- Between 2017-2020 the bond markets collapses, inflation and interest rates rise.
- US stock markets return to historical P/E ratios of 16 or less. From the mid 60’s to the early 80’s P/E ratios went from mid 20’s down to 7. The S&P 500 went from 700 to 300 during this period. The Dow from 7358 to 2000.
- The price of bitcoin will rise as a decentralised version of protectable wealth. Gold and Swiss Francs will do well too, but not as well.
- This rise will lead to euphoria around Bitcoin and it will begin to appreciate faster than the rate of user adoption, much like the 2013 Bubble.
- Governments, the general public and large funds will take part. It will correct dramatically but still be at least 3 times the previous trough which was $220 at the start of 2015.
- At this stage, when bitcoin leaves it's longer term trend line, and s&p 500 stocks seem to be trending towards record lows(pe5-15), it will be the time to put money into stocks, gradually.
- This could be over 5-10 years. Stocks stayed sub 15 pe for 12 years from the mid 70’s to mid 80’s (1974-1987) so this may be hard to stick with but dollar cost averaging would have paid off well during this period.
- More Countries will secede as they blame weak nation state monetary policies for their economic woes.
- The scaling problem will be solved not due to rational thinking but because the economic incentives will outweigh the egos.
- I don’t think price can be predicted except to say it will be more than 10x today’s price if this transpires. Rick Falkvinge and Wences Cesares do though.
This is a positive outcome scenario for bitcoin, driven by macro events. Best to think of it as Science Fiction. While writing this I keep in my mind that there is a nontrivial chance that Bitcoin could go to 0. I also run a bricks and mortar retail business so these events would be potentially very bad for me. In the next 10-15 years the following things could happen:
Willy Woo has a useful breakdown of how to value bitcoin using the quantity theory of money. This process has separately been used to make enormous valuations by people with early vision in bitcoin. So lets have a look at four of the most prominent outlier bullish predictors.
1. Rick Falkvinge - Founder of the Pirate Party announced that he was puttin all his savings into bitcoin in May 2011. At $10 a coin this was prescient. He also claims that Bitcon will be worth $2-5m. His thinking is that the banking industry is heavily regulated. A deregulated version of it has the potential to replace the total value of it. "I'm counting backwards. It is a transactional system and a store of value. What is the size of that market? How much can bitcoin take? It is going to replace international trade."
2. Tuur Demeester - Early Bitcoin investor and in 2012, predictor of central bank crackdowns on digital currencies. - In the above chart he shows off some of the markets that bitcoin could disrupt. If bitcoin can replace offshore deposits it could be worth $800k
3. Wences Cesaraes - Sold his compny Patagon for $750m in 1997. "There is a 20 percent chance it goes to Zero.....I think that there is a higher than 50% chance that bitcoin is goes to more than $1m."
4 Chandler Guo - Earlly angel investor in bitcoin. One of the biggest miners in China. In a few years when bitcoin becomes the basis of the world GDP like Guo envisions, bitcoin will most likely reach a market cap of trillions of dollars. This is not far off Rick Falkvinge's prediciton if you consider the total money in circulation is estimated to be $60 trillion. GWP as estimated by CIA is approximately $78 trillion as of 2014.
Who am I missing? The requirement for this list is some early contribution or track record in bitcoin or elsewhere.
The further I progress the more I end up going back to try to understand core concepts that I have tried to skip over. One of the reasons for this is that if a definition doesn't make sense to me, my instinct is to plough on. A better system may be to take more time trying to define each concept in a way that I understand. To describe it in different terms. Sometimes I'll try write it out with a pen, then transcribe it to word text to see if I understood it. It's a slow process.
I started with the Rails Guides for each core Rails folder and then began my definition search. Here is a typical rabbit hole.
Bin - "Contains the rails script that starts your app and can contain other scripts you use to setup, update, deploy or run your application." What is the definition of a script though?
Script - A script or scripting language is a computer language with a series of commands within a file that is capable of being executed without being compiled." Why would file need to be execute without being compiled?
Compile - Compile is the process of creating an executable program from code written in a compiled programming language. Compiling allows the computer to run and understand the program without the need of the programming software used to create it.
This can go on forever and so for me the best thing is to try to grasp the core concept of the more common terms, before peeling the onion any further. In the first section of the guide this is the table in section 3.2:
Back to Bin described in my terms - 'A Folder containing the rails scripting language that starts your app'.
