Monday, October 21, 2024

Disproving the Moon

This is yet another treatise on the disgusting but very interesting economics of the crypto world. The belief that bitcoin can reach ten, or why not a thousand, times its current worth, is amusing at the highest level - and why I come to this sub! Because: what would happen if it did?

Well, imagine the cash flows of crypto as a closed system. This approach can elegantly predict a very, very low probability of the so called "mooning", an event a certain other sub is dreaming of at most days of the week. The proof lie in that there is no way of escaping the dreadful zero-sum-equation. What it looks like? Glad you asked.

What we want to look at is cash flow in filthy, filthy fiat, to and from all crypto tokens as a whole. Cash into the system, Cash going out. "Closed system" also means we ignore whatever Butt Magic goes on inside the crypto space, such as wash trading, dog coins, forks and whatever other very, but not really, interesting things they have inside. In the end, it's just inefficient databases painted with hype on the inside. What really matters is cash entering and exiting.

First, the outflows. There's the people and the corporations (exchanges, miners) that make their money from BTC. The salaries, running expenditures and profits of these entities are an outflow of actual money from the crypto system. They get their money from the inside and pay their fiat bills with that. The total outflow could be estimated since many companies are public, I won't do that here but it's of course an obscene amount. Which in turn is mostly the reason for the current BTC price, I'd argue, but that's beside the point! Next, we also have the people ("investors/ speculators") cashing out their Butts in favor of cash. These people are really important, for later. So, the costs of running the system, and the "investors" cashing out, are the outflows.

Then there's the inflow. People buying into crypto with cash, through exchanges or other means. Possibly indirect investments through ETFs and other assets, also investing into miners and exchanges, but in the end it's mostly the same thing: people choosing to push their cash into crypto for the sake of making money from it. But let's not forget! There's the second type of inflow: people paying for transactions when they are using crypto as an actual currency! Sadly (for butters) this is a very, very small inflow, compared to the other type - investment with the hope of tapping into the cash flow at some future point. Just look at the percentage of the block reward that is fees - a vanishingly little.

Anyway. There we have it. All cash ins and outs can be placed into those categories. Nice and easy.

What's the conclusion? Well, it's that there is simply no cash value appearing by Butt Magic anywhere. The value of the ecosystem is governed by the inflow / outflow of usable cash. This also means that if any butter at any time chooses to cash out, this money is taken from the inflow. And that is after the running costs have been paid!

So. What if Butt Magic increases the token price? Then even more cash inflow has to compensate for any outflow when someone suddenly wants to spend their hodled tokens. Suppose a token would hit ATH all of a sudden, wouldn't you think there would be someone that would want to collect from their investment, after hours or even days of waiting for the lambo? And even if no hodler wants to do this, the miners have to, to pay their bills, eventually. But wait! The money always comes from the inflow, and what is there to say that the inflow will increase in lockstep with the outflow? There are after all only so many fools out there, from whom money can easily be parted... So, at the higher price, even more such fools are needed to pay for each no longer hodled Butt. And even if they hodl a while longer, what if it rises to 50 % more - won't someone paper hand it? Then 50 % more fools are needed. Always more fools.

Conjuring more tether and other bullshit could of course keep the price from falling for a bit, but there's no escaping the fact that anyone who wants to cash out, in actual money, must be paid by someone investing actual money. And that is after the "investors" have compensated the corporations profiting of the crypto world. It's a zero sum game after all...

Well, the Butter will say, it's not like there's another asset class somewhere, where the object of investment actually create external value from the enterprise itself... Right??