand. They're not. They can smooth volatility, but outflows can happen as easily as inflows, they're speculative also, people will buy and sell them with the price. If the above 2 things happen, this will too.
If all this happens, then of course Bitcoin's price will drop significantly. Nothing new. So how is this one different?
Well first, it breaks all the prominent models, stock to flow, power law, all broken if Bitcoin peaks around where it is now. Stock to flow is a great idea, but it neglects one fundamental measure, demand. I can have an nft with a stock to flow of infinity, if there's no demand for it it's worthless. Demand for bitcoin cannot be just taken for granted, and if you're serious about trying to find a real world value for it you can't do that.
Second, I talk a bit around here about how Bitcoin's value is its security, and the supply cap means security is doomed to failure and therefore so is it's utility and price. If you're interested in my takes on that check out my public bookmarks. I thought before that Bitcoin had one more cycle in it before that process began to become apparent, but now I'm convinced that this is the one and there are a few key indicators.
First, Bitcoin dropped below the previous all time high in the last bear market. This has never happened before. Second, Bitcoin reached a new all time high before the last halving, this has also never happened before. Third, this bull market, percentage wise, has been incredibly lackluster compared to previous ones. These are all signs that Bitcoin is experiencing peak hype by speculators, which let's be honest, almost all of you are. The act of predicting the future and making decisions based on that is called speculating.
Finally though, and this is the real big one, block space demand is not going up, hash rate is not going up. These are very very bad signs. All previous cycles saw transaction fees skyrocket and hash rate multiply, but not this one. These are signs that the security of the network is decaying. These are indicators that my thesis, that the security of the network will collapse as a result of capped supply, is beginning to occur. And Bitcoin's value, what we are trying to find when we price it, comes only from it's security.
So I fully expect that after this peak, which either has recently happened or is going to happen next month, Bitcoin will enter a decade long bear market. I am going to get a lot of hate for saying this, but you always get hate at 6am when you tell everyone you're out of blow and its time to go home. The party can't go on forever.
I expect there to be a lot of "what happened?"s and "I don't believe in the mission anymore" and the like. But not everyone will give up, there's those of us that still understand the true value in money like this. So I expect a decoupling of the crypto markets from Bitcoin. I expect some things to begin to have their own market movements independent of Bitcoin. I don't know all what, but from where I sit basically the only big blockchains that have the utility for that are Monero and Ethereum, I don't think it's a bad bet to assume they'll be in that club.
I do expect, when the damage is surveyed and with the clarity of hindsight, someone will try to fix the problems in Bitcoin that will lead to this, after whatever infighting inevitably happens. I do not know whether it will succeed. I hope it does. It's not going to happen next year, I expect that it won't happen until the next all time high doesn't arrive.
That of course doesn't mean there won't be ups and downs over the next decade. There will be, of course. But I expect no new all time highs for 10 years.
I expect the governments to come and tell us they have to ban and regulate this technology to protect investors. We cannot let them do that. The only blockchain community that I know of that outright refuses that offer is the Monero community. I hope we see success there.
I'm not just some doomsayer or naysayer. I love bitcoin. I'm not a trader or a number go up guy. Try to find as detailed an explanation as I've given here and elsewhere from the likes of Cramer and Schiff. I'm actually explaining what I see. Those guys will of course gloat, but they don't have a clue. I hope their gloating leads the governments to dismiss us again, we are gonna need it. But there have been serious architectural problems with Bitcoin, and some serious refusal to see what's in front of us, that inevitably led here.
I'd say I hope I'm wrong, but I don't. I'm certain I'm not. Even if I'm wrong this time, what I've warned of is coming. But I don't hope I'm wrong because something better can come after. Not better *than* Bitcoin, better *for* bitcoin. And at this point I don't believe there's any other way for that to happen, and I don't believe it's avoidable. And so, I firmly believe, we are on to the next chapter of the story. Let's make it a good one.
Replies (30)
So who's who in that picture? Are you the clown or the joker?
I could be either. LOL. But if Bitcoin is going to collapse, im driving off a cliff.
Well don't do that. But at least tell me, you expect a bear market soon, right? Maybe not this catastrophe I speak of, but couple year downtrend, what we are used to already?
I still believe in the 4 year cycle, but dont think we have a disaster and couple year downtrend. Nothing stops this train.
I do think at some point Sailor will have to sell or will be caught with paper Bitcoin.
Same, there will be an exchange caught with too much paper Bitcoin- whether contagion will hit also ETFs, im not sure.
So if saylor sells, you don't expect that to cause a massive price drop? I expect that to be this cycle's FTX. Not to say it will cause all the later stuff I talked about, I don't think it has anything to do with that.
Some of us see things early.
This is a trajectory we are on. Add to that, that many retail investors this time will need the fiat money to survive and you know that this will hit differently.
I see Monero as a perfect hedge. People in it are Bitcoin OGs with deep pockets. The only down pressure comes from fractionally reserved CEX and from selling products that are only available for fiat.
Monero us poised to reach a new ATH against BTC.
The only thing that would disqualify our thesis is the fiat and Tether money printer that can buy and support Bitcoin with infinite fiat on borrowed confidence by people.
