Most People Get Bitcoin Volatility Completely Wrong

Why is something that's so incredibly predictable as far as supply, why does the price go all over the place? And the answer of course is because of demand is even if the supply is predictable, the demand is not. So let me give you an example of a hypothetical asset. Let's say I launch a stock on the stock market. And this is the Joel stock. Here's how it works. I just announced to the world. You know, there's no good way of doing this, otherwise it'd be a fun experiment. But I announced to the world that there's this stock trades under this ticker Joel Jel. And it has this unique characteristic that on day one, it pays a dividend of $1 on day one. On day two, it pays a dividend of $2. On day three, $3 all the way through day 10,000. And on day 10,000, it pays $1,000 dividend. And then after that, zero. It's worthless after that. Now, that would be the most predictable stock that has ever existed in the world because on every single day for a thousand days, you know exactly how much it's going to pay you in a dividend and and you know that at the end it's going to be zero. Okay. So, what would happen? You would think something that is completely predictable like that would be have a linear sort of price rise or price fall, but that's not what would happen. So this thing is announced and the very first thing that would happen is people would think ah it must be a scam. Joel's not really going to do it. And so but somebody somebody's going to come along and they're going to pay 50 cents for this stock that is going to pay a dollar on the first day. You know like before it even launches somebody's going to pay 50 cents for it thinking maybe I'll get lucky and he will pay a dollar on the first day. So now you have a stock that should be worth at least a dollar but it's it's trading at 50 cents right because people are not sure the dollar will get paid. Well, as c soon as the first dollar gets paid on day one, speculators are going to jump in, which, you know, there's nothing wrong with speculation. And in fact, all investing is speculation to some degree. And somebody's going to jump in and say, "Wait a second. If he paid a dollar on day one, I'll bet he's actually going to follow through with $2 on day two." And so, what's going to happen? Well, somebody's immediately going to bid the stock to a buck 50 or $2. Well, then somebody's going to say, "Hey, but wait a second. This stock is actually super valuable because he's going to pay $3 on day three, $4 on day four, all the way to $1,000 on day a thousand. So, somebody's gonna say, "Hey, this total thing is going to pay out $500,000 over the course of its life. That's at least worth $100,000." So, the price very early is going to spike from basically nothing to $100,000. And then people are going to freak out and say, "Yeah, but what if Joel doesn't actually pay what he said he's going to pay all the way through day 1000?" And so the price is going to crash from $100,000, you know, way down to $50 or something crazy. And then people are going to say, "Oh, wait, but he does keep paying. You know, we're only on day whatever 20, but on day 20 he's actually paying out the 20 bucks. Maybe that means on day a,000 he will pay out the $1,000. So then the price is going to zoom from 50 bucks up to $200,000. And then it's going to crash down to, you know, $100,000. Then it's going to zoom to $350,000. Then it's going to crash to $200,000. And it's going to go all over the place. And towards the end of the thousand days, people are going to speculate, hey, maybe it's going to keep going past the thousand days. So, some people are going to be bidding on the fact that they think even though the whole thing is programmed to not pay anything after a thousand days, they're going to think, hey, maybe Joel will just keep it going. So, people are going to bid the stock way high in anticipation. Then, when it becomes clear that no, he said it goes to zero after a thousand days, it's going to crash again. So when you take a step back and you look at that price over that time, it's going to be extremely volatile. Even though in retrospect when the all the dust settles and it became clear that the whole thing worked just as planned, a dollar on the first day, $2 on the second day, all the way through $1,000 on day a,000 and then it goes to zero. Even though it did completely 100% the predictable thing it was supposed to do, if you look at the stock chart over those thousand days, it would be absolutely all over the place. So that's an example of something that is completely predictable, but that the human psychological behavior of people anticipating whether it's going to happen all the way through the thousand days, whether it's going to continue past the thousand days and buying it in anticipation that hey, if I buy it on day four, I can get the value of all the days from day five through day 1000. And so they're going to bid the price way past technically the $4 you're supposed to get on day four. very predictable things can be very um very unpredictable as far as value based on demand. So Bitcoin works the same way. Even though the supply of Bitcoin is completely predictable and even though you know we know in the year 2140 that there's going to be 21 million and the value of Bitcoin you know it never goes to zero because the Bitcoin unlike my stock example Bitcoin never goes away and in my stock example it just goes away at day a thousand. Bitcoin never goes away when it reaches 21 million coins. They continue to circulate for the rest of you know human existence.