It does more than this but I wouldn't recommend going too deep at this stage if you're a beginner like me.
Config - 'Short for "configure your routes and database".' 'Allows you to adjust the general behavior of the application'. I tried looking further than this and quickly got lost, moving on.
Config.ru - Used for Rack configuration. What is a Rack? Its a Rack of servers.
DB - Contains database schema and migrations. The Schema basically describes how your data is organised. Its is a skeleton structure that describes the logic of the database. Also provides constraints.
Migrations are "incremental, reversible changes to relational database schemas. Took me a while to digest both of these concepts.
And then stop. This is enough for one session.
The best way to invest in ICO's ( Initial Coin Offerings), and avoid scams, may be to just buy Bitcoin.
As ICO's grow in popularity for functions ranging from Games to smart contracts, the scope for potential scams grows wider. The DAO hack was widely publicised, but it was never a clear proposition. Buying a share in a game is much easier in principle to understand. The temptation to 'get in at the start' of a promising game may prove to be overwhelming for some people. The marketing video for the Augmentorgame.com ICO, which launches in 2 days, is illustrative:
"As the sale progresses, databits will become more expensive"
" As a backer of the game you will have a once in lifetime opportunity"
"This unique opportunity will never be repeated"
"Destined to put you ahead of all the other gamers in the battle to be the best of the best"
It mixes gaming terms with lots of well known sales tricks, which those familiar with Robert Cialdinis book "Influence" will recognise. There is no mention of investments.
I'm not saying that Augmentorsgame is a scam. In fact bits of it look promising and is less likely to be one due to the Shark Tank publicity. I also think that ICO's have lots of potential once industry standards develop. But there are no warnings about how much money you could lose, which normally accompanies regulated financial products. What many founders have realised is that this is a much easier way to raise $1m than going out to venture capitalists.
My guess is that the full ICO speculative frenzy is yet to come. When a mainstream, game, singer, artist or film raises money with a coin that appreciates rapidly in value, it will be more widely reported. This could open the floodgates. So how might you avoid this?
I suspect that those who succeed in scamming will cash out early into bitcoin. Those who succeed due to legitimate ventures which bring some decentralised success, will also cash out at least partially into Bitcoin.
So if and when the speculative ICO frenzy comes, it might be worth avoiding the temptation to think you can predict the future and just leave your money in Bitcoin. Even if the BTC value drops precipitously after an ICO 'crash', remittances and other use cases might save it. It's hard to see the same outcome with the more narrowly focused coins. But I could be completely wrong, and my suggestion could lead you to lose all your money. At least I'm willing to admit that.
This is not investment advice. Speak to an investment advisor before speculating on anything.
Is it possible to predict what the future value of bition will be? The temptation is to look towards the well known thought leaders, or find people who said the value would go up before it happened. There is some merit in this if the predictions were specific and measurable. What is more difficult to find, and possibly more useful, is predictors who took a measured approach to future value, in a time of irrational exhuberance.
Industry participants survey
A measured approach to the future is one of the characteristics of 'Superforcasters' according to Philip Tetlock. In the following article 50 people were asked what the value of BTC would be in 12 months time. It was about $500 at the time. This is a useful survey because it is so specific. Out of the 50 asked, very few showed a measured analysis. Many prefaced their comments by saying its very tough to predict, but still predicted at least a doubling. One of the key factors may have been confirmation bias, in that their businesses would massively benefit from a big uptick in the price. Only one person predicted the right range. By simply saying they didn't know, the other two were more accurate than all of the other bullish predictions.
Alexander Lawn - Don't know
Frederick Thenault - - Don't Know
Alena Vranova - Trezor- Range from $50 to $10,000
Another interesting angle is surveys of miners. The full data isn't public so needs to be taken with a pinch of salt. http://blog.genesis-mining.com/customer-survey-results. Here are some of the conclusions:
Do these provide any predictive value? A survey doesn't typically involve much skin in the game but these people are mining customers so that would imply more commitment than a random survey. The problem is that the questions aren't specific enough to produce useful answers. The phrase 'catch up' could mean to close the gap in altcoin vs bitcoin total market cap by 5% or 100%. Or or it could mean catch up in terms of features. Betting markets might provide more useful answers.
