10 million times in 10 years! The logic behind bitcoin’s madness!

2020 is a year to witness history! In addition to the epidemic, the US stock market crash, bitcoin this year has also opened our eyes! Just two days ago, the price of bitcoin broke through $280 million at one time, reaching a record high of $28365 per piece, the highest market value in the past decade. So far this year, bitcoin is up more than 233%. At recent prices, a bitcoin is worth about 15 ounces of gold. Since bitcoin was proposed by Nakamoto in 2008, it has been developing steadily for more than ten years. The price of bitcoin is from the initial purchase of two pizzas with 10000 bitcoins to the current sky high price. The price rise in a short period of more than ten years is shocking. Many friends on the Internet don’t understand that bitcoin is actually a virtual currency, a value given artificially. Our A shares have been fluctuating at 3000 for ten years. Why can bitcoin rise so well? In fact, this is not the first time that bitcoin has soared. In 2017, bitcoin prices were close to $20000, but the current round has lasted longer. In order to find out why bitcoin has soared, it is necessary to abandon the bias that its intrinsic value is zero. Because in the eyes of many people, bitcoin is the product of a string of code, and it has no value in itself. The typical representative is Mr. Buffett. He once said that “it is basically just an illusion and a way to transfer funds. The idea that bitcoin has great intrinsic value is a joke to me.” But if you were given a piece of gold, you wouldn’t think so. But notice that gold itself has no value. To primitive people, it is a piece of metal. But gold has become a common currency, which means that even if it’s just a man-made value, we can’t recognize its value. Secondly, bitcoin can continue to soar this year, which is inseparable from the current market environment. This year is very special, with the spread of the epidemic and the economic depression, especially in foreign countries. The pace of the Fed’s release of water has never stopped, and the world has entered the mode of risk aversion. And that just sets the foundation for the rise of bitcoin, because its biggest advantage is that it is not controlled by the state and the organization, and it is very flexible. We all have experience. Now there are restrictions on bank withdrawal. In the United States, banks have limited the amount of cash withdrawal to $3000. This has also created a better natural environment for bitcoin. For the new generation, it is very appropriate to choose bitcoin as a safe haven. Moreover, bitcoin is scarce. As we all know, bitcoin has a total circulation of 21 million, and now there are only a few million on the market. This year, bitcoin will be halved, production will be reduced and mining cost will be higher. As the saying goes, “the rarity is the most valuable”. This is a bit similar to diamonds. In order to sell diamonds at high prices, South Africa deliberately controls the production to ensure its scarcity. It is the scarcity that makes investors have the desire to speculate. Once someone speculates and someone is willing to give value, bitcoin will naturally rise. Will bitcoin plummet when it rises? Although the unknown field is unfathomable, here is still the author’s opinion. First of all, as the volume of bitcoin increases, the overall volatility will slow down. Secondly, judging from the global economic development situation next year, it is unlikely that there will be a global liquidity crisis similar to that in March this year. Therefore, there is a relatively small probability that the extreme situation, such as the sharp fall of the currency price to below $4000, will occur.

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