Different Stages of Understanding Bitcoin

Stage 1: Ignorance

You’ve read FUD blogs about how bitcoin is synonymous to a Ponzi scheme. You’ve been told bitcoin is nothing but Farmville tokens. You have seen the chart that puts the number of major retail outlets accepting bitcoin at < 10. You checked the 5 years price chart of Bitcoin and the gains are nothing like ever seen before. At this stage, it’s only logical to conclude that Bitcoin is a scam. Bearish views from the likes of Jamie Dimon, Warren Buffett and other reputable value investors are there to reassure your skepticism about Bitcoin. Also,the transaction fee has been reported to be on a steady upward slope.

Finally, you’ve concluded in your mind that bitcoin is nothing. Worth nothing. Can’t be compared to gold. A lot of people are going to cry and you have evidence of people that have panic-sold to reaffirm your bearish thesis. Not for me, you say as you close the coinmarketcap.com tab on your browser.

Stage 2: FOMO

Fear of missing out. A friend who you recently warned against buying bitcoin told you he just tripled his money. “How is that even possible?”, you ask. Bitcoin is supposed to crash after touching $5K? Why is it still up? You are now contemplating between the list of top crypto exchanges. Kraken, Coinbase, Cobinhood, Binance are all free to new users. You load some cash into Coinbase. 5 hours after buying bitcoin, you are already up 7%, making over a $1,000 in less than a day. This can’t be real.

Stage 3: Full Understanding

Bitcoin just plunged 15% in less than 20 minutes. The $10K gain you accumulated over the past 6 months has disappeared. You log in to telegram and twitter and its a festival of bearish memes. You also heard the founder of Litecoin, Charlie Lee, sold all his stakes in Litecoin. Meanwhile, Mr. Satoshi, the founder of Bitcoin is yet to be found.

You download the bitcoin whitepaper once more to read.

Then it hits you. Bitcoin was meant to be the solution of a mathematical problem ensuring the preservation of the uniqueness of digital assets by preventing double transfer from user A to user B. This transfer is registered on a central ledger and confirmed by miners who are paid to solve a mathematical function faster than attackers can invalidate the transaction.
You realize that the only thing driving up the value of bitcoin all this while has been nothing but pure speculation that it will replace FIAT currencies while performing all the functions of money.

Stage 4: Accepting Fate

The bears were right, bitcoin was only a profitable investment when the first wave of investors got into it. The value rose tremendously due to the scarcity( limited number of bitcoin that could be mined) ensuring that participants could market the scarcity-effect to drive up the price. The introduction of other altcoins with features to address some of the shortcomings of bitcoin has also put a pressure on demand for bitcoin as the holy grail of cryptocurrencies.

Now, you understand why the pros have been calling Bitcoin a bubble. You also understand why Bitcoin fans love it. The volatility, occasional crashes to buy the dip, ignorance and the dream of buying a Lambo before the age of 25.

Who wouldn’t want all that?? Finally, you decided to HODL.