Where does Bitcoin stand? More importantly, what is the future the leading cryptocurrency?
The answer to these questions obviously varies. There are still Bitcoin maxis who believe it is the answer to everything. These are usually transformed gold bugs who misinterpret monetary history. At the same time, we have the naysayers who still claim Bitcoin is going to zero.
What is the truth? Naturally, speaking truth when projecting into the future is difficult since we are dealing with a projection (or forecast). However, we can draw some logical conclusions.
My best guess is the answer resides somewhere in the middle.
Bitcoin will not be the global reserve currency. I will once again state the reason for that. We also have a situation where I think it safe to say that BTC will not head to zero.
In this article I will lay out the basis of both those viewpoints.
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Bitcoin was never the future of money. The idea of it being electronic cash was a doomed idea.
The problem with that view is it did not properly look at the idea of a medium of exchange. To operate as a currency, this is one of the most crucial roles. For this reason, it was a non-starter.
Again, that doesn't support the "Bitcoin is worthless" narrative. Instead, we see where it lands on the spectrum.
To reiterate, BTC will always fail as a medium of exchange due to the volatility and distribution. The one characteristic that Bitcoin advocates tout is what makes it a lousy medium of exchange.
For a currency to be effective, it requires two things: price stability and distribution.
The former is what feeds into invoicing. When people invoice, they are not into speculation. Your utility provider is not seeking to gain 10% from the time it invoices you until the payment is made. Nor does it want to lose 10%. Anyone who is into speculation does just that. We do not, as a whole, engage in speculation when billing.
Then we have the distribution. Here is the reality of monetary history: fixed money always pools.
It was something that was mentioned long before the recent Bitcoin adoption. We saw a number of moves over the last 2 years which have proved this age old adage. BTC is pooling. Look at what Coinbase is holding on behalf of its clients. We are seeing the distribution of BTC only consolidating.
A currency cannot operate unless people are holding it. The only way to acquire it is to have money. Either one can afford expensive mining equipment or that person buys BTC. The latter is the obvious choice for most. Of course, one needs resources to enter.
Hence the pooling is once again proven true.
This is another idea that is being promoted.
To be clear, the basis here is really timeframe. Some claim there are really few stores of value since the business cycle always pushes purchasing power higher and lower.
With Bitcoin, we have a long track record where it did exceed expectations. We do have to embrace the fact that Bitcoin has not been without its swings. Again, volatility is ever present. There were large drawdowns over the years. We recently saw that over the last few months.
Here is where we see the "Bitcoin is going to zero" crowd emerge.
It is important to acknowledge this is possible. My view is that a total collapse is not possible. Markets can push numbers to exceedingly low levels or skyrocket them to the moon. That is what markets do.
With a fixed asset in terms of the numbers, demand becomes the major component. This is the future discussion summed up: what will the demand for Bitcoin be?
Answering this accurately provides the clear insight into the future. We are, as always, offering a forecast which can be amiss.
My guess is the demand for Bitcoin will remain strong going forward. The reason is people have confidence. That is the basic essence of the game. With countries looking into this asset for their wealth funds, this could be the major buyer in the future.
