Latest posts of: Crypto

The difficult part when predicting the price of Bitcoin is that it doesn't have to be logical. There is nothing in the universe that says the price of Bitcoin must be represented by the value it provides.

It is worth what people are willing to pay for it.

The other interesting thing is that the price is not necessarily what it's worth. I know that sounds crazy, but let me explain. When someone calculates the market cap, all that they are doing is taking the most recent transaction (the most recent buy/sell) and multiplying that price by the total number of bitcoins in circulation. This is not the total amount that has been invested in BTC and is sitting in some vault somewhere.

Sure, the market cap might be $89 billion, but that doesn't mean it is worth $89 billion. Hypothetically if everyone in BTC got together and said, "you know what, we should all cash out, let's split the $89 proportionally based on our relative ownership" - they couldn't. The moment some of them started selling the price would begin to drop due to supply and demand. It would plummet and as the price of the most recent transaction went lower and lower, the total market cap would approach zero well before the people with coins could realize even a fraction of the $89 billion.

Similarly, if there is enough hype and people are looking to buy at the same time, there is no reason the price couldn't hit some of the outrageous numbers that people throw around. It is unlikely to sit at those numbers for sustained lengths of time, but not impossible to hit them. All it takes is one crazy person willing to pay $1 for 1 satoshi and BTC is worth $100k at a market cap of $1,764,737,500,000,000.

I had a similar discussion with my friend in early 2017. I predicted that XRP would do well because it had such a low price per coin. She's like no way, the circulating supply is so high and so the market cap is all that matters. Yet I kid you not, one of the things I kept hearing from people was how XRP was so "cheap" relative to BTC. "What if it goes to $20k like BTC?". People kind of suck sometimes!