Simple, off-the-wall arguments can be infectiously persuasive.
I have invested in Bitcoin (BTC 1.24%) Although I've been doing it on and off for over 10 years, I didn't have the confidence to hold on to the coins for long. After all, it is doubtful that coins have the practical utility of precious metals, and it is certainly true that there is no major nation-state or equally powerful entity that would endorse their value or accept them as a medium of exchange. It is.
But a few years ago I heard a ridiculous argument that completely avoided all of those concerns, so now I'm convinced I'll buy and hold Bitcoin forever.
Values are a social phenomenon
We use the dollar as our main currency every day. Despite the fact that paper with the President of the United States on it is essentially never useful for productive industrial purposes, there are still people around the world who realize that such paper still has value. There are many.
In fact, people believe so deeply that the dollar has value that they are accustomed to willingly exchanging their time, effort, and other resources for it. In other words, there is a broad social consensus that the pieces of paper known as dollars are themselves exchangeable for other people's resources.
There is still no such consensus about Bitcoin, even though it is becoming more widely accepted as a store of value and has made dramatic progress. Nevertheless, there is a common stereotype that no matter what anyone says about Bitcoin, there is a group of passionate crypto enthusiasts who are completely convinced of its benefits to the point of delusion.
Critics say such investors are hoarding Bitcoin because they are unable to discern that digital coins are actually worthless, since digital coins are useful for making most of the transactions that require money. They would argue that it's because there isn't. In that respect, the critics seem to be right. If you've ever tried to buy a burrito using Bitcoin, you've probably gone home hungry. The financial infrastructure to use it for everyday purchases doesn't exist and doesn't seem to be ready for it.
But the bears are overlooking a more important point. People who hold Bitcoin in a cult-like way are so convinced of its value that they will do anything to dissuade them, no matter how clever, pervasive, and factually correct the opposition is. It is virtually unaffected by attempts to do so. they simply don't care. Their minds are made up and, if you can believe it, their opinion on this matter is firm. They are effectively indoctrinated because they are always willing to buy Bitcoin from someone who no longer believes in Bitcoin.
And even if they could help it, they would never sell even a fraction of their Bitcoin. In their view, as the difficulty of mining a coin increases over time as a result of the halving encoded in the protocol, fewer and fewer new tokens will be added to the circulating tokens, and as the price rises. It is considered. Therefore, for them it makes sense to buy at any price, because in the future it will be even higher.
In other words, the presence of these serious Bitcoin enthusiasts means that even if the price plummets, there will still be individuals who want to buy Bitcoin as long as they have dollars or other currencies, so It means it will never be zero. . Therefore, there is a lower bound on the price of Bitcoin.
They believe this persistent buying behavior will pay off in the long run. The group that is putting continuous upward pressure on the price of a coin is responsible for providing a baseline level of demand that produces the price action they desire. They invest and evangelize as a self-fulfilling act of prophecy.
So far, they have been handsomely rewarded for their beliefs. And despite the ridiculous argument, you don't even need to believe in the benefits of the Bitcoin protocol to see why it's a good investment. You just need to believe that the fanatics exist and they will do the rest.
There is no guarantee that it will stay up forever
Is it really true that all it takes for Bitcoin to rise forever is a relatively small group of evangelists?
That's not correct. But perhaps it is. More investors are adding this coin to their portfolios every day, and there will never be more than his 21 million coins listed in the protocol.
Taking into account the enthusiast population, any increase in a coin's investor population means the price will rise, even if new converts are not as convinced. Of course, investors' beliefs can change. Bitcoin's value could drop significantly and never recover, making it a terrible investment.
But the bullish argument is persuasive because it acknowledges that a currency's direct utility can be a separate issue from its role as a store of value. Similarly, something need only be a store of value if others believe it to be a store of value and act accordingly. As for Bitcoin, I'm going to buy slowly for quite some time because that belief is already there.