Good Morning Everyone,
Jurrien Timmer is the Director of Global Macro at Fidelity, which is one of the largest Asset Managers on the planet with an estimated $4.5T assets under management (AUM). He shared a fascinating thread this morning where he revisits the supply/demand dynamics of bitcoin, following the deviation of bitcoins price from Plan B’s stock-to-flow model; and compares network growth to that of mobile phones as well as the internet as a useful analog to help model the exponential growth of the bitcoin network.
We previously discussed the growth of bitcoin compared with that of the internet, and believe it’s a valuable analog, but the comparison of mobile devices is a good one I had not looked at previously. The thread begins as follows:
The chart shows the stock-to-flow in yellow, mobile phone S-curve model developed by Timmer in blue, the internet adoption S-curve in grey as well as bitcoins price in black. Visually it appears that the price is tracking more in line with that of the internet and mobile phones than the stock-to-flow model. Timmer explained:
Given bitcoins issuance schedule is fixed, and known into the future you would think there is little to model on that side but Jurrien makes an interesting point on the potential diminishing returns as a result of the reduced (deflationary) issuance over time.
He compares a modified S2F model, a multi-variate modified supply model which tracks more tightly with that of mobile phones and finds when comparing it in hindsight that it tracks more accurately on the whole than the original S2F.
Something he notes with both that of mobile phones and the internet is that the growth slows over time, and becomes asymptotic, meaning it begins to hit its limit. With the mobile phone analog it tracks tightly with his modified S2F for the next 10 years before really starting to flatten out. The internet curve began flattening out much more already. Jurrien explains as follows:
At the end of the day models are not comparable to reality. A model is by definition a simplification. It’s one of the ways we humans try to understand the complex world. It is impossible to model the complexity of reality which is important to realise when working with models. They can be a guide at best. At worst they’re like having Stevie Wonder as your guide.
Is bitcoin’s adoption mature? In my opinion, far from it. Most people that own bitcoin still do not even realise what it is, and the implications of it existing in the world. It’s impossible to truly know what a global sound monetary standard can do for humanity in entirety over time. The gravity of this innovation is way beyond what most people are appreciating i believe.
I don’t know which one we have here, whether we have a guide that knows where they’re going or if we’re walking blind but no doubt some fascinating data to look through regardless. It’s particularly interesting to me looking at the adoption curves of various innovations like cars, TVs, radio’s and even VCRs. The thing is to acquire all of those you need money. I believe what we’re looking at will far eclipse all those things combined, and the true power of this technology is not something that can be captured in a model.
Alex Gladstein has highlighted that something in the vicinity of 40% of the worlds population lives under authoritarian rule. This technology has the potential to upend this by enabling people with a monetary standard that can not be inflated away, can not be seized and can not be censored. What happens when the global human society is enabled in a way that has never been possible? I can’t say for sure, but i’m willing to bet it will enable a renaissance on a scale that will eclipse anything that has come before it - and i’m here for it.
Hope you all have a great weekend. I’ll talk to everyone Monday.
AK
