Bitcoin Liquid IndexPanjang
The Paradigm Shift
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If the bottom is put in here, the logarithmic growth curve begins to look obvious. And yet it is still anything but 'obvious' to most in the Crypto sphere. What looks obvious to some, and anything but obvious to others, is itself explicable in terms of the paradigm. Of course, the paradigm that has been most dominant recently has been the S2F model. Like all models, or interpretations, it is 'theory-laden' - there always tends to be a set of presuppositions at work underpinning the development of the model even if the said model for all ostensible purposes looks to be purely objective. Indeed, the strong claims of pure objectivity tend to correlate with those of certainty on the one hand, and a set of beliefs that lie thinly veiled beneath the façade of the model as mentioned. Here follows those beliefs, and what makes something like the log growth curve difficult for some to accept... even if they may be dragged kicking and screaming to accept it as the market further reinforces the idea. Yes, markets are not purely rational, but rather frustratingly 'irrational'.
1] Bye bye one million [or even ten million] BTC. Many have in mind one million per unit of Bitcoin, and a market cap that will swallow up a large part, if not all, monetary value as relative to other currencies, or assets priced relative to Bitcoin.
2] The hyper-inflation hypothesis. Many in the Crytpo sphere think they have unlocked all the mysteries of the monetary universe with the magic word of 'fiat'. Though useful in a certain context, no other word has tended to lead people to devalue USD more while over-valuing BTC [the point is finding a right valuation]. It's a 'fundamental' approach, as opposed to pragmatic, that has proved quite disastrous in real world conditions as many budding traders have been wrecked with this, what can only be called a fixed idea or ideology, in mind.
3] The assumption that past returns/ results can simply be projected into the future. Here belief and desire get the better of reason. People first want something to be true, to normalize impressive past events, and so the rationale follows tricked out in all the statistical specialization, academic respectability - all the appeal to authority that 'the expert' supplies. This is itself a market - the production of an idea/ explanation to meet a need, and then the mass consumption of that idea.
Of course, I have the S2F model primarily in mind here. It is an influential model. If it weren't, not many would believe it, but it has its flaw as any model does, primary among which, in my opinion, is its determinist tendency - the market price is seen to develop mechanistically and rationally along the lines of a formula based on supply. In reality though a market is anything but rational, more often irrational than rational, developing as it does with a conglomerate of economic agents acting and reacting in a chaotic manner. think the madness of crowds, not the wisdom of them.
So what does the log growth curve represent. It depicts the growth of something organically and cyclically. It is a force of nature, where I doubt it could be perfectly represented in a formula, though it certainly has a geometric form. As far as BTC follows it, I think this is explicable in terms of a nascent currency in the process of capitalization. A capitalization that will eventually be 'capped' in log terms, as the curve plateaus out, though continues to appreciate perhaps in more conventional/ linear terms. Where I think S2F goes wrong is creating a static model of past performance and extrapolating it to the future [chart below], something that is obviously unsustainable [as all straight lines on log curves are] short of hyper-inflation. However, hyper-inflation of USD can not be assumed as the same pattern [log curve] is seen against gold as against the dollar.
1] Bye bye one million [or even ten million] BTC. Many have in mind one million per unit of Bitcoin, and a market cap that will swallow up a large part, if not all, monetary value as relative to other currencies, or assets priced relative to Bitcoin.
2] The hyper-inflation hypothesis. Many in the Crytpo sphere think they have unlocked all the mysteries of the monetary universe with the magic word of 'fiat'. Though useful in a certain context, no other word has tended to lead people to devalue USD more while over-valuing BTC [the point is finding a right valuation]. It's a 'fundamental' approach, as opposed to pragmatic, that has proved quite disastrous in real world conditions as many budding traders have been wrecked with this, what can only be called a fixed idea or ideology, in mind.
3] The assumption that past returns/ results can simply be projected into the future. Here belief and desire get the better of reason. People first want something to be true, to normalize impressive past events, and so the rationale follows tricked out in all the statistical specialization, academic respectability - all the appeal to authority that 'the expert' supplies. This is itself a market - the production of an idea/ explanation to meet a need, and then the mass consumption of that idea.
Of course, I have the S2F model primarily in mind here. It is an influential model. If it weren't, not many would believe it, but it has its flaw as any model does, primary among which, in my opinion, is its determinist tendency - the market price is seen to develop mechanistically and rationally along the lines of a formula based on supply. In reality though a market is anything but rational, more often irrational than rational, developing as it does with a conglomerate of economic agents acting and reacting in a chaotic manner. think the madness of crowds, not the wisdom of them.
So what does the log growth curve represent. It depicts the growth of something organically and cyclically. It is a force of nature, where I doubt it could be perfectly represented in a formula, though it certainly has a geometric form. As far as BTC follows it, I think this is explicable in terms of a nascent currency in the process of capitalization. A capitalization that will eventually be 'capped' in log terms, as the curve plateaus out, though continues to appreciate perhaps in more conventional/ linear terms. Where I think S2F goes wrong is creating a static model of past performance and extrapolating it to the future [chart below], something that is obviously unsustainable [as all straight lines on log curves are] short of hyper-inflation. However, hyper-inflation of USD can not be assumed as the same pattern [log curve] is seen against gold as against the dollar.
Nota
S2F appears to be an average of growth curve in the aggregate.tradingview.com/chart/dBwszmhR/
Penafian
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