Trying to predict the future prices of Bitcoin, by analysing only historical trends of prices is like trying to predict future wind speed by analysing only historical trends of wind speed, it seems to me.
To get reasonably good predictions of future wind speeds we need to analyse all of the known dependencies in the system, especially the things actually causing the wind to blow, like atmospheric pressure, moisture, and land / sea temperature distributions, and a stack of other things.
The more of those we take into account, the better the predictions.
Bitcoin is obviously part of an incredibly complex system, the factors that should be taken into account include numbers of users, and network utility (Metcalfe’s law), again a whole stack of other things.
The utility (How useful it seems to users) of Bitcoin changes as a result of things like transaction blocking, and indeed market price, which is obviously easily influenced by things like pump and dump techniques.
There are aceademic studies that can be found, of reasonably good mapping of Bitcoin mean price over time with Metcalfe’s law.
They still hold, understandably, as does Metcalfe’s law on any network.
I read about those years ago but had never heard of such a thing as trying to predict price from supply flow, until your article here, but then I am not an investor, so am not part of any investment community.
If you only look at things like flow and demand, then that explains why you might not consider things like Metcalfe’s law.
That might also explain why you maybe believe in dilution of capital being somehow related to value.
Considering the value of sunlight, it obviously has some value, as that is what makes life grow. Without it there can be no life.
Every day we get more and more sunlight, it never stops, but the value of it stays the same, day after day, it makes life grow.
If we were to get that wrong, by considering something scarce as having more value than something abundant, like sunlight, then the effect on humanity is the same as if the sun had stopped shining, of course we should expect to see problems, like global pollution, and massive inequality, in short, humanity feeding upon itself, and its environment.
And we do, because we think things like gold, against which we even reference the value of money, have value, whilst ignoring that the value of everything actually comes from sunlight.
It is an illusion, leading us to practice what is in fact a grand energy Ponzi.
The value of scarcity is an illusion, it is not real.
If we really want to know the real value of Bitcoin, it is in knowing where it might fit, in converting our illusion to reality by aligning our view of value with the value of sunlight.
To do that we have to look to see how it relates to sunlight.
If you are interested to know more, you could start with the article below, or skip to the chase by searching out “Kardashev Hinge”, in Medium.