Just to clarify, i dont expect he would sell the whole stack, but if he is this cycles FTX, there would be a scramble for self custody. Isnt that bullish?
โhash rate is not going upโ
Why would he have to sell? Doesn't that depend on the loan agreements he's made?
If this happens i think it's likely that the institutional reenforcement and pressure on development lay off and we gey good improvements to the bitcoin mainchain in privacy and sovereignty. If bitcoin where private and sovereign everyone would be using it.
This revolution starts and ends with bitcoin like it or not.
Zoom out.
Every single exchange failure in the past was bullish for self custody. People still seem to be clamoring to give someone control over their stuff.
People that bought stock are going to begin selling when the price drops. This will cause the stock price to drop faster than the bitcoin price. Investors don't like to see that, they'll spook and expect to get something locked in. Theres 0 chance they don't have some type of guarantee.
I agree that everyone would be using it as money. But the people that maintain bitcoin node software fight heavily against any real changes to the network. If people do finally come to their senses it will be because something catastrophic happened. And users aren't going to wait with baited breath, they'll find something that works now.
its going up since 2018; did i miss something?
Do you know the terms or are you speculating?
Yeah, you missed the opportunity to put that in your screenshot.
Hash rate has gone up in this past cycle. But not anywhere near the rate it used to go up every cycle. And that's because (in my ooinion) the margins for mining are no longer proportional to the value of the network in nominal terms. I expect at the next halving for that to become blatantly apparent. As the reward halves, the only thing that makes up for that is increased demand for block space, but we aren't seeing that this time around, so capital's readiness to jump in and make a buck is less than in the past, and will be even less in the future.
Your assuming people are informed and rational. I suspect people will buy the btc ticker regardless
I'm speculating. But we speculate. If the valuation of MicroStrategy begins to drop they will have to liquidate part of their balance sheet, if you think that's not gonna happen, I mean we are both speculating but I wouldnt take that bet.
Well this already happend last cycle with an 80% draw down. Why would it be different now?
Because of what I said after that part.
Transaction fees not going up this cycle is a big indicator that I might be right about this, and that now is when what I'm talking about begins to become apparent.
mister_monster
Alright. Let me take a deep breath real quick.
So, miners are rewarded for securing the network. If they're not, they don't do it.
In bitcoin, they're rewarded by the block subsidy, the coinbase transactions, and by the transaction fees of people moving money around. I'm going to call these "users" as opposed to holders, which are also users but I'll distinguish between them in that way.
The block subsidy is like a tax on all holders and users in the network, just as monetary inflation (which I refer to as "debasement" because that's what it is) is a hidden tax on all of us who work for and buy things with fiat.
Holders benefit from the security of the network. That is bitcoins entire value proposition, that's what gives it value, that it is infeasible for anyone to just steal your money without tying you up first. A coin with a supply of 1 and no security is valueless. Scarcity isn't the end all be all of value, as you can see from countless other supply capped altcoins, other considerations are, demand being the big one, but none of that matters if you can wake up to your money gone. The security of bitcoin is it's primary value proposition.
Network security is a commons in game theory parlance, to the bitcoin network, and a situation where some group can benefit from the commons without contributing to it leads to what is called a tragedy of the commons. Those people in game theory parlance are called "free riders", they benefit from it without any cost incurred to them, and for the commons to continue to exist, the cost must be incurred by someone else. That someone else in bitcoin is the users, those actually sending bitcoin and paying transaction fees.
There's a block subsidy right now in bitcoin, but since the supply cap is known, we can treat that yet to be issued subsidy as existing and just not being spent yet. It is "priced in" as you might say. It can be treated as if it already exists, just like satoshis coins can be treated as if they don't exist. Consider your share of the debasement via the block subsidy paid, consider your share of bitcoin as being out of a total supply of (slightly under) 21 million coins, that's what most people do anyway.
So what happens is, there's an incentive built into this game theoretical system that is bitcoin, where people are incentivized to hold and not to spend. They benefit from the security paid for by those who have to spend, and their wealth is secured for free. So as time goes on, more people do this. The more people that do this, the more users have to pay to spend money, the more pressure they feel to just hodl and spend something else, and so on. It has a compounding effect.
The end result of this is of course, a world where nobody or almost nobody spends bitcoin on chain, and where miners have to reduce cost and therefore security. And as security goes down, so does the value of the network, and therefore so does the value of your bitcoin holdings.
A solution to this is a tax on holdings. But that's messy, you need a way to just take money from people when mining a block, keeping track of everything and knowing what everyone has.
A simpler way to do this is to just create some press determined number of new coins every block. It taxes everyone equally in proportion to their holdings, everyone pays for security of their wealth in exact proportion to the benefit they derive from the security of the network. Simple, elegant, problem solved, as long as this money only goes to miners and nobody else.
This could be done on any number of schemes. You can do it on a geometric scale, 2% or 3% as central banks do (even though they don't need it to pay for security. They're just scammers), or you can do it on a linear scale, like Monero does with a set per block emission number that we call a tail emission. I could go into the reasons why this is optimal even though on the surface it may not appear to be viable long term as opposed to geometric debasement, but that's a whole separate thing.
