Bitcoin is skyrocketing into money still far away?
“The first phase of bitcoin (2008-2016) – to create a digital goods; second stage show that it is a valuable tool storage; third stage as a currency.”
I found a lot of people forward or share this my tweets, this is a very hot topic, so I want to expand my view in this article.
In my previous article or tweets, I will bitcoin written as a commodity, which caused a lot of people confused. Is it not a digital currency? Well, maybe, but it can not be called.
I do not believe that bitcoin as a currency is appropriate, I think it is a can be used for trading goods and services of goods. Maybe in the future it will become a kind of currency, but now, it is not money, now, it is a scarce commodity number.
This passage took the first bitcoin article of the self, the release time is 2014 March.
In order to clarify my view, let’s take a little time to understand the difference between the value of goods, storage tools and money from the most basic level (these definitions are from Investopedia), I will briefly summarize.
The commodity is a kind of basic goods in an economy, although it may exist in different grades (A, B, C etc.), they are basically uniform, and easy to exchange. Gold, silver and other precious metals is a good example of goods, in addition to wheat, corn, pork, etc..
The tool is a store of value can not easily damaged goods (therefore, wheat, corn and pork will not be able to become a store of value, the tool) will not result in depreciation time (for example, mass production of automobiles or other similar products because of technology and time problem and a big devaluation, so they cannot as a store of value instruments). The value of storage tools usually have a basic level of demand, the price will not drop (such as platinum is a store of value, thought it was a store of value, in addition to industrial demand) tools may also cause structural changes in the local or global economy, even the black swan event. In essence, the value of the value of the tool storage will not decay over time, in fact it can also be increased.
Many copycat coin holder shouted said: bitcoin may be replaced because of better technology. It is possible, but bitcoin has a huge network effect, this is Facebook. I’m willing to bet that in the short term, there will be another kind of encryption currency because of technological advantages beyond bitcoin. If this happens, it is the main factor in the network effect and the demand for goods, rather than technology.
Money is the common basis of transactions in essence. It is very difficult to carry a large amount of gold or other value storage tools, so the money was born, in the history of money has made gold (endorsement is no longer, I won’t go to discuss this issue). The money is used as a medium of exchange, otherwise, you will need to constantly calculate a commodity exchange rate for another commodity.
If you are interested in learning more about monetary knowledge, you can read Nick. Saab (NickSzabo) in the outstanding papers written in 2002: “the origin of the money”.
So, what is bitcoin? By writing “Nakamoto bitcoin: electronic cash system” a point of white paper, I think it misled many people, yes, this is a great long-term vision, but it does not explain, bitcoin has become a digital cash system before it needs to experience what steps.
In terms of bitcoin, which will become a trusted medium of exchange (or money), it needs stability, and has low volatility. Currency volatility and unpredictability in business is particularly harmful, if bitcoin volatility is too large, the enterprise will not be willing to accept this risk, the same applies to those who earn bitcoin. I’m not talking about bitcoin as a payment network, through third party services (such as Abra or Bitpay) will be converted into currency. I have discussed, is really accept and hold bitcoin, because as a medium of exchange, they are trustworthy, and will not devalue.
Bitcoin since its inception, high volatility has become its label, there are many reasons, including the market / liquidity pool in the past 3 years has expanded (more information in the previous articles). In fact, bitcoin volatility is the lowest level in history. (data from BTCVol)
It is more and more close to the stability, but this does not mean that we have arrived at the second stage. I think bitcoin first rose to $3000, I believe that later in the year, it is entirely possible. But it must maintain low volatility and steadily rising pace, if prices rise too fast, in fact there is no help for it. If before the end of 2017, bitcoin rose to more than $4000, then I’m sure we’ll see a crash, then we will return to the origin.
As I pointed out in the beginning of the article, I think we have just experienced the first stage of bitcoin, bitcoin is widely accepted as a kind of digital goods, millions of people hold the bitcoin miners digging it and get good returns, bitcoin is also regarded as the scarce and the deflation. The final total does not exceed 21 million (in the next 100 years, the surplus can produce bitcoin is not more than 5 million).
If the first phase of bitcoin is as a kind of digital goods, the second stage will prove that it has sufficient market demand, then bitcoin prices will rise steadily over time. Bitcoin holders are an interesting group, they want to see the return of 20 times a year is like crazy, drug addicts in seeking the next stimulus. In the next few years, we should aim at the year 2-3 times earnings, and earnings should decline steadily over time. Dynamic compound growth, will ensure that we can still get 20 times the return, but requires a longer time period. Bitcoin has become more stable, it is close to the value of storage tools, and eventually become a kind of currency. Then, bitcoin will usher in a new era, and this may need to wait 5 to 10 years.
If you want to know more bitcoin related, with “money said” WeChat (micro signal: bishishuo), note: BtcTrade. Before entering the official exchange group.