Market is about people and their perception of the market.
In a world where people are crossing their fingers as Bitcoin escalates towards $6000; every fucker is having their opinion.
These are the same people you and I run into every day and they fall into either one of these buckets depending on their IQ.
IQ < 0
Who’s definitely not going to make money
- Who is living under the rock and has yet not heard of the fancy new girl in town, Bitcoin.
- Whose ass is scared of the unparallel volatility of Bitcoin.
- Greedy morons who jump because they heard in some bar that it’s ‘hot’.
IQ >= 0
- Who’s just here for the fun and make some quick money because why not. And because they are ‘fucking awesome trader'.
- Who’s making money not by holding or trading bitcoin but by selling the idea of Bitcoin to dumb kids around the block.
- Who believes that Bitcoin is of great future worth and hoards it.
- Who uses Bitcoin in their day to day transactions.
Enough about people; for now. We will now look at another piece of the puzzle before seeing how these people fits into the bigger picture that “BITCOIN IS GROSSLY UNDERVALUED”.
Common sense #1:
What should be the worth of a bitcoin?
- Suppose the GDP of the whole world is $1000 trillion after 20 years.
And we know that there would be $21 million Bitcoins.
So each bitcoin is worth,
$1000 trillion / $21 million = $47,619,047.62
Simply put, more than the number of Bitcoins, should be the value of a single Bitcoin.
Common sense #2:
Bitcoin is deflationary in nature. So, unlike the dollar, its worth increases with time. As a result of which people tend to hoard it rather than using it for their daily transactions and thus reducing the liquidity and widespread adoption.
So, it makes sense that bitcoin is undervalued. But, how much?
Now, this is where people come into play. All their opinions, however dumb they are, matters more than we think. Since, everyone from the above mentioned buckets participates in the market, they form a kind of harmony in which the market flourishes. Just like our ecosystem. Herbivores and Carnivores, both are important to maintain stability. People who use Bitcoins daily create liquidity. Dumb people who lose money helps boosts the morale of winners who in turn spread the word and more people follow into the system. More the people enter into it, more is the trust reinforced in the system. Therefore, a right mixture of people from different buckets will create a conducive environment for Bitcoin to flourish. And if that happens, then and only then, under current scenario is Bitcoin grossly undervalued.
By the way, you and I; we are winners. Why’s that? That’s the story for another day. See you around.