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Author: Admin | 2025-04-28
As increased or improved regulatory oversight or improved education, there is an issuance schedule that halves approximately every 4 years. Assuming demand remains stable or increases over time, this means that such demand is met with an ever-decreasing rate of supply. With the protocol capping the number of bitcoins to ever be mined at 21 million, this type of S-curve adoption pattern ultimately is best measured by the use of the logarithmic scale.What Can We Deduce From Bitcoin On Log Scale?A linear visualisation does not provide relevant information on Bitcoin's price evolution because investors are generally concerned with returns (i.e. percentage gains or losses) rather than absolute price changes. Consequently, we are presented with the ideal conditions for using the logarithmic scale. What was once a flat, and seemingly uneventful line that persisted until 2017, is now better visually represented with its upward-sloping curve.The logarithmic transformation indicates to us that the rate of change over time can be characterised by a weakly increasing trend. That is, a curve that is rising but gradually becoming flatter over time. What is particularly worth drawing attention to is how Bitcoin’s seemingly extreme fluctuations in absolute price in the last year appear hardly volatile in comparison to our log-scaled curve. Indeed, the curve is smoother and now we can sensibly compare and interpret peaks and falls in price across time.However, this is not to say that Bitcoin has not been volatile nor that it has reached a point where price changes are flat. In its early years, Bitcoin holders would have experienced some of the greatest volatility as depicted by significant percentage movements in and around 2011, 2013-2014, and 2018-2019. Despite this, we can see that an investor that purchased the digital asset just before any of its price drops during noteworthy peaks in 2011, 2014 or 2017 would still be in a positive position on their investment. In comparison, recent fluctuations are relatively small to these historic price movements. Thus, periods of short term volatility aren’t as significant to the long term investor as they are on the short term trader.ConclusionThe most appropriate way to view Bitcoin’s price over long periods of time is on a logarithmic scale. A traditional linear scale mischaracterises growth and this is because Bitcoin growth follows the same rapid adoption growth patterns we have seen in new network technologies such as the radio or the internet. This necessitates the use of a logarithmic visualisation in order to analyse percentage changes in price rather than absolute movements. It is only through the logarithmic lens that we can unlock the bigger picture.The content, presentations and discussion topics covered in this material are intended for licensed financial advisers and institutional clients only and are not intended for use by retail clients. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented. Except for any liability which cannot be excluded, Monochrome, its directors, officers, employees and agents disclaim all liability for any
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