Bitcoin has been dancing around the $450 mark for the past month or so. Markets are asking questions about where the value is going as well as asking why the price is showing such a level of stability. Bitcoin is a volatile currency and evidence of growing stability has to be viewed positively, especially in light of the hardening of stance this week from the PBOC. The cryptocurrency is now in a place where external factors are causing fewer and fewer unexpected changes to the bitcoin price. We are, as a community, seeing the Bitcoin price gain stability and this had longer-term advantages. Banks and governments are not, and never will be, our friends; we are, in fact, a people’s revolution. Further, we are not alone in attracting the spite of the banks and their masters; the whole field of commerce fights alongside us. Commerce, or business, suffers from continual Government over-regulation and taxation and this is in an arena of shrinking banks with inflating fees. Businesses today are subjected to costs and regulations that would have destroyed most firms twenty years ago. Bitcoin price is now stable for a variety of reasons and not the least of these is that citizens do not take advice from States that, it seems, cannot manage their own affairs.
[dropcap size=small]V[/dropcap]alue, in the world of economics in any event, is dependent upon two factors. (1) usefulness, and (2) scarcity. Now, water is very useful but it holds little value because it doesn’t possess scarcity. If you were in the Sahara and dying of thirst, and someone offered you a bottle of water for $100, and you had $100, it is likely you would purchase the water. Water, in this scenario, has both scarcity and usefulness. Now, if you had a gold coin in a city, it would have a high value, in the same desert, unless someone has a second bottle of water, it’s practically valueless and this is because it has scarcity but not usefulness.
Bitcoin, has more and more traders coming on-board and this gives the currency usefulness, in the form of liquidity. This level of usefulness is growing. Bitcoin has scarcity (21 Million hardcap) by definition. If use is growing and scarcity is defined… then value, in the long run, must rise. The last time Bitcoin price exhibited such stability for weeks on end was in the late summer period of 2013, when it held just over $100. Three months later, the bubble rose, and the $1,000 bitcoin price was a bubble. If we now look at today’s bitcoin price, we can see that there is a 400% increase since the last period of stability. We are aware that fund managers have begun taking an interest in Bitcoin and we can assume, due to the quantities involved, that the coins they have bought into have been sold to them from the stock of early mined coins, coins from the wallets of some early adaptors. The level of sales is being carefully managed so as not too affect the price. Mt Gox coins may well resurface in the future and add to our pool but the fact remains that, unless there is a material change in quantity of bitcoins available, the value of bitcoins (in other words the Bitcoin price) could be expected to rise over the summer. It would be unreasonable to expect that rise to be sudden after a period of stability.
Bitcoin remains a long term investment, it has matured to a level of financial independence it did not have six months ago.
Last modified: May 1, 2014 08:39 UTC