A power law is a relationship in which a relative change in one quantity gives rise to a proportional relative change in the other quantity, independent of the initial size of those quantities. An example is the area of a square region in terms of the length of its side.
In this case it means Bitcoin halving makes number go up.
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Wow so they finally figured it out.
Bitcoiners are running around thinking they are geniuses right now because they learned how to draw a straight line on the log chart. This is something I've been pointing out since 2018. I've been calling it the doubling curve, and I have to say this is such a hilarious thing to be going mainstream right about now.
It looks like the big difference between the Power Law and the Doubling Curve is that the Curve only factors in price on the log scale while the Power Law factors in time on a log scale as well... which is pretty weird but whatever. Apparently it also has applications in other areas of cosmic scale, but I'm not really interested in going down that rabbit hole.
I must admit that calling it the Power Law sounds so official and scientific. It's a good brand that Bitcoiners will surely rally around until it is inevitably busted. How long will it take the model to get destroyed? Probably next bull market I assume. This tends to be how these models work out. Especially when everyone starts becoming so sure of the outcome.
Doubling Curve
This is the model that I'm still using. It still has yet to be invalidated. Perhaps if we never trade above the line by next peak it will be. Until then we are temporarily embarrassed millionaires resulting from the collapse of 3AC, UST, and FTX in 2022. We've been trading under the line for less than 2 years... in fact we will hit that 2 year mark in May. Guess what I think might be happening in May or June? We'll see.
Time is still on a linear scale here and there's no reason to believe that anything has changed as far as I'm concerned. Well, especially now that the climate is hyper-bullish. The line currently sits at $120k and there's no reason to think we can't catch up to it at $200k by the end of the year or earlier. This line extends all the way back to the end of 2013 at a base of $100.
https://charts.bitbo.io/long-term-power-law/
A very interesting intersection between the Power Law and the Doubling Curve is $400k. $400k seems to be the crux of a lot of models in fact. The Power Law states we should peak somewhere around $400k while the doubling curve expects a bubble at least x2.5 higher which just so happens to be $1M BTC. In 2017 and 2013 we were x13 and x11 higher than the curve respectively which is more in the $4M-$5M range. So all we have to really do is wait and see what happens in over the next 18 months or so.
Know what I think will happen?
We'll be trading at something like $250k at the end of this year and everyone will be taking gains and calling an end to the bull market early. There's a consensus that the bull will end early because we hit all time high early as well. I'm not buying it but we'll see. Linear comparisons to the lackluster 2021 run are irrelevant as far as I'm concerned.
Rule of three
Bitcoin really likes to do things in groups of three. And wouldn't you know it we've already done three halving events and we are onto the fourth one. The chance that we do something completely unpredictable is quite high in my opinion for a lot of different reasons. And when that happens we'll hear all about S-Curves and super cycles.
S-Curve
The S-curve is a technological phenomenon in which early adoption and bootstrapping of cutting edge tech starts out very slow and then explodes into mainstream adoption. When applied to Bitcoin it is thought that the price will explode in a similar looking S-shape, except with a flatter middle and a tail that goes to infinity within the supercycle.
Supercycle
The supercycle is an only-up wet dream in which the pain of bear markets is a thing of the past. Rest assured that when the Power Law is proven wrong the supercycle and hyperbitcoinization will be the talk of the town. "This time is different." "We're never coming back down."
Hyperbitcoinization
The hypocritical idea that all Bitcoin zealots hold dear; that all the universe's wealth will ironically be contained within the confines of the Bitcoin blockchain. Because there no solution to centralization like even more centralization, amirite?
Absolutely perfect timing.
There's only one reason to post charts and make speculation like this, and that is to sell the top and not get caught off guard by the bear market. This goes directly against the ethos of the communities that create these models in the first place. Which is it? You gonna HODL forever or you gonna try to time the top? Can you really have both? Is Bitcoin the exit or is the exit to USD inevitable?
The Power Law gaining popularity right when it's about to be proven wrong is quite fantastic. It allows this entire situation to play out exactly like I think it will. The plebs will trade themselves into the poor house just like they always do. Constantly trying to time a top that doesn't fit any model and it just keeps going up. All I can say is that I'll be unloading at bit in November 2025 no matter what the price is. Not gonna fall into the "this time is different" trap like November 2021. Nobody needs that.
Are you ready for it?
Bitcoiners love to posit this question for events that never need to be prepared for. Imagine if a supercycle actually did happen and Bitcoin really did only go up. Why would anyone need to prepare for that? That's an environment where it's impossible to lose no matter what financial decisions get made. Asking if people are "ready" for the zero-pain narrative is a showcase of ignorance and illogicality. Never expect something like this to happen because even if you're wrong you still win.
Conclusion
If I'm being honest the Power Law chart does look pretty good at first glance. The numbers being predicted are high but certainly not out of the range of possibility. The fact that time is on a log scale shows that things should slow down as time goes on even though price is exponential. But is that really how technology works?
There are many problems with this line of thinking. The biggest one being measuring Bitcoin in terms of a USD unit-of-account. Can we really assume that USD is going to be a stable enough asset over a 10, 20, and even 30 year timespan? Definitely maybe! Maybe not. The only certainty is if USD crashes to zero then Bitcoin is worth infinity just like all the maximalists say. Dividing by zero seems to have that affect.
