oin successfully proved the concept (we respect that), but the world needs a cryptocurrency that actually works.
Price = Intrinsic value + competitive advantage + mass craziness
This is my model for valuing an asset, in today’s market where there’s lots of innovation and a lot more speculation, ignoring any of these 3 could be costly.
Intrinsic value — this is something fundamental for people to be willing to put their money in. An ICO, no matter how ridiculous, will need to tell a story to convince people to buy, for example, the selling point of doge-coin is it being very ridiculous.
Competitive advantage — no matter how valuable an asset is, if something else just works better — even slightly, they’ll take the whole market — this is how Google / Apple / Amazon grows so big. In the case of Doge-coin, it has to be the most ridiculous coin to stand out, if there’s another one that’s even more ridiculous, that one will be in this example.
Mass-craziness — Citron learnt it the hard way on GME by ignoring how crazy the majority can be. (BTW those who bought GME at 300 probably also learnt that they should cared fundamentals).
There’s no deny that Bitcoin has quite some value
The value of a currency is coming from the system that’s built around it. USD is powerful because of the powerful global financial system that enables you to pay with it in every conner of the earth. A currency with a bigger, better eco-system built around it, is always stronger.
Bitcoin definitely has an eco-system, and there’s no deny it’s still getting stronger. It’s also built a strong brand, and it’s the first thing people think about when talking about cryptocurrency. Plus it’s inflation resilient, and we hate inflation!
… but its competitors have all its advantages, and are better
Other than the hype from being the 1st, as an open protocol, there isn’t too much competitive advantage Bitcoin can maintain, so its competitors can easily do a fork and inherit all its greatness.
Then time moves forward, and people other than drug dealers and warlords start to use cryptocurrency, and then things get funny:
Is limited supply a good thing? After all, the GDP of countries keep growing, no producers want to sell their product for something others obtained almost for free.
If an organization has influence, why not issue a new currency so that the most benefit goes to themselves instead of making the drug dealers even richer? There’s at most 20M Bitcoins, but then can be 2 Trillion other type of coins — and BTW, starting a one is very cheap!
Oh and by the way, though Bitcoin was the pioneer in cryptocurrency, it’s now a lot slower, a lot more expensive on energy consumption and transaction fee, than most of the new coins, and because of the nature of blockchain, improving Bitcoin is a lot harder than starting a new one!
And the trend is not great already for Bitcoin
Bitcoin used to account for 100% of the cryptocurrency market cap. Now it’s dropped to 60%. This means most of the cryptocurrency growth is from other coins. So if you wanna speculate, buying other coins will give you a higher return.
It’s almost certain in future Bitcoin’s share of crypto market cap will continue to drop. This means the utility demand will continue to shift to other coins, and the speculators, realizing the growth will be from other coins, will shift to other coins too.
There’s no digital gold, and the hype from being the 1st means nothing in tech.
Despite the uselessness of Bitcoin, many believe that the mass craziness factor will keep Bitcoin’s price pumped, as Bitcoin has built a brand for itself as being “the crypto”, and the obsession of owning some of the 1st Crypto will make people want to own some Bitcoin — just like owning gold.
Of cause not!
There’s a clear difference between gold and crypto — gold has real world utility, it could be used to make jewelry or chips, which a currency (not only crypto), if no longer a medium of value exchange, is completely useless. Remember, things are valuable because first they provide utility, then because they are rare, just being rare means nothing.
Once crypto become mainstream and people start to use the actual functional crypto currency, bitcoin will disappear, just like MySpace / Nokia / Netscape — of course there’s be some that still enjoy holding some bitcoin for fun (including myself), but the demand will just be too small the pump up the price.
Bet with me for one Bitcoin!
At last, I want to make a bet, on 02/12/2033 (another 12 years after bitcoin was born) if a Bitcoin is still worth more than $1000 with a L30 average volume above $100M, I’ll give 1 bitcoin to one randomly picked reader — no matter is $1M or $1000.01.