Thread by @Crypto_Macro

1/ St Louis Fed piece on Bitcoin:

- Bullish case: price will appreciate indefinitely due to capped supply & ever-growing demand.
- Bearish case: price will fall to zero, as it's an intrinsically worthless.

=> price likely to remain between extremes.

research.stlouisfed.org/publications/e…

2/ Bullish case too optimistic because Altcoins represent *substitute products*.

"There are no fundamental economic factors determining the exchange rate between two intrinsically worthless objects. Something similar holds true for Bitcoin and Altcoin."

3/ Trading above fundamentals is commonplace.

- Many securities trade above fundamentals.
- Gold trades above its value as measured by its industrial applications.
- The USD trades above its fundamental value in discharging tax obligations.

4/ Bitcoin is a database management system tailored to meet the needs of a given constituency. The fundamental demand for Bitcoin derives from the fact that there are at least some people who values this. This fundamental demand provides a non-zero lower bound on price.

5/ In summary: "Economic theory predicts price of an unbacked asset is likely to be highly volatile and inherently unforecastable. While Bitcoin's price is not likely to fall to zero, a flood of Altcoins is likely to place downward pressure on the purchasing power of Bitcoin".

I've been talking about alts representing *subsitute products* for bitcoin, for over a year now => alts supply reduces bitcoin demand. Good to have the Fed backing me up.