Bear markets in crypto are the WORST but there are many valid strategies to mitigate them. The problem with those strategies is that they require financial discipline like the ability to DCA sell while number keeps going up during peak FOMO. On a very real level it's much easier to just tell everyone to HODL or wait for some absurd price point rather than having to expend that kind of emotional bandwidth. And so this is where we are.
I love how people try to apply ideas and models to something after the fact to make themselves feel better about what happened. The whole I knew this was going to happen all along gets tired. I'm not talking about you of course, but you know the type of people I mean. Just throw a dart at X and you will likely find one!
This one says it was originally published in 2019 but yeah... if we look in the red we can see that you wouldn't have sold at the $69k top; Expecting it to go a bit higher.
As soon at this model fails: just watch.
They will all be talking about S-curve and supercycle and "this time different".
Haha, for sure!
Stock to flow and now power law and s curve. Im not convinced by power law. Occums law says the simplest explanation is usually the best one.
Do you mean "Occam's Razor" instead of
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Its the same.
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Occums lawon multiple search engines and simply get redirected to "Occam's Razor". 🤯🤓Have some !WEED with !LUV! 😁
Exactly.
You might want to use the correct spelling nonetheless, because not everyone is familiar with the term or would search for it online. 🤔🤓
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This time is definitely different! And, i believe that Christmas 2024 will be the time of $100k, and the start of another rise. Or maybe the time of people actually using their bitcoin. So we have bitcoin moving like never before.
As you said, the dollar is not staying stable. We have gone from about 5% real inflation to 12% to about 25-50% depending on which asset. (and then, the crack up boom is coming)
So, the power curve, how much of it is measuring dollar go down, and how much bitcoin go up?
Of course there is a top, "all the money in the world", but i feel that long before then, no one will trade into fiat. When will that point be?
So, the S curve will be in play, but when will that start?
End of this year, start of next may see actual bitcoin adoption. Where, we stop speculating on a new technology, and start using the new technology. And that will change everything.
However, i may be too optimistic (time wise)
In order for me to really say bitcoin is being adopted. Price will be over 1 million, and we will hear of nations settling debts using bitcoin.
It is all coming, but it is so hard for me to put it on a timeline. It should happen now!… maybe next cycle? But i don't know if America has another 4 years. Biden wins with 125% of the vote, while 200% of Americans voted, and then we start going sideways at $70k bitcoin?
I feel the same about the "Supercycle" and all the nonsense about mega buyers. Math is kind, the universe is always right, God loves numbers more than humans.
Wow! I don't often learn something practical from a blog, but this one is full of information. I'm not a mathematician. Curves, logs--not my language. But you have packed this full of theoretical stuff that with a bit of study I can understand. It's like a course in economics, packed into one blog.
This part I get off the top:
Isn't this why we all hedge? Isn't it why @trumpman buys silver and supplies in bulk? Unshakable faith in any currency is a mistake.
Great blog. At the end of my busy day I will be reading again. So much to learn!
$PIZZA slices delivered:
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Thank you for the analysis.
It is difficult to conceptualize every relevant variable, and particularly black swans that, like asteroid impacts, completely transform every relevant variable. It is necessary to retain support during any human endeavor, like a back foot that prevents loss of balance during execution of a kick. While remaining anchored prevents spectacular flying, spinning roundhouses to the head that finish off your opponent, it also prevents suddenly getting utterly slaughtered by an unanticipated feint while you have no support on which to base a block.
Political machinations are utterly fundamental to economics. From time to time every economic trend is terminated when empires collapse. It is also impossible to reproduce an economic trend from one polity to another. For example the chart of US adoption of technologies does not resemble Russia's, or Niger's. Neither does that chart show what happens to the tech that has been superseded. What happened to the telegraph, or faxes, or steam engines? The differences in those charts is due to political factors as much as tech advance, and this is a consideration investors are well advised to keep in mind in the tumult of political upheaval ongoing today. There's a line of fire stretching almost from the Arctic to the Equator smoldering permanently in Kosovo, raging conflagration in the Ukraine, all but burned out in Gaza, and flaring up across the Bab al Mandeb. Everywhere there's fire sparks are flying. How can that risk of a blaze erupting all across that landscape be mitigated, even if you guess wrong about if and when it does?
Politics is a game of deception, and this is why poker players don't wear mirrored shades at the table. Keep in mind the players in the game are wearing poker faces when you reckon the odds of something that can end the game, like nuking Nagasaki, criminalizing crypto, or collapse of the global rules based order into total war. Normalcy bias is a risk during cataclysms. Sometimes the only game in town is suddenly not the game you were playing. Hedge accordingly. Unless you're Bruce Lee, don't try to win it all with a flying bicycle kick finishing move, and if you're Bruce Lee's son, watch out for Alec Baldwins. Be Indiana Jones in a sword fight.
Always remember that money isn't wealth, and preserve your real capital.
Thanks!
The only pain in that scenario is from selling early.
This probably works until purely tangible and physical constraints set in.
"All the money in the world" is estimated at about $85 trillion.
"Global GDP" is estimated at about $110 trillion
"Global market cap" of all equities/securities is an estimated $105 trillion.
When we reach a point of thinking that BTC can buy everything in the world multiple times... we either end up at some version of hyperinflation, or the idea of "value" breaks down completely, leaving the price of Bitcoin sort of moot.
At some point, the theoretical math bumps into tangible reality. Unless we change "reality," rendering this entire conversation irrelevant.
Fun to speculate on, though....
=^..^=