google-site-verification=RoadygaH2N3jsP-zBochCrn0ABtnedK76rnS7kMfyOU
Take a fresh look at your lifestyle.

Why do people buy Bitcoin if it is unstable?

0


Given the fall that the leading cryptocurrency suffered and its relative recovery in just days in the month of March, many in the community wonder why people buy Bitcoin if it is so unstable?

Given this, it is evident that there is a controversy marking two clear positions. One that alleges that Bitcoin has no value and is only an instrument of speculation, and the other that considers that Bitcoin has some value.

Of course, in both cases the purchase of Bitcoin can be attractive if it is so unstable. Either for those who want to make money through trading, or for those who want to accumulate Bitcoin on the downside seeing it as an instrument of refuge of value.

What to think about when buying Bitcoin?

Debate when buying Bitcoin: price vs. value

It is common to come across the argument that Bitcoin is not a haven of value when its price falls. However, there is most likely an error when trying to argue that the value of Bitcoin is set in dollars.

This is because price and value are not the same thing. The price is what we are willing to pay for something, but the truth is that it represents the most accepted way of “trying” to measure the value of things.

Value is a quality, or set of attributes, of an object or something. That is, the value is given by its own or intrinsic characteristics. So it has nothing to do with price.

However, the reality is that in our collective mind, we think that something is very valuable when it costs too much, and the opposite is also true when its price is very low.

It should be mentioned that this is derived from the high difficulty that exists in knowing how to measure the value of things, since the value is usually relative to each person.

Buying Bitcoin as an instrument of speculation

First of all, it must be clarified that anything that can be traded is susceptible to speculation.

We have the shares of a company, precious metals and even food with which you can speculate with their prices. From lithium to avocados can be speculated. Bitcoin is no exception.

In a way, this is not bad. What I mean is that it is more normal than many have tried to spot Bitcoin.

However, it is usually the most recurring argument of those who surely have had a bad day trading with Bitcoin. Thinking that it is Scam, Ponzi, pyramid and even CIA instrument.

If you buy Bitcoin or sell it being so unstable, you can leave good profits for those who make a correct strategy and management in their trading.

Furthermore, this “instability” or volatility will not necessarily be eternal, since it should decrease when mass adoption has triggered its price. If your price is too high, it will be more difficult to move a percentage grade.

But it should not be lost sight of that, when trading with Bitcoin, the technology remains the same. It is not affected in the least even if its price rises to $ 100,000 or falls to $ 10, its value remains intact.

When you buy Bitcoin, you are buying technology to store and transfer value without an intermediary.

How do you know if something has value?

As I mentioned, there is an acute difficulty in knowing the real value of things. In addition, we must remember the sector that considers Bitcoin as an instrument of speculation with the idea of ​​taking advantage of its volatility.

Those who see it like this give comments like that the golden metal does have value, and that’s why they practice buying Bitcoin. Sometimes perhaps in an attempt to appear knowledgeable.

But, when that same person is asked “what is it that gives value to gold ?, or” why is it valuable? “, One may notice a certain lack of knowledge and mastery of the subject. Noting that these same people recommend buying Bitcoin because it looks like gold, without being able to answer these questions.

So we can deduce that they believe that gold has value, not because they know its real value, but rather because “the majority has historically said so.”

Nor do I mean to imply that I think gold has no value. Rather, that the majority understands that gold can be a refuge of value, just because the majority has accepted it and not because of knowing its attributes.

Attributes or characteristics of something of value

So how do you know if something has value? As I mentioned above, the value of things is given by their own characteristics. So beyond the price of Bitcoin, its value is mainly given by the following:

  • Shortage
  • Difficulty obtaining
  • Divisibility
  • Portability
  • Fungibility
  • Durability
  • Decentralization
  • Permissible
  • Unfalsifiable
  • Immutable
  • Ungovernable

All together they contribute characteristics that make Bitcoin unique. At the moment there is no such thing, despite the altcoins that exist.

Also, mainly buying Bitcoin offers resistance to censorship, since it cannot be stopped or blocked by any government or entity.

Also, if someone wants to store $ 1 of their wealth, without having the possibility of being confiscated, Bitcoin is the right instrument, since there is no way to extract or freeze it from your account.

Of course, thinking that you have a network of thousands of computers with computing power that regulate and guarantee the security and legitimacy of holdings, is an added value without equal, called Blockchain.

That is to have sovereignty and control of your money.

Bitcoin as a haven of value

If you buy Bitcoin, you choose where to deposit the time and energy you invest in exchange for your work.

In general terms, it is your wealth that you keep out of the banking system. A poluto system of debt and junk money, which seems to be falling apart.

Of course there will be those who think that the recent decline in global markets, stemming from the threat of the Coronavirus, demonstrated that Bitcoin is not a haven of value.

We must remember that the majority of the global population, in the face of a crisis, will seek refuge that they “consider safe. So in that sense, the majority ran towards the dollars, even causing gold and silver to fall. So buying Bitcoin was something that many people decided was not feasible.

Furthermore, if we accept the fact that Fiat money has not been the best way to represent and safeguard wealth, then it would not be correct to think that Bitcoin has lost “value” by measuring it in terms of that same Fiat money, which has not done so either. .

What should a refuge of value be like?

So, How should a refuge of value be?. Of the aforementioned attributes or characteristics, to be a value refuge, only 3 intrinsic attributes and 1 element foreign to the refuge itself are needed. The 3 attributes are: scarcity, difficulty of obtaining and durability.

Scarce

It must be scarce, since scarcity is inherently linked to our notion of value. With Bitcoin we know that there will never be more than 21 million units. So existing Bitcoin should not be purchased, since no new ones are generated.

Hard to get

It must be difficult to obtain, because that way it is guaranteed that not everyone can produce in excess, maintaining a controlled supply.

The difficulty of mining allows to self-regulate the issuance time of new coins. Making it impossible to accelerate the production of Bitcoin.

Furthermore, this difficulty produces a high energy cost, making producing Bitcoin expensive, and not everyone can incur in an uncontrolled emission.

Durable

Also a store of value must be durable, because it must be maintained and preserved over time, allowing the deposited wealth to be transferred to the future.

The Bitcoin protocol has no validity or expiration date, it is free of corrosion and physical space. In addition, its protocol allows a scheduled broadcast until the year 2140 and continue working after that.

The fourth non-intrinsic element

And finally, a refuge of value must comply with an element that is “assigned” and not its own. This is the perception or adoption of people.

For example, when people think of gold and silver as a haven of value, then they act accordingly. It is the notion that they serve to store value that makes people use it as such.

In the end, if the idea is that in the future the wealth stored in a refuge of value can be used, we must not forget that people should be the ones who accept and recognize that deposited value.

This was explained by John Bollinger on his Twitter account:

Based on the many comments to my note on Bitcoin’s safe haven status, or lack thereof. Refuge is a matter of perception, not fact. If an asset is believed to be a safe haven, it is. The matter is completely psychological

Realistically, it is quite silly to think that any asset will perpetually increase or remain at the same dollar price.

The term value haven actually means that the asset in question possesses unusual qualities or attributes that make it more suitable for retaining value over time than other assets.

And while gold and silver could be good assets as a haven of value, their physical condition limits them and in turn enhances Bitcoin’s other attributes in time and space.

For now I say goodbye and take this opportunity to remind you that:

“The essence of Bitcoin is to give individuals sovereignty and freedom over their money to control their wealth.”





Leave A Reply

Your email address will not be published.