You can short bitcion on the some of the exchanges at any time, giving an indication of the bull vs bear split in a market. But being able to bet on a public, specific outcome in a prediction market gives a weighting of where certain people see the price over a specifc time frame. On https://fairlay.com/market/bitcoin-to-top-1200-before-mar-2017/ There is a 25% chance at the time of writing that bitcoin will surpass $1200 by March 2017 months according to those willing to risk their money on it. There isn't much liquidity in the market though so its hard to say how accurate this will be.
Of the 3 methods, the first and third are useful but the second is not. Suffice to say that I will now look to Alena Vranovas Twitter in times of bitcoin euphoria.
Why Slack may be worth $20 Billion by 2020. Signals from Occulus, Github, Bitcoin and Stripe.
I wrote recently about how Bitcoin and Stripe are examples of technology success stories that may have been relatively predictable due to an early consensus among developers. Paul Graham was one of the first to popularise this idea with his article Return of the Mac. Are there other examples of this? If developers flock to a certain technology, is it a sure thing in terms of success?
There are many stories about the homebrew computer club as a precursor to the popularity of the home computer. But anecdotally it wasn’t obvious that Microsoft and IBM would be the main winners.
I had previously used Hacker News as an unscientific way to get a sense for these emerging technologies or companies that had a developer consensus. Y combinator now release their application data which provides a useful guide to what is ‘hot’ in Silicon Valley at least. Unsurprisingly VR, AR and Machine Learning have become popular.
In terms of companies that provide platforms, unscientifically, Slack has emerged as the most visible in the last year. The same may have been said for Github at one stage, with a strong developer surge of enthusiasm. Slack had a valuation of 3.8B around last round of funding. It will be interesting to see if it IPO’s or raises a bigger round, particularly as the funding environment has become more challenging.
There is a possibility that Y Combinator applicants have become more of a reflection of market trends than a signal. The book Superforcasters highlights that predictions need to be specific to be useful. They also need to be independently observed which is hard to ensure in an industry that can be an echo chamber. Having said that, many applicants to YC are risking their time on projects in this area so it may have some signal. Risking your money might be a better predictor.
When Oculus launched it was crowdfunded and a lot of early adopters were right in predicting that the technology was ready to breakout. Unfortunately due to the lack of an app coin, or crowdsale of shares the only people who benefitted were VCs. Erik Voorhees discusses this on the Bitcoin Epicentre podcast. If the regulations around this change, we may see more early adopters providing signaling and investment.
Another way to find this signaling might just be to follow those who have been contrarian and right in the past, and who express their predictions clearly on Twitter. By their very nature they have been able to resist public sentiment and persist with their theory until the were proved correct. A few examples would be:
Paul Graham. - , Apple’s resurgence, rise of angel investors
Naval Ravikant - Rise of Angel investors, Twitters success.
David McWilliams- Irish Property Crash
Robert Shiller - US property crash
Peter Thiel - Tesla, Paypal, Stripe, Palantir
Scott Adams - Trump will become president. Predicted before the primaries.
The ability to curate thoughts from these people on twitter may prove to be very useful if you could compile enough of them and use something like Nuzzel to distill some consensus. The danger is that they may only have been correct in the past and that provides no future potential. Also that they don’t stick to very specific timelines on their preditions so again you get nothing concrete to work with.
We know from that data around Venture Capital exits that there is a Power Law distrubution of outcomes. Which seems to disprove the idea that some companies like Stripe were destined for big things. But if you were to ask the early investors to put a probability on their potential for a $1B+ valuation, I suspect it would have been in the 50%+ range which is way off the average odds for success at angel investment level. The early Occulus backers felt the same way. Maybe crowdfunding, and superforecasters will eventually combine to create much more obvious signaling that was previously thought possible.
I give this prediction an 80% chance of success.
The human tendency to paint retrospective narratives on events, that we didn’t understand at the time is well explored in the book The Black Swan. Therefore predictions, and experiments that have the potential to disprove them, is a better way to review the past.
It’s now common on Twitter to point back to incorrect articles if they were critical of something, and laugh. But in fact predictors put exact terms on what they thought would happen, providing a useful reference to learn from. A more common, self-preserving strategy is to make vague predictions that have no useful purpose. Bitcoin has disappointed people in the last two years and so it's tempting to laugh at overly optimistic predictions.
