“Why Bitcoin” (Scarcity)

Here’s a short thread explaining why

The supply/demand graph for a normal good is in equilibrium at the point where the demand and supply curves intersect.1/

Demand is downward sloping; an increase in price causes a movement along the curve resulting in a lower quantity demand. The supply curve behaves oppositely. 2/

A Giffen Good is is a good whose demand curve is initially upward sloping; as price increases so does the quantity demands.

The demand for a Giffen Good eventually does decrease at the point in which it becomes too expensive. 3/

While Bitcoin itself is not a giffen good; it does share the trait of an upward sloping demand curve.

Bull runs tend to bring more attention and demand to Bitcoin; creating an upwards sloping demand curve. 4/

Bitcoin is different from a Giffen Good in that it is a monetary good and it can never too expensive and bend the demand curve

Therefore it’s demand curve can be represented more simply. 5/

This thread discusses how demand for money (bitcoin) is always positive at the margin and therefore Bitcon’s demand curve will not bend backwards in the same way a Giffen Good’s demand curve does. 6/

x.com/MitchellHODL/s…

Bitcoin could also be compared to a Veblen Good which have also has an upward sloping demand curve.

The difference between a Veblen and Giffen Good is that the former is a luxury good and the latter is an inferior good with no substitutes. 7/

Bitcoin, being a monetary good, does not perfectly fit the definition of either a Veblen or Giffen Good.

But it does share the trait of an upward sloping demand curve; just for different reasons. 8/

Bitcoin’s absolute supply limit of 21,000,000 creates a perfectly vertical supply curve.

An increase in the price cannot result in an increase in the quantity supplied.

Price is purely a function of the quantity demanded; it is not based on equilibrium between the curves. 9/

This illustrates how an increase in the quantity demanded (q*) affects the price (p*) 10/

As the quantity demanded (qD) increases, the slope of the demand curve will be forced to increase exponentially as the quantity supplied (qS) is capped and technically qD cannot be greater than qS.

qD !> qS

11/

Demand and Price feed off of each other. An increase in demand increases the price but also an increase in price increases the demand.

The 21,000,000 limit on supply, and effectively demand, forces parabolic price action. cc @Wicked’s Stock2Fomo 12/

x.com/w_s_bitcoin/st…

Lastly, Bitcoin has a limited supply but is is also, effectively, infinitely divisible. So even as price and demand go parabolic, people are still able to acquire Satoshis.

Moreover, the parabolic increase in price will spawn the ‘unit of account’ phase. 13/

If you haven’t already realized: there is no apples to apples comparison for Bitcoin. It is unlike anything else on Earth.

It is revolutionary to technology, economics, energy, history, and more

Not having exposure to #Bitcoin is the greatest risk an investor can take.

As long as this Stock2Fomo thesis has yet to play out, it is still early for Bitcoin

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