I thought it might be a good time to bring this up again. See if we can expand a little.
So what we are seeing now are three
additional, compounding effects, on the money supply and monetary velocity.
UTXO lock-in - Coins taken out of supply, because they are under the minimum network transaction fee.
Mempool Lock-in - Coins are taken out of supply because they sit in a mempool limbo.
User Lock-in - Coins taken out of supply because users fear to move them with decreased network usability.
Speculation: This huge reduction in supply / decreased velocity will lead to bubble bust, moon juice. Furthermore a separation in value will occur due to decreased utility of on-chain w.r.t. off chain coins. (coins on an exchange are relatively more valuable, as they have the extra utility of easy to sale)
The above compounded effects will heavily incentivise exchanges to risk fractionally reserving their coins.
What exchanges provide daily proof of reserves?
@lunar I've been thinking about this recently.
@Christoph Bergmann GDP = Money (unit used to measure value) × Velocity
why do you say GDP = amount of units x value of unit x velocity - value is not quantifiable by any other means other than the money unit when measuring GDP?
[quotre]
Gross Domestic Product
Known also as GDP, this is a measure of the economic production of a particular territory in financial capital terms over a specific time period.[/quote]
I found this definition which is consistent with my rudimentary economics classes: looking at the equation below the Bitcoin GDP should be a about $90 Billion is that realistic?
and GDP stays the same, than velocity and value of units are inverse (more velocity = less value, and the other way round)
So, paradoxically money is worth more if it is less usable.
When we look at the situation leading up to the Hyperinflation in the Weimar Republic we see that during WW1 the government over inflated the money supply - during that time people were saving - pulling money out of circulation. Money velocity was low, low monetary velocity allowed money inflation to increase without affecting the Price levels too much - so there is a
correlation in this example with low velocity = More value). (the
MV=PT) If money velocity were lower and Transaction Levels the normal monetary inflation would have been felt much sooner. - Monetary inflation devalues the value of Money. Increasing velocity does not.
It's not a paradox the money in circulation drooped and was offset with monetary inflation. The money value reflected as P remained relatively constant (the MV=
PT) Transaction levels
T most certainly dropped this is the
causation - that previous spending turned to savings. P may have gone up but
T dropped off the charts as the vast majority of production was destroyed in war few goods flowed in the in the economy.
After the war when the destruction of production stopped the inflation rate increased to pay back war reparations
M increased.
T went up - as goods and services went into the economy;
V increased and
P shot through the roof.
Consumers corrected for the hyperinflation by increasing velocity (by spending it quickly consumers were able to get better value from the money) increase velocity being correlated to hyperinflation, not contributing to it. The catalyst of the problem was normalizing of in economic measured as Transactions. That liquidated savings - releasing the previous monetary inflation held by savers at the same time as new monetary inflation. - High velocity just allowed people get more value before abandoning the monetary system.
So looking at this a bit I would like to understand
MV=PT better in relation to bitcoin, can someone who understand this better help me.
Option 1
M:
$16,179,500,000 x V:
5.52** = P$850*** x T:
105120000 ( T 1MB transaction capacity per year =
red fixed value)
Option 2
M:BTC
16,179,500 x V:
1** = PBTC
0.154 x T:
105120000
** measuring velocity has in the past been described as Bitcoin Days Destroyed. however it changes based on the value being exchanged how can this be measured - i think it should be less than 1?
***$850 is the average value of a transaction at a $1000 exchange rate - sucking some estimates out of my thumb based on USD Transaction Value from blockchain.info average BTC transaction.