Its worth considering the potential effect of this 'trough of disillusionment'. Fred Wilson touches on it here. http://avc.com/2014/09/the-bitcoin-hype-cycle/ . Total transactions are up on last year and anecdotally developer activity is strong (although this provides a counterpoint) but it hasn't translated yet to new optimisim. The popular exicitment around a rally hasn’t existed for a long while and this lag may be an opportunity. Arguably that started a year ago but hasn't hit the wider population outside the bitcoin community yet. Tuur Demeester has been a vocal proponent of this.
Potential problems for the currency stil include: A 51% attack. The rise of another currency. Adoption of blockchain tech without bitcoin. Reversion to gold in a crisis. Government clamp down. Core developer infighting around block size. Some unknown bug or other unkown unknowns.
The total value of remittances are 583 billion dollars worldwide . The total value of gold is 7.8 trillion dollars. Global debt in 2007 at the height of the crisis was 149 trillion. Its is now about 200 trillion. The nationalist movement has pushed more countries and areas towards secession. These are all possible factors that people speculate could help the growth of bitcoin or simply serve as a good hedge against sudden changes in these markets.
One of the less discussed factors around the long term strength of bitcoin is the consensus, among 'correct contrarians’ that it will be a mainstream technology in the future. By 'correct contrarians', I mean someone who has bet their time and money on a what seemed like long shot technology at the time, and been right about its success. I have listed them in a separate article. The only other time I have seen this is when Stripe was launched. It was not an investable theory but I did predict that would be big when they had 20 employees. I think the same applies to Bitcoin.
For all these reasons I think that:
Bitcoin may be worth more than $10,000 before December 2021 - I give this a 60% weighting in Dec 2016.
I would put the weighting of $3000 before December 2019 at 70%
If I'm wrong I'll have something useful to reframe or dismmis my previous assumptions. And something for people to laugh at.
After building my first ZCash mining Node I decided to do some sentiment research on Bitcoin. Particularly to try and find dissenting voices among technologists with a strong track record. I found a number of skeptics among economists but not many technologists. If anyone knows of any please let me know. Also any changes in stance would be interesting. By strong track record here I mean they have made large public, successful bets on technology. Usually this is in the form of their own companies or investments but I would also take a longbets, or any other bet.
Marc Andreesen - Created first web browser, Netscape. Early investor in Facebook, Twitter, Pinterest and Github.
“There have been 3 paradigm big changes in technology.
Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014.”
Peter Thiel - Founded Paypal. Owned 10% of facebook at IPO which he bought for $500,000 in 2005. Early investor in LinkedIn Yelp and Stripe.
“I do think bitcoin is the first...encrypted money…. that has the potential to ...change the world
Paul Graham - Founded Y Combinator, first investor in Airbnb and Dropbox.
“ I am very intrigued by Bitcoin. It has all the signs of a Paradigm shift, hackers love it, yet it's derided as a toy. Just like microcomputers.”
John Collison Stripe.com
“Genuinely a technological breakthrough, the fully decentralised nature of it is a phenomenal accomplishment.” Patrick Collison “ I really like bitcoin” http://bit.ly/1jqFUKp
Naval Ravikant - Early investor in Twitter. Founded Angellist.
“Bitcoin will eventually be recognized as a platform for building new financial services…..Silicon Valley knows a platform when it sees it, and is aflame with Bitcoin. Teams of brilliant young programmers, entranced by the opportunity, are working on [ideas]”
Chris Dixon - Early investor in Skype and Kickstarter
“Bitcoin is a serious proposal for dramatically improving the payments industry. There are plenty of open questions but I think it’s an experiment worth running.”
Richard Branson "Virgin Galactic is a company looking into the future, so is Bitcoin,"
Milton Friedman on Ecash in 1999 http://www.youtube.com/watch?v=6MnQJFEVY7s
“Bitcoin has the potential to be a massively disruptive technology,” “It is the leading digital currency and it’s growing fast.”
Wences Casares - Sold first fintech startup for $750m
“I think it will take time, just like the internet took time. But it may have more impact than the internet.” http://uk.businessinsider.com/how-bitcoin-may-have-more-impact-than-the-internet-2015-2?r=US&IR=T
Ketih Rabois - Dec 2013
I don’t have a strong perspective , I don’t know how bitcoin will play out. The underlying primitives are fascinating. …. There is no chance that bitcoin will suceed in the US. If someone in DC wants to make them illegal, it will be easy. Do I think bitcoin can suceed outside the US? Absolutely. https://www.youtube.com/watch?v=Ia1bqXuOg04
"I think it's a technical tour de force but that it is an area where governments are going to maintain a dominant role."
