Bitcoin is the “Ultimate Arrow Security” which means it will continue to appreciate due to fundamental economic theory.

Bitcoin is a pure state contingent claim that pays off when fiat fails, precisely the Arrow security concept. It delivers extreme purchasing power in a high inflation or sovereign debt crisis state and is worth far less in normal times. That makes Bitcoin a natural hedge. By combining Bitcoin with other assets you can replicate any desired payoff across macroeconomic scenarios. Rational allocators across corporations, banks, central banks and sovereign wealth funds will adopt Bitcoin once they see it as the foundation of a complete contingent claims portfolio. It is not a speculative gamble; it is the Arrow security for the one state everyone secretly fears. As an Arrow security, economic theory implies every rational wealth holder should hold some Bitcoin. The only question is what share of their portfolio to allocate, based on their objective function and the probability they assign to the extreme crisis state. Since Bitcoin’s payoff is extreme this means when its price falls, rational actors will buy as soon as their allocations dip below target. This behavior is already visible in recent price action. Bitcoin’s price itself also signals the market’s assessment of the likelihood of that Arrow payout but also the fraction of participants who have accepted it’s status as an Arrow security. Bottom line: as more participants recognize Bitcoin as an Arrow security, its price is unlikely to fall significantly. Prices may plateau for extended periods if there is limited new information on the probability of a large payout. Only a fundamental and convincing restoration of monetary discipline by fiat governments could cause Bitcoin prices to fall. Anyone who has studied history knows that is unlikely. This argument rests on Nobel Prize level economic theory that is now widely accepted among central banks and corporate financiers. Happy Bitcoining. We’ve done it. We have brought sanity and discipline to a multipolar world order. submitted by /u/68dot164dot57dot219 [link] [comments]

Apr 26, 2025 - 05:04

Bitcoin is a pure state contingent claim that pays off when fiat fails, precisely the Arrow security concept. It delivers extreme purchasing power in a high inflation or sovereign debt crisis state and is worth far less in normal times. That makes Bitcoin a natural hedge. By combining Bitcoin with other assets you can replicate any desired payoff across macroeconomic scenarios.

Rational allocators across corporations, banks, central banks and sovereign wealth funds will adopt Bitcoin once they see it as the foundation of a complete contingent claims portfolio. It is not a speculative gamble; it is the Arrow security for the one state everyone secretly fears.

As an Arrow security, economic theory implies every rational wealth holder should hold some Bitcoin. The only question is what share of their portfolio to allocate, based on their objective function and the probability they assign to the extreme crisis state. Since Bitcoin’s payoff is extreme this means when its price falls, rational actors will buy as soon as their allocations dip below target. This behavior is already visible in recent price action.

Bitcoin’s price itself also signals the market’s assessment of the likelihood of that Arrow payout but also the fraction of participants who have accepted it’s status as an Arrow security.

Bottom line: as more participants recognize Bitcoin as an Arrow security, its price is unlikely to fall significantly. Prices may plateau for extended periods if there is limited new information on the probability of a large payout.

Only a fundamental and convincing restoration of monetary discipline by fiat governments could cause Bitcoin prices to fall. Anyone who has studied history knows that is unlikely.

This argument rests on Nobel Prize level economic theory that is now widely accepted among central banks and corporate financiers.

Happy Bitcoining. We’ve done it. We have brought sanity and discipline to a multipolar world order.

submitted by /u/68dot164dot57dot219
[link] [comments]