Well once again $1T economy doesn't require $1T in cash.   i.e. the world economy $75T annually runs on ~$10T in cash (M0).

Money supply is a timeless value.  Values of economies (i.e. GDP) are timed value (i.e. usually $x per year).  You can't directly compare the two and they will never exactly equal each other unless velocity is 1.  Usually the same unit (dollar or Bitcoin) can be used in MORE THAN one transaction per year and thus the velocity is >1.

Yes, they have to.

Like usual , appreciating your post.
But can I have your view on the "velocity" of those two ? BTC and $ ?
I have the feeling that currently bitcoin is the tortoise looking at the number of transactions in the blockchain.

Agreed, I think this is a troll thread.

We have very limited data to work with.  Velocity is the metric which balances money supply and GDP.
GDP = Velocity * Money Supply.

In plain english terms
(economic activity) = (avg number of times a $/BTC is involved in an economic transaction) * (money supply)


Change in velocity is why we have seen little inflation despite the fed printing an insane amount of cash.  If velocity remained constant we would have seen massive price inflation which would drive up at least the nominal GDP and force companies to spend their rapidly depreciating cash reserves.  Everyone has heard about how much the fed is printing (increase the money supply) however the other component is velocity and in this lackluster recovery velocity has collapsed.  More money is offset by less transactions per unit (dollar) and thus the economy remains sluggish.


BCT image proxy doesn't like the image so here is a direct link to the chart: http://research.stlouisfed.org/fred2/graph/?s[1][id]=M1V


In the Bitcoin world I don't know of any detailed analysis of GDP or velocity.  The nature of Bitcoin makes that difficulty,  although as Bitcoin gets larger I imagine economists will attempt to estimate the GDP just like they do other economies.  Even in "real" economies GDP, velocity, inflation, and even money supply are just estimates. 

One crude way would be to look at things like blockchain.info "estimated transaciton volume".  Blockchain attempts to remove the change from the transaction, but not all those transactions are "economic" and thus don't contribute to the "Bitcoin GDP".   Someone moving coins from one wallet they own to another wallet they own is not economic activity, anymore than moving $100 from your checking account to your savings account adds to the US economy.  Per blockchain.info there were 73 million BTC in transactions in 2013.  The average money supply for 2013 was 11.4 million BTC.  If we assume all blockchain tx were economic (not likely) and there were no economic off blockchain tx (not likely) that would be a velocity of ~6.5.  The hard part would be quantifying economic tx vs non-economic txs.

In comparison, national economies generally have a velocity of between 5 to 10 when looking at the M1.  Bitcoin is technically more like M0 but it probably displace the utility of M1 so that might be a better comparison.   Currency is a store of value, and a unit of account (used in transactions).  Bitcoin has been primarily the former but if it was used in transactions heavily I would imagine it would have a velocity on the high end of national currencies (i.e. velocity of 8 to 10 or higher).  On the other hand if BTC remains primarily a store of wealth and not a transactional currency it could have a very low velocity.  I don't know if anyone computes the velocity of gold (or more specifically gold bullion and coins) but my SWAG is that it is very low (<1).  A lot of gold once minted simply never changes hands for years or even decades.

TL/DR version:
We don't have enough information to estimate with any degree of accuracy the velocity, or GDP of the "Bitcoin economy".  Most national economies have a velocity (M1) of 5 to 10.  If we Bitcoin ends up similar that would mean supporting a $10T economy would mean a money supply valued at $1T to $2T.  On the other hand if Bitcoin was used more as a store of value then it would drive down velocity and increase the value of the money supply.

Interesting.  Would you agree that the M3/M0 ratio would be larger in a fiat-based economy than in a bitcoin-based economy?  

For example, I have very little "cash" at home, but plenty in the bank.  Of course my cash at the bank is not my cash at all and is instead lent out, thereby increasing velocity.  In a fully-developed bitcoin economy, I believe I would store a much larger fraction of my bitcoins in a paper wallet, outside any bitcoin banking system that emerges.  Perhaps a lot of economic participants would be content to sit on paper wallets and slowly take advantage of the natural deflationary gains, rather than risking their coins by lending them out.  

When you factor in those in the top tiers of the wealth distribution holding in excess of (say) 75% of the coins, could not velocity in a fully-developed bitcoin economy drop below 1?

I wonder if we can find historical data on velocity during times when gold coins circulated freely (and rich lords had huge vaults full of the stuff).  

The fraction of government employees who are True Believers is fairly small, at least in the US.

The typical government employee is disgruntled to at least some degree and is there for the pension.

