Today I will explain the paradox of why the combined forks of BTC+BCH had more value than BTC alone.
In theory, the price of Bitcoin after a fork should be equal or less (loss of confidence), to the combined value of the two tokens after a fork. However this didn't happen. Some are amazed that it didn't. But why didn't it?
The reason can be found in the connection that exists between price and perception of price:
Bitcoin priced at 4500$ is an arbitrary number, based on an arbitrary quantity (21mn coins). The price only appears "high" only because of scarcity. It's the equivalent of Berkshire stocks, currently priced at 266k USD each.
If Satoshi picked a number like 21 billion coins, nobody would talk about bubbles, high prices, etc at 4.5$ each. Instead people would be like "wow, this will go to 50-100$ for sure". Now, talk of 50.000$ or 100.000$ per coin seem somewhat stretched or premature on a 21mn coin supply - yet it would be the exact same thing as talking about prices of 50$ and 100$ on a 21bn coin supply: One thousand dollars would buy you the exact same percentage over the total coin supply.
So August came and BCH came into the scene too. Almost instantly, the combined price was over 3000$ - which was more than the previous all-time-high of BTC.
BCH price, despite climbing to over 1100$ for a short period, didn't affect BTC - because BTC price was (and is) already suppressed in terms of "perception scaling": After certain price levels people feel like it's heresy for something like Bitcoin to cost so much...
BCH represented a mental bypass to the arbitrary limits our perception places on BTC price - and thus the combined value of BTC+BCH were effectively higher than BTC alone. This demonstrated, for the first time perhaps, the effect that our perception has on the price levels.
Now does this mean that if we fork Bitcoin over and over, that we can "scale" the price more as an aggregate compared to Bitcoin alone - as our perception can more adequately manage a sum of 1000$+1000$+2000$+6000$ rather than something like 10000$ ?
In terms of perception the answer is yes, however the end result is not certain because it also introduces other variables like trust in the limited supply, risks in choosing the X or Y forks, confusion, etc. BTC is still new to the world and it will be more beneficial in the long run to build and preserve trust with the people in terms of its underlying principles and fundamentals.
Rivetting analysis. I know there was talk of denominating in millibits, to counter this perception issue. (who wants to spend $1000 on 0.2 of something?)
Indeed. It seems like you are getting ripped off or something when you pay too much for getting too little.
Millibits definitely make more sense as a denomination... Gold which is way less scarce than bitcoin (over 6 billion ounces compared to 16 million bitcoins), is typically priced in grams and ounces rather than kilograms or tons. Although depending the size of organizations involved, different weights are used. Central banks count their reserves in tons, gold depositories count in terms of 400-oz bars (12.5kg), small gold dealers give prices by the gram, etc.
A downside to not having a central, issuing authority, is that we need to wait for common usage to deliver up names for the different weights/sizes/denominations of fractions of coins, to fill the gap between 'bitcoins' and 'satoshis'
And on top of that, people are really bad at math and fractions, heh...
There are so many beautiful writing of your blog. I hope the difference between BTC up BCH showed. It's a lot of interest I read it and I understand many things. But BTC is now the most popular digital currency
quiet helpful to clear my understanding!upvoted!
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