1/ On the eve of #Bitcoin 's quadrennial supply shock, inquiring minds are wondering whether the so-called "Bitcoin halving" is "priced in". In this thread I will explain that it is not and it cannot be priced in.

2/ It is important to understand that #Bitcoin is not a traditional financial asset and cannot be priced as such.

3/ In finance the term "priced in" refers to whether information that affects future potential cash flow of a revenue generating asset or company has been properly discounted into the current valuation, factoring in things like interest rates.

Yet #Bitcoin has no cash flows...

4/ #Bitcoin 's price level is determined entirely by its reservation demand. That is, the demand to hold it in reserve in anticipation that it will keep or hold its value. Reservation demand for monetary assets is game-theoretic. Everyone tries to anticipate everyone else's view.

5/ The game-theoretic setup is not unanchored, however. It is the the monetary properties of #Bitcoin that drive a fundamental demand from those who believe it will out-compete other monetary goods, such as gold, at the margin. https://medium.com/@vijayboyapati/the-bullish-case-for-bitcoin-part-2-of-4-c918977c40f6

6/ The quadrennial #Bitcoin halving throws a spanner in the works by creating a supply shock that disrupts the game theoretic equilibrium that would otherwise be established.

Between halvings an equilibrium is sought by the market. https://twitter.com/real_vijay/status/935412305952612352

7/ Due to Satoshi's brilliant insight to build a difficulty adjustment into #Bitcoin 's mining protocol, Bitcoin miners are continually made into marginal businesses. That is, they're largely forced to sell the bitcoins they mine to pay for their continuing costs (electricity)

8/ In equilibrium, #Bitcoin 's price would reach a level where the supply of bitcoins continually being sold by marginal miners would match the inflows from those seeking it as a store-of-value (e.g., using a recurring fraction of their paycheck to buy #Bitcoin aka #stackingsats).

9/ The Bitcoin halving shatters this equilibrium by reducing the sell-side pressure by half. All things being equal this excess of demand over supply would cause the price to rise to a level that would reach a new equilibrium.

10/ In reality, as a new equilibrium is sought and the price begins to rise in response to the supply shock, the "madness of crowds" sets in and investors rush to acquire bitcoins at prices higher than a stable equilibrium. https://twitter.com/real_vijay/status/935412170090795008

11/ The height of the final crescendo top cannot be known (or priced in) because it is determined by the latent cohort size "reachable" in the current hype-cycle and the individual demand curves of those in the cohort. https://twitter.com/real_vijay/status/1135800393781223425

12/ We do know, however, that during this cycle #Bitcoin will achieve something close to geopolitical significance in monetary terms. The world will be watching. https://twitter.com/real_vijay/status/1141599567026294785