Paul Buchheit “Bitcoin may be the TCP/IP of money"
In the interest of balance I will include some well known detractors below. Except for Buffett none are succesful tech entrpreneurs or have made big, successful, public bets on future technology.
"Bitcoin is a mirage" - Slightly dissapointly compares it to cheques and calls it anonymous. The interviewers also were unable to challenge his view. https://www.youtube.com/watch?v=ewMYbX47-IE
Paul Krugman - Nobel Laureate
when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it’s a terrific medium of exchange
Robert Shiller - Nobel Laureate
Bitcoin is a bubble
Glenn Fleishmann - Writer/ Entrepreneur
Andreessen attempts to draw a parallel between the birth of the personal-computing era and the explosion of the publicly accessible Internet and Bitcoin. These are fundamentally flawed analogies
Matthew O’Brien of the Atlantic calls it, “the ultimate dotcom stock,” a bubble that will burst
Mathhew Ingrham - GigaOM writer
“Bitcoin can’t track the thief or reverse transactions”http://gigaom.com/author/mathewingram/inevitably burst?
Naval Ravikant "Winding up and Winding down are the unique challenges of our time"
Winding Up "Getting into a focused zone of productivity"
Winding Down " Going from that focused zone into relaxation"
Those who are naturally good at winding up seem more anxious. Driven by irrational but useful factors such as competition, work success, more money and status.
Its more obvious that those who are naturally good at winding down are more predisposed to be calm. More driven by work/life balance. They avoid over long work days and big swings in mood. Nobody gets the balance right.
Tim Ferriss is a good example of someone who has identified himself as a natural winding up guy who now spends a lot of time learning how to winding down. His podcasts address sleep, meditation, self reflection and he identifies himself as a highly driven, A Type personality.
When I think of a Winding Spectrum. I feel I'm 60/40 winding down vs winding up. And so I need systems to get good at winding up. For me these include, as many classes and mentoring sessions as possible. Often they force me to do some revision out of embarrassment and a feeling of wasting money.
I don't think the end goal is trying to get to 50/50. There are times when it might be worth sacrificing calm to get a project finished. Worth sacrificing sleep for an important public speaking gig. We often need a weeks holidays to counteract these periods of heightened stress.
My sense it that there is now more focus on winding down due the relentless distraction of smartphones. Meditation, yoga and other mindfulness practices have become more popular in the last 10 years. https://www.google.ie/trends/explore?date=all&q=mindfulness
Winding up well seems to be less explored and worth exploring.
Paul Graham and DHH often talk about the importance of long blocks of free time in order to fully engage in a programming problem. Both seem to be particularly good at not only blocking out these times but also resisting distraction during them.
I have heard it said that Hacker News is successful because procrastination is a constant problem for programmers. So if you do get a free block how do you get into a state of distraction free programming? If like me you aren't naturally good at blocking distraction, there is a system that has worked for me.
Naval Ravikant has identified on the Tim Ferris Podcast that winding up and winding down is one of the unique challenges of our time. His prescription is meditation and while I agree, I think the format is key. When I am working through a problem, I, like many people get that sudden urge to check and email, twitter etc . So the most important programming habit I have developed so far is how I react to that feeling.
Initially I tried meditating but got quickly distracted from it by the level of anxiety I was feeling about not getting anything done. What I eventually realised is that I was starting the meditation too late. The second the urge to break starts, its time to close the eyes and breathe and engage in a type of short term meditation for 5-10 minutes.
I now do this regularly during programming and although initially it felt like I was losing time, it has led to much greater productivity. Very unscientifically, the best indicator that I am relaxing well, is my eyes start darting under my closed lids. It feels like REM but could be unique to me or imagined.
In terms of winding up, I actually think it is a misnomer. For me, Winding up is getting into a productive 'zone', which is a habit built over time. And so to get good at winding up, I had to slowly build my consistency from 10 mins of programming up. The best way to do this was to join a class, or get a mentor who will automatically worked with me for an hour. From there I began to extend either side of the class.
The same thing has applied to winding down. It didn't work, felt frustrating and seemed pointless at first, until I set my expectations lower and just aimed for consistency over outcome. Getting good at longer meditation sessions seems to have helped me 'drop' into a useful 10 minute session pretty quickly.
And so managing my expectation for meditation has been the best way for me to improve programming concentration. It doesn't always work, but has certainly helped.