Bitcoin becoming ‘mainstream’

After what happened in December 2017, with the parabolic climb of 244% in 24 days, and the media and consumer hype surrounding it, I’m pretty sure we witnessed Bitcoin break into mainstream culture.

Now that CNBC has their own dedicated crypto TV shows, Bloomberg has an entire section on their website devoted to cryptocurrencies, and TheSouthAfrican.com has a weekly review on crypto, surely it can be considered mainstream now?

Why buy into the notion of cryptocurrency?

First off, as the Project Leader at SA Crypto and in this first article from us, I would like to discuss Bitcoin’s future.

Obviously, as the CEO of SA Crypto, I am pro-Bitcoin and pro-cryptoassets. But this isn’t a team that you choose to side with like you would your favourite soccer club. You either believe in crypto now while you’re still trying to figure it out, or you don’t – and will have to wait and see if this all succeeds – at which point you will have to believe in it.

Why am I pro-crypto? Because I understand it. If you don’t understand it, then it behoves you to go and read up about this remarkable technology, before slamming it with a preconceived opinion – because (besides countless other reasons) one day, pretty much everything you do will be based on blockchain technology. A good start is the work by Andreas Antonopoulos, like this video here.

What is Bitcoin really worth?

But for today, I want to take a look at the value of Bitcoin. How much is it really worth? Is it really worth the crazy $9300 it currently costs to get your hands on one? And if it is so valuable, why?

Let’s try and get a brief overview of its value in this article, and perhaps build on it in future pieces. In this particular article, we shall use only one of its strengths that give Bitcoin its inherent value: scarcity.

There are a number of other strengths, like its open source platform, its support of over 10,000 computer nodes distributed around the world to give it powerful decentralization, its thousands of devoted computer programmers working on its code not answering to a single authority – only the community. The list of strengths could go on. For today though, we’ll use the crash of December 2017 to looks at its scarcity, and why that alone gives Bitcoin significant value.

What happened in December 2017?

It was an amazing month for Bitcoin. Records were broken every single day. Starting on the 24th of November, until the 9th of December, Bitcoin’s price reached a new all-time high on a daily basis. With two ever-so-slight pullbacks and much to the amazement of even the longest Bitcoin hodler*, the price charged onwards to its all-time high of $19,850** on the 17th of December.

Bitcoin’s price climbed $14,089 in the space of 24 days, marking a 244% profit for lucky investors. And let’s be honest, “luck” is the right word – because it didn’t matter how much you believed in the fundamentals of Bitcoin, no-one could have predicted a parabolic increase of 244% in only 24 days.

And then… POP!

Just like that the party was over. After briefly hitting its all-time high of $19,850 on 17 December, the profit-takers took their chance, sparking a worldwide sell-off. In 6 days the price capitulated to $11,065 on the 22nd of December – losing $8,785, or 44%, of its value. Not the Christmas present uncle John was hoping for after investing in Bitcoin for the first time the week before.

Many analysts thought the carnage was over. Surely it couldn’t retrace all the way back down, could it? It could.

For the next 46 days, ending on the 6th of February 2018, Bitcoin continued to plummet back to its mid-November price of $5,970. A full retraction and the bubble had certainly popped. And what a bubble it was! A full quarter (three months) of 244% gains, and 70% losses. Euphoria to despair in less than a single trimester of pregnancy.

What went wrong?

It was never sustainable.

It doesn’t matter what you think about digital assets and their incredibly bright future, a commodity with that much volume cannot sustain a 24-day 244% parabolic increase.

But as the dust has settled since the great 2018 capitulation and the get-rich-quickers have long fled the scene with their tails between their legs, what do we have left? What remains among the ashes of despair and people’s dashed dreams? We have exactly what we started with: The first-ever global economy belonging entirely to the people.

Sure, most of us love to see the value of our Blockfolio*** hit those all-time highs and 100% gains. But that is a distraction from what we are really seeing: The world’s economy beginning to unravel at the hands of the people. We are still in the very early stages, and there are decades of development to come, but one day banks will be as foreign as gramophones and card merchants as obsolete as snail-mail.

But let me not get distracted into the philosophy behind Bitcoin and what it could do to society. This article was meant to be a fundamental exploration of what Bitcoin’s value could be.

What Bitcoin’s value can be

With our memories refreshed of the great 2018 sell-off and our portfolios desecrated, what is the potential of our rekt**** portfolios? Using a bit of theoretic analysis to explore the potential of Bitcoin, we will simply consider some numbers in a few basic steps.

There are currently 3.2 billion people on Earth with internet access, out of 7.6 billion. That leaves still 4.4 billion yet to come online in coming years (even if these were all children, which they’re not, they would still have to grow up and come online). There over 160 cryptocurrency exchanges worldwide, contributing to a global daily volume of approximately $30 billion! Bitcoin ($BTC) is the primary currency pairing on 90% of these exchanges (a select few like Etherdelta use Ether ($ETH) – but most people use their $BTC to convert to $ETH before using exchanges like Etherdelta). With Bitcoin being the primary means through which people get into the cryptoassets markets on almost 160 exchanges, and then looking at how many people are online (and yet to come online) it is not a stretch to estimate that 1 billion people will want Bitcoin in the next 5 years. Now if you divide 1 billion people by the maximum supply of 21 million Bitcoin (still 14 years away from being fully mined, anyway!), that leaves 47 people per $BTC. (This isn’t even taking into account the large wallets who have hundreds of thousands of Bitcoin – thus making that supply even lower). Now imagine 47 people standing around an ounce of Gold, bidding to own it. Can you imagine what that ounce of Gold would sell for? What we have here in our calculation is 47 people essentially bidding for one Bitcoin (assuming all 21 million were actually available)! If we divide this the other way, it works out to 0.02BTC per person. How much do you think a Bitcoin would be worth if there was only 0.02BTC available per user?

And so?

The point of the exercise is not a mathematical one to come to a specific price conclusion, but rather to indicate the value of a Bitcoin in an economy of very high demand and limited supply. And based on these (in many ways conservative) estimates, it’s not hard to see that Bitcoin has a very, very bright future indeed. When you consider that this exercise is only based upon consumer use, and doesn’t even take into consideration the billions of dollars already streaming into cryptoassets by the behemoth financial institutions, it becomes even clearer just how bright that future actually is.

What’s the bottom line? Get your 0.02BTC before the masses get here.

Glossary of terms

*hodler – Purposefully misspelt slang for “hold” in the Bitcoin community.

** The all-time high of Bitcoin at time of writing was approximately $19,850 – depending on which exchange one uses for data analysis. This article was comprised using data from Bittrex.

***Blockfolio is an app that allows you to track the latest prices of your cryptocurrency portfolio.

****rekt – more Bitcoin community slang for a wrecked portfolio – all the prices of the assets you own falling dramatically to lose immense amounts of value.

Important: SA Crypto is not a registered financial advisory, and the information provided in this article is for entertainment purposes only. Each reader is responsible for their own financial decisions, and SA Crypto cannot be held responsible for any decisions made by readers of its website and articles. SA Crypto encourages all readers to consult a professional and registered financial advisor before making any such financial decisions.