The price will go down, because this spike wasn't caused by new money entering the system, but by moving around of some money that was already in the system. And it's not a lot that's in, so it was only a matter of time when the rise gets exhausted and starts to fall back. I think that we will see some low volume aftershock waves today, and maybe even tomorrow, but it won't be long when the price drops back to sub 400. As long as there isn't new money coming in, then it's a bad call to just sit on BTC. Only thing to hope for is that the drop will be fast and not slow and ugly, like it has been for the past months.
While such analysis might hold true for a short time such as a few months, it nevertheless remains that since the end of 2009, Bitcoin userbase has grown 10,000x and its price 100,000x.
By betting that the downtrend will continue, you are betting against exponential growth. Why would you do it?
Are you saying that it has suddenly become much more difficult than before to reach the next order of magnitude of userbase and, hence, valuation? And saying that in the exact relative low point of the price according to the trend so far? And that Bitcoin userbase will actually stop growing and start shrinking? Now? It's almost discounted in price btw
Man, you got to be kidding!
This one stands unrefuted, you may try:
The market today does not give more than 12% probability of that happening; probably much less than that.
That's why I am buying and telling others to buy.
Bitcoin has a long and glorious history that its price has had nothing to do with long-term expected value. My estimate of scenario-probability-weighted discounted 2020 value of 1 bitcoin is about $500,000 and the fact that the majority of players in the market think differently, is my advantage.
And I am quite sure I know the reason for that. It is the
extreme information asymmetry between Bitcoin owners and non-owners. (To simplify,) Bitcoin owners know that bitcoins are very valuable, and they buy and hold as much as they can. But as a result of their price going up, it forces people to sell, not because they don't trust Bitcoin, or expect the EV to be anything less than $100k or whatever in a few years, but because their entire net worth consists of bitcoins and it is rational to diversify (cf.
Kelly betting). Even if the price goes down, these true believers cannot buy much more because the same optimal allocation strategy holds true.
The ones who don't own bitcoins, don't know it is good
They are converting to bitcoiners at an exponential rate, though (see my previous post, and
this thread for the ownership distribution). This increasing adoption gives the steam to the rise of price, in a self-sustaining virtuous cycle.
First only very few people knew about Bitcoin, and they were technologically astute and early adopter type. Many could start using Bitcoin immediately upon hearing. In the second phase more people heard, but they were, on average, slower. In the third phase or so, in which I belong, I heard and it took me 12 months to buy. In the next one, people who heard in 2011, propelled the boom in 2013 because their average decision making time was even longer. In the whole of 2013, especially the time around the peaks, 100s of millions of people heard about Bitcoin. On average, these people are even slower than previous ones, perhaps taking on average 24 months to enter (and also a smaller percentage of them enters). But they are so many! There is nothing you can really do to prevent the fraction of these people adopting Bitcoin, and by doing it, their action increases the price again by a decade, letting the rest of the planet to hear about it and putting hundreds of millions of people in the pipeline.
Bitcoiners know it, the rest don't. The price does not go to $1 million in an instant because only the ones who realize the above thing, can push the price up, but it will nevertheless go there eventually, because the above thing is a self-sustaining loop. Therefore buying bitcoins when you read and realize it, is the most lopsided bet you can ever make. You can actually pay $460 for something whose EV (expected value = average payback of all scenarios weighted by their probabilities) is in between $100k and $1M+. ONLY the fact that people realize this one at a time, slowly but exponentially, keeps the bitcoin price "at check", growing at an average of 1000% per year, for 5+ years now.
My wealth is dependent on the above being true. Nobody has explained to me, why it is not so. The stage is yours!
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