Do you see it? It's not about "the miners have to be paid", it's about who pays the miners and who benefits from mining. The two have to be one and the same, and in proportion to their benefit, or any network is doomed to fail. Incentives are outcomes, always, with anything social in nature.
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Yeah... I think if bitcoin begins to fail out of necessity it will change to the environment. People will not just let it die. Its not a static thing. I think dominance is maintained and monero is along for the ride. It may get bumpy but there are enough religious bitcoin zealots that will keep bitcoin alive no matter what
Never heard that fiat printing theory, interesting
I don't think you can count on that the way youre saying. I think it's possible, I can't argue with someone that says it's likely, but I don't think you can count on it. And whos to say some of these forks or cryptocurrency implementations aren't it changing yo it's environment, people not letting it die? The zealots are a double edged sword: they want to keep it alive, but they think any changes are not bitcoin. A paradigm shift has to happen one way or another with them. I like them, and steadfast stubbornness is a valuable trait to prevent something from getting taken over, but you also have to see what's in front of you with your mental faculty.
If the money printer could keep this going forever it could keep itself going forever. If the printer guarantees that bitcoin will have a selling point, then bitcoin cannot be endlessly propped up by the printer.
well, on a log scale i can see what you are talking about.
Fiat is so shitty that itโs pretty hard to imagine bitcoin not going up indefinitely when measured in fiat. I had no savings at all before bitcoin. The network doesnโt even have to grow and it will go up in fiat terms. I donโt consider myself to be a bitcoin maxi, but itโs just hard to see how it could go down perpetually in dollar terms.
So I said "poke around my public bookmarks" but to understand why it isn't the hedge against fiat debasement that people think, here it is
mister_monster
Alright. Let me take a deep breath real quick.
So, miners are rewarded for securing the network. If they're not, they don't do it.
In bitcoin, they're rewarded by the block subsidy, the coinbase transactions, and by the transaction fees of people moving money around. I'm going to call these "users" as opposed to holders, which are also users but I'll distinguish between them in that way.
The block subsidy is like a tax on all holders and users in the network, just as monetary inflation (which I refer to as "debasement" because that's what it is) is a hidden tax on all of us who work for and buy things with fiat.
Holders benefit from the security of the network. That is bitcoins entire value proposition, that's what gives it value, that it is infeasible for anyone to just steal your money without tying you up first. A coin with a supply of 1 and no security is valueless. Scarcity isn't the end all be all of value, as you can see from countless other supply capped altcoins, other considerations are, demand being the big one, but none of that matters if you can wake up to your money gone. The security of bitcoin is it's primary value proposition.
Network security is a commons in game theory parlance, to the bitcoin network, and a situation where some group can benefit from the commons without contributing to it leads to what is called a tragedy of the commons. Those people in game theory parlance are called "free riders", they benefit from it without any cost incurred to them, and for the commons to continue to exist, the cost must be incurred by someone else. That someone else in bitcoin is the users, those actually sending bitcoin and paying transaction fees.
There's a block subsidy right now in bitcoin, but since the supply cap is known, we can treat that yet to be issued subsidy as existing and just not being spent yet. It is "priced in" as you might say. It can be treated as if it already exists, just like satoshis coins can be treated as if they don't exist. Consider your share of the debasement via the block subsidy paid, consider your share of bitcoin as being out of a total supply of (slightly under) 21 million coins, that's what most people do anyway.
So what happens is, there's an incentive built into this game theoretical system that is bitcoin, where people are incentivized to hold and not to spend. They benefit from the security paid for by those who have to spend, and their wealth is secured for free. So as time goes on, more people do this. The more people that do this, the more users have to pay to spend money, the more pressure they feel to just hodl and spend something else, and so on. It has a compounding effect.
The end result of this is of course, a world where nobody or almost nobody spends bitcoin on chain, and where miners have to reduce cost and therefore security. And as security goes down, so does the value of the network, and therefore so does the value of your bitcoin holdings.
A solution to this is a tax on holdings. But that's messy, you need a way to just take money from people when mining a block, keeping track of everything and knowing what everyone has.
A simpler way to do this is to just create some press determined number of new coins every block. It taxes everyone equally in proportion to their holdings, everyone pays for security of their wealth in exact proportion to the benefit they derive from the security of the network. Simple, elegant, problem solved, as long as this money only goes to miners and nobody else.
This could be done on any number of schemes. You can do it on a geometric scale, 2% or 3% as central banks do (even though they don't need it to pay for security. They're just scammers), or you can do it on a linear scale, like Monero does with a set per block emission number that we call a tail emission. I could go into the reasons why this is optimal even though on the surface it may not appear to be viable long term as opposed to geometric debasement, but that's a whole separate thing.
Do you see it? It's not about "the miners have to be paid", it's about who pays the miners and who benefits from mining. The two have to be one and the same, and in proportion to their benefit, or any network is doomed to fail. Incentives are outcomes, always, with anything social in nature.
View quoted note →
