February 3, 2019
Why Is Bitcoin So Low?
Bitcoin has had its highs and lows over the last 10 years and despite numerous obituaries, every time the price went down it has recovered. But why is Bitcoin so low? How are those extreme fluctuations even possible? The answer might be less complicated than you would think. Let’s explore the reasons why Bitcoin prices have stooped so low.
Is it About the Economics?
The basic reason why Bitcoin is so low now, is economic. Demand is lower and supply is perceivably high. This happens because the pressure from the demand side that was pushing prices up to the $20,000 USD mark was driven by quite a bit of speculation. That is, people were getting into Bitcoin for the wrong reason. Bitcoin is not an investment vehicle; it is a medium of exchange or a long-term store of value that constitutes a hedge against the traditional economy. If I tell you to invest in buying Japanese Yen, would you go all out to get your hands on as many Japanese bank notes as you can? That doesn’t sound very logical to most people. In fact, when the average person talks about investing, they rarely ever think about currency. There are ways to make money on the forex market, but most would rather invest in stocks or other financial products that are based on the productive parts of the economy.
If I tell you to invest in buying Japanese Yen, would you go all out to get your hands on as many Japanese bank notes as you can? That doesn’t sound very logical to most people. In fact, when the average person talks about investing, they rarely ever think about currency. There are ways to make money on the forex market, but most would rather invest in stocks or other financial products that are based on the productive parts of the economy.
Is Supply Really That High?
Therefore, people who want to invest in Bitcoin, should be looking at entrepreneurial endeavors that will generate a profit. An investor that invests his money on Mitsubishi Corp instead of on the Japanese Yen for instance, is investing in a productive part of the Japanese economy. Anyone looking to invest in Bitcoin, should find a suitable business to invest in and profit from its productive activities, but the idea was that Bitcoin prices were going up and it was a good asset to hold to make a fiat profit. For those looking to profit on Bitcoin prices, the supply of coins out there is pretty high.
People who are looking at Bitcoin through the prism of a medium of exchange or an asset that will allow them to store value long-term, cannot see how supply can ever be too high. They know that Bitcoin is so low because those who were driving prices, didn’t understand that this asset is a vote against the traditional economy. Therefore, there cannot be enough of it to go around when the traditional economy fails again.
So, That is Why Bitcoin is So Low!
Perspective then, is key to understanding why Bitcoin is so low. Perspective can also show us that historically speaking, Bitcoin is not that low. So, despite the catastrophic plunge from that $20,000 USD high, Bitcoin is still going strong. In time, more people will understand what the true value of Bitcoin is, they will change they will question their assumptions about the traditional economy, and they will change their perspective to the point they start asking why they even thought that Bitcoin was so low when it really wasn’t.
*This article is an opinion piece. It should not be taken as investment advice.
