We don't know how much a Bitcoin will be worth on the exchanges on a day-to-day basis, but there are a few things we do know:
- Every day, more and more websites, e-businesses, and brick-and-mortar businesses accept Bitcoin as a means of payment;
- New software, apps, and services for Bitcoin are launched every week;
- Hundreds, if not thousands of very intelligent and experienced programmers and entrepreneurs are dedicating their time to Bitcoin's development;
- Bitcoin makes possible previously impossible or costly financial transactions.
What do the above mean? Continuous growth of the Bitcoin economy.
What is continuous growth divided by 21 million? A continuously increasing price for a Bitcoin.
The fall from $32 to $4.80 is literally a bump in the road. Makes you wonder how high it can go, doesn't it?
I have recently come to the conclusion that bitcoin is not going to go way up in value. That, in fact, this very possibility is what is currently holding the currency back from wider-spread adoption. I detail all of this in a recent paper I wrote. I would be interested in hearing your feedback.
ReplyDeleteYour paper says:
ReplyDelete1. Whenever the value of the coin moves up, there is extra downward pricing pressure.
2. Whenever the value of the coin moves down, there is extra upward pricing pressure.
The main problem with this is: How do you measure value? You've simply pegged the price of the coin(roughly) to another currency or basket. Many proponents of Bitcoin as a currency are proponents precisely because it is not pegged, and its known rate of inflating the money supply will lead to a much more stable value than any fiat currency.
Hi Anonymous,
ReplyDeleteThere is no pegging to another currency or basket. The "value" of the coin is not to be equated with its "price" in any one currency.
All I am saying is that the current bitcoin was not designed to be stable in value -- it was designed to be massively deflationary. We could instead design one that is more stable, and that would make it more likely to be widely adopted.
In effect, the value of the coin would be held down to somewhere near the cost of energy to generate it. This not a peg, it would be a market force holding it down.