To be clear, I hate Bitcoin and all crypto currency. I just think it's dumb and makes no sense. Seriously, just think about it, it's a limited amount of space on this thing called a blockchain that produces nothing of value. We can't touch it, we can't taste it, we can't feel it, it's just there; and it's been there in upwards of $19,053.47 at the time of writing this Blog.
The reason, is the same reason by which our economy lives and dies: supply and demand.
It's been years since some of us have sat in a business or economics class, so I'll refresh your memory. In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market,
the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted.
In laymen's terms, a good, service, or financial asset is worth what people are willing to pay for it. And, usually, if there's more of a good, service, or financial asset, people will by less and vice versa. While the concept of Bitcoin and crypto currency is still quite fickle in my personal opinion, the fact is it's become extremely valuable by limiting it's supply (₿21,000,000 to be exact). This, coupled with the inevitable fading value of the dollar, has created an asset class that may become one of the most valuable we've ever seen in the near future.
Mind you, I hate saying all this! Truly, I do! It sickens me! Why? Because, like most of us, I've always viewed value, currency, and assets as either something (like a company) that produces a good or service or in the case of currency, I've always felt like it should be backed by something. This is where the door has been opened for Bitcoin and other cryptos to take over. The phrase "backed by something". Until August of 1971, the U.S. dollar was always backed by gold. Meaning, for every dollar bill, there was gold to account for it in the Federal Reserve. This kept our government's spending in check and inflation at a stand still. At the time, gold was approximately $35 per ounce. Today, it's priced at approximately $1,848 per ounce! That, my friends, is called inflation and it's what happens when there's no checks and balances placed on our money.
And so, Bitcoin has solved this problem per se, by creating a limited amount of a currency "backed by" complex mathematical problems solved in the blockchain. Again, I just think it's stupid, but it's the facts. Skeptics still look at Bitcoin's past, it's low's in the $3,100 range as recently as 2018, dropping from $15,145 in that same year! Yikes, that is scary; but I pose the argument now that Bitcoin was a misunderstood asset class at the time. Institutional investors and the big boy's had yet to buy in to the concept. However, that was then, this is now. They've begun to buy in and I don't see cryptos going backwards anytime soon. It's not where it's been, it's where it's going. And since there's a limited supply of Bitcoin, it's inevitable that the valuation will continue to rise. I say buy it at every dip, and buy it now, before it's too late. Call it just in case money.
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