The scientific community is currently exploring patterns in complex phenomena, leading to the widespread use of mathematical models, with ‘power law’ relationships gaining popularity. The Bitcoin Power Law Theory (BPLT) is a recent predictive model attempting to forecast the future value of Bitcoin (BTC).
Although the BPLT may seem appealing on the surface, it relies on flawed assumptions to create a theory that claims to explain all of Bitcoin’s price movements but falls short in doing so. The power law, developed by former physics professor Giovanni Santostasi, predicts that Bitcoin will reach a price of $1 million by 2036, starting from when it traded at $1.
Proponents of BPLT argue that Bitcoin’s adherence to a power law places it in the realm of a physical system governed by physics due to the existence of power laws in nature. However, this mischaracterizes the nature of Bitcoin, leading to logical fallacies.
Categorizing Bitcoin as a physical system is a fundamental error as there are two distinct aspects of Bitcoin – the asset and the network – that predictive theories must consider. Bitcoin’s core lies in its code, cryptographic algorithms, and rules, making it better understood through information theory than physics. This misclassification results in various logical inconsistencies.
Bitcoin is not merely a physical system but also a social system embedded with trust and social pressures that influence its operation. Despite its decentralized nature, Bitcoin is subject to human behavior on a global scale, making it volatile and less predictable. Therefore, drawing parallels between physical systems and Bitcoin is a misalignment in nature and scale.
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