What is the fair price of Bitcoin? “Believers” are the key
What is the fair price of Bitcoin? “Believers” are the key
Seeing an asset go from almost $ 20,000 ten months ago to $ 6,000 today is scary. In the world of financial markets, fear is a feeling that can cost you everything you have. To stop being afraid of what is happening today we must understand why it is happening. What scares us the most is what we don’t understand.
The first cryptocurrency, known as Bitcoin, was created in 2009 by Satoshi Nakamoto in response to the fall of Lehman Brothers and the consequent global financial crisis. Nakamoto’s goal was to create a decentralized and secure currency that could be used by anyone, without correlation to the political scandal or the economic crisis. The idea was that the price of Bitcoin would depend exclusively on the supply and demand of its users.
Now, on the tenth anniversary of Lehman’s downfall, the Bitcoin community has evolved tremendously. Bitcoin is now a symbol of a brave “new economy”, even if it has had its share of crises and initial troubles.
Due to the growing interest of the financial sector in crypto, the Internet is now full of articles and analyses from the top Wall Street traders. They explain, with charts and technical financial terms, why the crypto market is being affected right now. These explanations generally use the traditional capital markets mechanism to demonstrate crypto movements.
Perhaps these methods of analysis are not appropriate? After all, cryptocurrencies were created to disrupt the banking sector. To understand crypto, you need to put aside what you know about the stock market, even if it’s the closest comparison available to us and stay focused on the Bitcoin model.
As Albert Einstein said: “We cannot solve problems with the same thinking that we use when we create them”
First, we must make an important distinction: Bitcoin is not an action, nor a derivative of any underlying. For example, if there was a company called “Bitcoin Ltd.” behind the Bitcoin token and that company was making $ 1 billion in annual revenue, as a Bitcoin holder, you would be entitled to exactly … Zero dollars. Why? Because Bitcoin is not equity. Bitcoin is also not a currency, as we know it. Digital money is decentralized and therefore decoupled from any central bank decision, political scandal, war, or major economic event. So what is Bitcoin?
Bitcoin is a concept: it is the concept of being able to electronically pay for any good, service or transfer money safely to anyone, almost instantly, without any physical third party charging fees or restricting their movements. You cannot compare Bitcoin with anything you know. It differs from everything because, essentially, it is a machine that executes an ideology without any human being or underlying situation that alters its program. Bitcoin only depends on its regular users.
What are these “regular users” or “Bitcoin believers”? These are the people who endorse the concept of Bitcoin – anyone who buys Bitcoins to use it for its intended purpose. This community of people is the only secret key to define the fair price of Bitcoin.
“Adoption” is the key
A famous adage says, “You can’t know where you’re going until you know where you’ve been.” The past often contains the answers of the future, so let’s look at some important stages in Bitcoin’s history.
Stage 1: Birth. In 2009 Satoshi Nakamoto mined the first Bitcoins and sent them to a developer community. An offer for Bitcoins was officially made publicly. As more people became aware of this payment concept, they adopted it by buying tokens to use for payment or money transfer. The price rose to $ 0.30 in early 2011 due solely to supply and demand. The community of regular Bitcoin users was increasing faster than the growing offer that miners put on the market.
Stage 2: The black market. Businesses and e-businesses began to embrace the concept and helped the community grow, while in the meantime making the name “Bitcoin” more popular. Some will say (as I did a few years ago) that Bitcoin was the currency of terrorism, drugs, and money laundering, but then I was missing the point: Bitcoin has no rules, no ethics, no regulation. Bitcoin was just a concept, adopted, day by day, by a larger community of regular users that caused the price of the token to rise.
Stage 3: Wall Street. A few years later, Bitcoin became very popular but purely as an investment, an asset, a speculative instrument – part of the concept had been lost. This precipitated the dramatic rise to $ 19,511 in 2017. Thanks to Wall Street players, the press around Bitcoin, and the dreams associated with it (becoming a millionaire and driving a “Lambo” just “holding”), millions of buyers retailers rushed. in, giving the appearance of mass adoption. But this was an illusion: they were buying advertising, rather than the concept.
Stage 4: today. People have forgotten that Bitcoin is a concept in essence and what is the concept. This year’s collapse has nothing to do with regulation, Goldman Sachs crypto ambitions, ETF creation, etc. Bitcoin’s core concept has not changed. Bitcoin’s price is only supposed to reflect the number of people who have embraced the concept.
Keeping Bitcoins in a wallet “for better or for worse until bankruptcy separates us” is not a Bitcoin adoption. Such “investors” don’t understand what they have and can panic their investments in the next big move, causing the price to drop and causing others to panic as well. This is what we have been seeing lately. So what happens next?
Going back to the original concept, the price is only supposed to reflect the number of people who adopted it, we can see that the price of Bitcoin is an indicator of the number of believers / regular users of the concept.
Before entering Stage 3, Bitcoin was trading around $ 1,500. Back then, before the “buzz”, this value represented the number of people who embraced the concept (and used Bitcoin to electronically pay for any good, service, or securely transfer money to anyone).
Although it was superficial and ephemeral, Stage 3 had a very positive effect: it gave Bitcoin great visibility and greatly increased its community of believers.
The real question is: How many more believers have we had since January 2017? Two times more? Three more times? Ten times more?
Surely, there are no fewer believers and users of the Bitcoin concept than when the price showed $ 1,500- $ 2,000? That means we could see those prices again. The logical conclusion of this analysis: BUY! TO BUY! TO BUY!
Even if we don’t provide an exact number for the fair price of Bitcoin (stay tuned for our next piece), the purpose of this article is to break the secret of the fair price – regular Bitcoin users.
“Investors”, “traders” and others who neglect the core concept of the currency may momentarily move the price up or down, but the minimum price will be implicitly defined by the number of users who regularly need Bitcoin. This community of people is designing the demand: they are the right price.