Crypto won't survive. That's the whole point. Look you could have had some other cool and fancy and amazing formula/equation or whatever you want. In the end the government is going to tax/regulate. If anyone is going to sit here and say this will be tax free with no regulations, you literally are some kind of self delusional free spirit thinker who thinks they know everything. Governments always tax, they always regulate, they always create laws/bills/amendments/policies/reforms.

The thing that puts me off the most about the virtual currency community by large, is that you all are so incredibly idealistic to the point of insanity. Come on down to earth and look at the track record of the US government. Don't sit there and say oh ra ra bitcoin da best, oh ra ra nothing can stop us, oh ra ra we are so incredibly hipster in the virtual world. Once everyone gets in on this almost none of you will even want to be associated with it. Same with Facebook, all the adults start using it, your parents, uncles, aunts, grandparents etc and everyone is fleeing Facebook and hopping on the twitter/instagram/pinterest/vine "next best thing that is for cool alt people".

I am extremely prejudiced against these type of people because my girlfriend has so many stupid friends like this (some are even into bitcoin) and they are the most annoying pretentious stupid people I have ever met.

I like bitcoin if you are addressing it towards me.

I agree with the fact that some major institutions will benefit greatly from using bitcoin, it might not necessarily be a government  anytime soon, but some major institutions will/is adopting it.  We need to find and encourage those institutions with what little power and influence we have.

We need to create allies to stand up to the banks with us. We need to be able to surround the Basel based cartels with counter-levers.

We will need some legal or at least wink-wink nudge-nudge jurisdictions where we can convert into other forms of liquidity, whether gold or IMF money.

I personally think that bankers and those regulators in China and India (especially China) are already buying big into bitcoin for themselves personally. Watching trading closely with the BTCChina.com price movement, and knowing Chinese culture, where corruption and well positioned networks taking care of theselves isn't really considered corrupt like we in the West do, I think there is little doubt that the very Government officials who banned deposits onto the exchanges are themselves getting Yuan on the exchanges. Even if they aren't getting their own deposits on right now, the Chinese population assumes that's what's happening.  It's just the accepted way their economy and culture works, it's considered normal.


I think we will have to consider diversions and distractions as key in our maneuvering. We will have to show the Basel, London, New York cartel “one main initiative” while actually going after multiple lesser initiatives more quitely. Remember, many within the cartels and governments know just how messed up it all is even more than we do, and are probably hedging their wealth just like we do. So it's not that the beast is totally committed against Bitcoin. Officially as an institution they may be, but as component individuals in those institutions they are not, so we already have our “double agents within the enemy. “

China is a great example, right now as the world's 2nd largest economy they have practically no power in the IMF and global banking/printing regime. They have no derivatives market power from the Yuan, they have no international repo market power. This is why they are buying shit tons of gold and have printed $15 Trillion in the last 5 years (there really is shit tons of money to get out of China). They are getting ready to assert themselves by playing unfairly. They are waiting for the natural cracks in the Western alliances to form, then China will say, oh look, we have real money, gold and real copper, and real, etc., etc. They already have the influence  all over Africa and Asia to the point of boxing out all Western corporations from getting any major new (mostly engineering) contracts.

Why wouldn't it be in  China's interests for example to get a contract with Friedcat and right now on the exchanges be buying Bitcoin , and then back 2 million BTC with gold as a part of asserting themselves into the new global reserve system (whether or not that new system is the reworked Special Drawing Rights regime when the IMF gets reshuffled).
Many states have been screwed by the Anglo-American-Basel power triangle, why wouldn't they give Bitcoin a home and thus let more bitcoin flow to them? The central bank of Malaysia is cuttting edge and has been diversifying into very innovative baskets of reserves for a long time, why wouldn't they buy bitcoin and give it a home?

We just need to provide a few side doors for the powerful who are inside the Anglo-American-Basel triangle to feel secure in the liquidity of their own personal Bitcoin reserves. And then we secure Bitcoin's double-agents in the halls of Basel, the Square-Mile of London, on Wall Street and in Washington.

We should probably set up a fund for legal and political economic lobbying and alliance building. Just laying down when finally libertarians have a real chip on the grand poker table of world affairs would be to act like the slaves they try to make us think we must be. ... When it's time to go all in! Show some f*ck*ng balls my fellow libertarians! Do not just bow down because they dangle power over you like it's naturally theirs in the physical order of the universe. It is mostly in all our minds, it is phenomenological 'power' first! They have pieces on the board of the chess match of perception and belief, but so do we (and most of all, let them play chess while we play Go). Their fiat is weak, everyone knows it. We must see their strengths and weaknesses but also our strengths and weaknesses... And play to win!