Bitcoin Global News (BGN)
March 06, 2018 -- ADVFN Crypto NewsWire -- The bullish case for
Bitcoin is far from obvious, but it is compelling enough that a
significant majority of the biggest cryptocurrency traders now move
most of the money they earn from altcoin trading into Bitcoin for a
long term HODL.
An ideal store of value is durable, portable, fungible,
verifiable, divisible, scarce, and it must be censorship resistant.
The last one is a new attribute that has become increasingly
important; "How difficult is it for an external party, such as a
corporation or state, to prevent the owner of the good from keeping
and using it." Bitcoin excels at censorship resistance, and across
the other attributes listed above as well, allowing it to compete
with modern ($USD) and ancient (gold) monetary goods.
The invention of Bitcoin created of a new scarce digital good.
Only 21 million bitcoins will ever be mined and most of these have
already been mined, with 16.8 million bitcoins in circulation
now.
The increase in purchasing power of Bitcoin creates fear of a
“bubble,” implying that Bitcoin is grossly overvalued. There is
some truth to this. The purchasing power of any monetary good is
higher than can be justified by its use value alone. The price of a
monetary good, $USD, gold, and Bitcoin all included, is not a
reflection of how much it is moving around the marketplace (its
"velocity"), but, rather, the price is a measure of how widely
adopted it has become for the "role" of money. Bitcoin passes the
use case test for “money” and this bodes well for Bitcoin investors
holding it for the long haul.
Further evidence that Bitcoin is a good long term investment
comes out of the view that Bitcoin’s valuation over time matches
the shape of a classic “new technology hype cycle”. The earliest
buyers in a hype cycle have an enthusiastic conviction about the
transformative nature of the technology. As the number of new
enthusiasts for the underlying technology investing during the
first phase dwindles, buying switches over to speculators who want
quick profits. Then, at some point, price drops rapidly, and the
speculative fervor is replaced by bad press and fear that the
technology was not transformative after all.
A stable price plateau forms where the original evangelists are
joined by the speculators (the retail and institutional “early
majority” investors) in accepting the pain of the crash and
adopting a renewed appreciation for the fundamental value of the
technology. That's where we are with Bitcoin right now. The current
Bitcoin plateau could persist for a long time.
We may be entering a boring, stable low for Bitcoin. This new
base sets the table for the next iteration of a repeating hype
cycle as laypeople and institutional observers begin to see that
the technology is here to stay and that investing in it is probably
less risky than it seemed during the last crash phase of the hype
cycling.
The next hype cycle and surge of Bitcoin's market cap will
happen when the late majority starts investing in Bitcoin,
increasing the total number of Bitcoin investors by perhaps 1000%.
There is no sure way to tell when that will happen.
The final hype cycle driving up the value of bitcoin would be
initiated when nation states start adding bitcoin to their foreign
currency reserves. Bitcoin would have to go to $380,000 per coin to
reach an equivalent market capitalization with gold. Many bitcoin
investors believe that that is where we are going once we finish
the final hype cycle.
Should you move all your altcoin profits into bitcoin and HODL?
It seems likely that Bitcoin is still early in its adoption curve.
But this article is just a starting point in trying to answer that
question. Do your homework, study the science and history of hype
cycles, and invest wisely.
By: BGN Editorial Staff