Since it’s currently en vogue right now, I’d like to announce that I’m launching my own cryptocurrency next week.
Let’s call it “kingcoin.”
Nah, that’s too self-serving.
How about “muttcoin”? I’ve always had a soft spot for mixed breeds.
Yeah, that’s perfect – everybody loves dogs.
This is going to be the biggest thing since fidget spinners.
Congrats! Everyone reading this is going to receive one muttcoin when my new coin launches next week.
I’m going to evenly distribute 1 million muttcoins. Feel free to spend them wherever you like (or wherever anyone will accept them!).
What’s that? The cashier at Target said they wouldn’t accept our muttcoin?
Tell those doubters that muttcoin has scarcity value – there will only ever be 1 million muttcoins in existence. On top of that, it’s backed by the full faith and credit of my desktop computer’s 8 GB of RAM.
Also, remind them that a decade ago, a bitcoin couldn’t even buy you a pack of chewing gum. Now one bitcoin can buy a lifetime supply.
And, like bitcoin, you can store muttcoin safely offline away from hackers and thieves.
It’s basically an exact replica of bitcoin’s properties. Muttcoin has a decentralized ledger with impossible-to-crack cryptography, and all transactions are immutable.
Still not convinced our muttcoins will be worth billions in the future?
Well, it’s understandable. The fact is, launching a new cryptocurrency is much harder than it appears, if not downright impossible.
That’s why I believe bitcoin has reached these heights against all odds. And because of its unique user network, it will continue to do so.
Sure, there have been setbacks. But each of these setbacks has eventually resulted in higher prices. The recent 60% plunge will be no different.
The Miracle of Bitcoin
Bitcoin’s success rests in its ability to create a global network of users who are either willing to transact with it now or store it for later. Future prices will be determined by the pace that the network grows.
Even in the face of wild price swings, bitcoin adoption continues to grow at an exponential rate. There are now 23 million wallets open globally, chasing 21 million bitcoins. In a few years, the number of wallets can rise to include the 5 billion people on the planet connected to the internet.
Sometimes the new crypto converts’ motivation was speculative; other times they were seeking a store of value away from their own domestic currency. In the last year, new applications such as Coinbase have made it even easier to onboard new users.
If you haven’t noticed, when people buy bitcoin, they talk about it. We all have that friend who bought bitcoin and then wouldn’t shut up about it. Yes, I’m guilty of this – and I’m sure quite a few readers are too.
Perhaps subconsciously, holders become crypto-evangelists since convincing others to buy serves their own self-interest of increasing the value of their holdings.
Bitcoin evangelizing – spreading the good word – is what miraculously led to a price ascent from $0.001 to a recent price of $10,000.
Who could have imagined that its pseudonymous creator, fed up with the global banking oligopoly, launched an intangible digital resource that rivaled the value of the world’s largest currencies in less than a decade?
No religion, political movement or technology has ever witnessed these growth rates. Then again, humanity has never been as connected.
The Idea of Money
Bitcoin started as an idea. To be clear, all money – whether it’s shell money used by primitive islanders, a bar of gold or a U.S. dollar – started as an idea. It’s the idea that a network of users value it equally and would be willing to part with something of equal value for your form of money.
Money has no intrinsic value; its value is purely extrinsic – only what others think it’s worth.
Take a look at the dollar in your pocket – it’s just a fancy piece of paper with a one-eyed pyramid, a stipple portrait and signatures of important people.
In order to be useful, society must view it as a unit of account, and merchants must be willing to accept it as payment for goods and services.
Bitcoin has demonstrated an uncanny ability to reach and connect a network of millions of users.
One bitcoin is only worth what the next person is willing pay for it. But if the network continues to expand at an exponential rate, the limited supply argues that prices can only move in one direction… higher.
The Bottom Line
Bitcoin’s nine-year ascent has been marked with enormous bouts of volatility. Therewas an 85% correction in January 2015, and a few others over 60%, including a colossal 93% drawdown in 2011.
Through each of these corrections, however, the network (as measured by number of wallets) continued to expand at a rapid pace. As some speculators saw their value decimated, new investors on the margin saw value and became buyers.