Bitcoin’s recent volatility in value is just a series of the newest and spectacular highs and lows since it was created in 2009. (Despite its recent fall, BTC is still five times higher. times since April 2018, before making a new peak).
Critics often boycott Bitcoin buyers, seeing them as innocent victims of the fraud bubble. But if we look carefully, we can track Bitcoin price history through 5 aspects. Each aspect reflects a different group of buyers and the contribution to long-term value growth.
Bitcoin grew out of a small group of cryptologists trying to solve the “double spending” problem of digital money: “cash” stored in a file format can be easily copied and used over and over again. This problem is easily resolved by financial institutions, but cryptographers want a solution more like physical money: private, untraceable, and independent from third parties like the row.
Satoshi Nakamoto’s solution is the Bitcoin blockchain, an encrypted, secure public wallet that records anonymous transactions and stores it in multiple copies on multiple computers. This early Bitcoin feature is described in Nakamoto’s original White paper. It argues that Bitcoin will dominate existing forms of cryptocurrencies such as credit cards, which are more advantageous in limiting reverse fees on buyers and reducing transaction fees.
From the outset, Nakamoto also promoted Bitcoin as a freelance audience. He did this by emphasizing the lack of central government involvement and the independence of Bitcoin’s own from both government and financial institutions.
Nakamoto criticized the central bank for devaluing the currency by issuing more money, and designed Bitcoin to have a finite amount at issue. He also emphasized the anonymity of Bitcoin transactions: safe, if more or less, from the prying eyes of the authorities. Liberals become ardent buyers and advocates of Bitcoin, not rebels for financial reasons. They have maintained a major influence in the Bitcoin community.
However, these are still small elements, and Bitcoin only really took off in July 2010 when a brief article on Slashdot.org was addressed to young and tech-savvy people. This community was influenced by the “Cali Idea” – which believed in the ability of technology and entrepreneurship to change the world.
Many people have bought small quantities at low prices and are also a bit hesitant to find themselves again as their investments have multiplied. They are increasingly volatile by its price and often favor “holding” Bitcoin (a word commonly used by traders). Holder stressed that the Bitcoin price would “to the moon” (from being said 178,000 times in bitcoin forums), and said he would take the lamborghini cars from the profits. Unreasonable taxation hurts the community and a commitment to hold Bitcoin maintains its value.
The remaining two groups contribute to the history of Bitcoin more conventionally. The fourth group consists of investors who are attracted to Bitcoin’s volatility and price peaks.
On the one hand, we have day traders who want to exploit the volatility of Bitcoin’s price by buying and selling very quickly to take advantage of short-term price moves. Like all investors in other asset classes, they have no real return in the big picture or intrinsic value but just the price of the current day. They only have the extreme “buy” and “sell”, in order to try to influence the market.
On the other hand, we have people drawn by price bubble news. In essence, the category of bubbles in the press is often designed to discourage investors from potentially having the opposite effect. These investors participate in a “beauty contest” in Keynesian parlance – they are only interested in what others are prepared to pay for Bitcoin in the short to medium term.
Those who balance categories
The last and newest group for Bitcoin investors are portfolio balancers: more complex investors buy Bitcoin to prevent potential risks in the financial system. According to modern portfolio theory, investors can reduce the risk of their portfolios overall by buying Bitcoin because its peaks and lows are not aligned with their other assets. This is how to protect when the market collapses. This group is emerging, but is likely to promote Bitcoin’s acceptability among mainstream investors.
Bitcoin’s price will accordingly be shaped on a series of aspects that it draws from the wave of buyers’ success. While mainstream critics often boycott Bitcoin because it lacks intrinsic value, the market value of the asset depends on the handling of such aspects.
Bitcoin may collapse again, but like any other asset. Investing in Bitcoin also can’t risk more or less than investing in tech companies that are on the stock exchange without ever making a profit.