This article explains why doubling the number of bitcoin investors will more than double the price.

In the 12 months to September 2017 the number of bitcoin investors rose by 43%, yet the bitcoin price rose ten-fold.

I have done alot of very deep research on bitcoin trends in terms of number of users, and the supply and demand changes. This research is published in my steemit articles.

It is clear from my research that, unless there is a major global ban, the number of people holding bitcoin is going to increase by more over the next 12 months than the increase of the last 12 months.

First let’s look at how new users affect the price of an imaginary crypto currency.

Example 1

If a coin has 100 users willing to invest $100 then the logical market cap should be $10’000. If there are only 10’000 coins, then each coin should be worth $1.

Example 2

Now imagine 100 new users arrive willing to invest $100 each into the coin. You would think that the market cap should now become $20’000, and the coin price should therefore be $2. Wrong!

This is false logic, because it implies that each of the first 100 users sells half his coins, (selling 50 each, or 5000 in total), so the new users can buy. The reality, is that only a small number of the original users will be sellers.

Let’s assume that only 10 of the first 100 investors care to sell. The other 90 early investors are willing to stay invested at any price.

Now we have a supply of 10 X 50 = 500 coins to feed the 100 new investors willing to invest $100 each. The new price of the coin will have to be $20. ($10’000/500 = $20).

As you can see, by using the assumptions in the example above, doubling the number of investors would result in a coin price which is 20 times higher.

This explains the large rise in price of bitcoin, despite the not so large rise in the number of new investors (in the year to Sept 2017 there were 43% more investors). Basically many of the early investors, didn’t feel like selling, even after a ten-fold price rise.

In the month of October 2017, the monthly increase in new investors was accelerating. The October numbers imply that the number of bitcoin holders will increase by more than 100% in the next 12 months. This is a 100% increase of a much larger number than the number of 12 months ago. It’s like going 100==>143==>286.

So the number of new investors in the next 12 months could be 3 to 4 times the increase over the last year.

The primary motives for selling could be spending needs. But who invests their shopping money in cryptocurrencies?

You might sell because you found a better performing investment. (Please tell me what that is?)

You might sell because of FUD. Great! Now you are back in fiat. Enjoy the lack of volatility as long as you can. Bitcoin’s volatility is like crack cocaine. You just have to come back.

What do all these new investors mean for the price of bitcoin? At what price would you sell? What would you do with the money?

Very important:

I want to reward those who actually read my blog. If you read this far, just use the word “hodl” in your comment and I will reward you. If on the other hand you are a regular comment spammer, leave me a few words along the lines of “Awesome post”, or “Thanks for sharing” and so on and it will entitle you to a free flag.

The below chart illustrates bitcoin’s “Price memory feature”. As each $1000 milestone is passed, the price $1000 lower looks like a good buying level. Two months later, it’s history.