Bitcoin's Price Frenzy May Not Be a Good Thing
Bitcoin's ups and downs (but mostly ups!) have caught the eye of many news agencies, media companies, and even wall street investors. Many are running to establish Bitcoin Futures, and ETFs, while the media gobbles up new all-time highs.
But is this really a good thing for the evolution of the cryptocurrency?
Simply looking at a chart of Bitcoin's price through long periods of time shows an undeniable upward trend. Any person can see how Bitcoin's price keeps driving upwards, from $1000 to $3000 to $6000 to $10,000 and beyond.
This presents an opportunity to many 'makeshift investors' to buy into the cryptocurrency. How many of these investors actually take the time to learn about the fundamentals and technical details of Bitcoin?
Likely a disappointing amount.
Rather, most of these investors are likely here with the massive expectation of price growth. And this might cause quite a problem in the future.
Incentives of Selling/Transacting?
Recently, from Reddit, BitcoinTalk, Steemit, and other platforms, a meme surrounding the word
hodl has formed— instructing coin owners to 'hold' their coins rather than selling them or transacting with them.
The obvious intent is to get investors to 'wait' for price increases, though this also brings up a question about real sales and transactions. What incentives are there for people to use Bitcoin to make real transactions, such as buying a car?
Why would you ever sell or transact with something that will 'make you rich'?
Bitcoin as a Currency
There are no good incentives right now for anyone to sell or transact with Bitcoin, because most of us come with an expectation that Bitcoin is going to rise exponentially to the 'moon' (which it already has somewhat been doing).
The first well-known public Bitcoin transaction for a real item was early, back in May 2010, when
10,000 BTC were used to buy pizza.
The incentives back then to use BTC for buying/selling were pretty existent, as not a lot of early holders 'knew' it was going to rise exponentially, and it was a speculative yet easy-to-use currency.
But if the original buyers of that 'Bitcoin pizza' knew their coins would be worth over $150M, would they have even made that sale? Obviously not!
Bitcoin's price going parabolic half the time, then facing odd corrections, is not a healthy price pattern. Liquidity and stability are insanely important for a currency, yet this new asset class of cryptocurrencies isn't showing very stable prices right now.
Why is this a problem if it's making me rich?
If you really want people using the cryptocurrency for what it was meant for (as a currency), the price will need to stabilize at one point. Nobody is going to sell or transact with something that they believe will make them rich.
Thanks for reading,