The price of bitcoin has crashed this year, but some people in the coin circle believe that bitcoin will reach 100,000 DOLLARS sooner or later, or even higher. Have you ever thought about what the value base of Bitcoin is? Digital gold of the future? Or become a peer-to-peer payment tool?
The many facets of Bitcoin
Most people in the cryptocurrency community believe that bitcoin "can only go up" in the long run, absolutely. Almost everyone expects to see bitcoin above $100,000 within five years. But it is important to "question assumptions that people take for granted". This article will attempt to explore all possible holding values of the CURRENT BTC.
The value of Bitcoin may come from...
Store of value
Inflation hedge
P2P payment network
National reserve currency
Internet native currency
A safe haven for personal assets
Bitcoin becomes the underlying blockchain infrastructure
Asymmetric venture capital
Store of value
The argument goes that bitcoin was designed to have all the attributes of sound money, making it a better form of asset than gold. The characteristics of a sound currency are: divisible, transferable, homogenous, scarce, durable and portable. Bitcoin arguably has all of these attributes and outperforms traditional forms of money such as fiat money or gold in all of them, making it a better store of value asset. Bitcoin, for example, is easier to carry and slice than gold.
As the market matures and becomes more efficient, bitcoin's price volatility will decrease over time, and eventually it will become much less volatile, making it a good store of value. Some supporters have even suggested that Bitcoin's volatility is a feature, not a bug.
Inflation hedge
The argument goes that inflation is usually caused by a rapid increase in the money supply caused by the government printing too much money. But Bitcoin is immune to these problems because, in theory, it has a fixed supply and a pre-set token economy.
Central banks are mad money printing machines, causing inflation and devaluing fiat money. Gold is considered an inflation hedge because of its scarcity. Bitcoin should also be a good inflation hedge for the same reason. While bitcoin may not be a good inflation hedge in the short term, supporters say it's worth taking a long view. Bitcoin is still young, and its value as an inflation hedge should be calculated based on long-term validation over many years, not short-term data.
P2P payment network
Bitcoin is the best payment way to move money because it is fast, secure, cheap, resistant to censorship and doesn't require any middlemen.
Transfers, especially international or large ones, are difficult: wire transfers take several days and are almost impossible to make on weekends or holidays. Some countries may even have restrictions on how much money users can transfer, to whom and from which countries. With Bitcoin, users can send billions of dollars in minutes for a fraction of the cost, and no one can stop it.
National reserve currency
The failure of Bitcoin as a form of money, coupled with the current fiat currency, will lead to the adoption of Bitcoin by institutions and countries. Eventually bitcoin will replace the dollar as the world's reserve currency.
Which countries have the most incentive to adopt bitcoin? Countries with the least to lose in terms of monetary sovereignty are more open to adopting bitcoin. El Salvador and the Central African Republic are among countries that have declared Bitcoin legal tender. For countries with weak currencies, Bitcoin seems to offer an "alternative sovereign currency" that can be easily adopted. But for countries that use fiat currencies, such as the DOLLAR, it is less attractive.
Bitcoin is a decentralized currency with fixed monetary policies, and countries that use bitcoin as legal currency are not dependent on other countries' monetary or economic policies. Proponents of this argument say that even if other countries do not believe the bitcoin-related investment arguments or adopt bitcoin, those countries will be forced to buy some bitcoin as a kind of insurance against falling behind.
Internet native currency
Bitcoin will become the web's native currency because it is more decentralized and secure than any other cryptocurrency.
Cryptocurrencies are the native currency of the Internet. The Internet is bound to evolve from simple information transfer to information plus value transfer. The web's native currency will open up new applications.
A safe haven for personal assets
Individuals should have the ability to own and control their own wealth to protect themselves from the terrible consequences of government corruption, hyperinflation and other problems. The argument is similar to the "bitcoin as the world's reserve currency" argument, but from the perspective of individuals rather than countries.
People in many parts of the world have been badly hurt by the bad economic policies of their governments. In Argentina, Venezuela, Turkey and other countries, local currencies are falling rapidly, forcing citizens to find other currencies to protect their wealth.
Bitcoin becomes the underlying blockchain infrastructure
Blockchain promises innovation and solutions that [should] build on the Bitcoin blockchain, as it is the most (and probably the only) decentralized blockchain. Much of this argument is based on the assumption that Bitcoin is the only truly decentralized blockchain (some people think Ethereum is too centralized).
I don't think assumptions are a problem, because the web3 space is so young, and I think it's unlikely that most of the dapps you see today are protocols that people will be using in five years.
Asymmetric venture capital
If some of these arguments happen, bitcoin's price could be very good.
The rising return on investment is 500%+.
The return on a falling investment is -100%.
Mathematically speaking: if there is a greater than 20% chance of a fivefold gain, the investment still has a positive expected value (expected value greater than zero), even if there is a chance of losing all your money in the remaining chance.
This is the logic behind why I think bitcoin is worth investing in. While I don't know which (if any) of the arguments above will play out, and I'm skeptical of many of the supporting arguments, I think one of them will work, and the return on investment will be substantial.