Bitcoin (BTC) breached the US$60,000 mark and some market analysts believe it would hit US$100,000 before 2021 ends. A more realistic forecast is that BTC could well hit US$250,000 in the next 5 years. How true is that?
Common sentiments by experts
Mark Yusko, the Chief Investment Officer of Morgan Creek Capital Management, an expert investor recently said that BTC could well reach the quarter-million mark in the next 5 years and there is a lot to be excited about. One thing for sure, the price might not fully reflect the value of BTC and that is a strong reason why it might not be the influencing factor.
Price increase not because of what you think
Like any other financial market out there, the price usually has NOTHING to do with the actual value of the asset. Price is the agreed amount between 2 parties for the exchange. As it has been seen previously, BTC price was forecasted to hit US$10,000 by November 2017 which it did. It would then go on and breach US$20,000 before falling down to as low as US$3,000. Price can change overnight but the actual value might seem otherwise.
Roles of investors influencing price
In 2021, the general sentiment is that the price of BTC could hit US$100,000 and that could be true. Financial markets usually experience:
- Changing ownership – Like in 2017, the price of BTC went above the value of the actual asset because of certain individuals. That is the same with any money market. The ownership of any market always changes. That is what happens because stocks and cryptocurrency change ownership often.
- Traders and speculators – These are those that only buy assets that are moving. They will naturally push the price way above its value. Speculators usually are well-versed with the financial markets with the aim for a positive outcome.
- Gamblers – This refers to those who are actual gamblers who frequent casinos like Vegas but because of the lockdown situation, they have nowhere to go. Hence, they turn to other ways to make money like online trading of crypto. They are the main reasons why the price has been so volatile. Gambling is a negative net present value activity because the house always wins. If you win early you get lucky then you stop, otherwise, you will continue to play and eventually you lose more than you expected.
What will this teach us?
Comparatively, BTC has the advantages that fiat currency doesn’t. This is most evident in the value. A British Pound could get you a pound of the silver 2000 years ago but will not even give you a fraction today. The price of the US dollar has inflated so much, it is unbelievable. Even gold has had its ups and downs but BTC is easier to transfer, can be divided into more and is cheaper to keep (as compared to cash or physical gold).
- Like gold, even if the price drops, its value still maintains which is the nature of BTC.
- Individuals like Elon Musk have been manipulating the markets. As long as it is not illegal, they will continue to do so.
It is time to convert your fiat currency into physical gold, silver or BTC which are more scarce today. Governments will continue to issue money because they are going into debt and need to pay up which will devalue their currencies. When you keep assets with value that are not centralized, you have the upper hand.