While BTC just hit $266, it’s hard to not call it a bubble. But a better analogy is a land grab. Like real estate, it is finite and there will not be that much more (doubling in 100 years) being made available.
Couple this with the facts that Bitcoin is easily transferable around the world in minutes and it is easily divisible, people can see BitCoin’s value as a medium of exchange.
The current growth in Bitcoin price is quite dizzying. Today it hit $240/BTC. Many commentators call it an irrational bubble. However there are a few features of Bitcoin that may make it not quite as crazy and irrational.
Here are the basic facts:
- There is a hard circulation limit of 21 million Bitcoins.
- There are at time of writing roughly only 11 million of bitcoins
- This is the first major digital asset that is also fungible (unlike say domain names) and not under the control of a single entity or government
- 1 Bitcoin is just an arbitrary unit. There is no problem owning 0.0000001 Bitcoins
- There is no barrier to entry to hoarding, earning and spending Bitcoin
- It’s international by default
The hard circulation limit together with the current limited amount of Bitcoin means this is pretty much a good old fashioned land rush. This is what most of the commentators are missing.
Yes as a currency I may not be able to buy groceries with it yet? There are lots of problems to solve. But none of that matters. Startups, programmers and regular users will solve all of these problems. What does matter is that if you don’t get some now, it’s going to be expensive in the future.
Get any group of Bitcoin nerds together and you’ll start hearing all sorts of ideas floating around for services and uses of Bitcoin that would have seemed completely outlandish just a couple of years ago. This is the future value.