Can the Bitcoin price reach $50,000?
What is Bitcoin?
Bitcoin is a cryptocurrency.
Crypto, meaning cryptic.
Currency, meaning money supply.
Bit, meaning binary.
Coin, meaning unit of wealth.
Bringing it all together, we should have: 'a secure digital form of money that can be traded and used in a market.'
Interestingly, binary is also often taken to mean a situation in which you have only two outcomes: 1 or 0. Something or nothing. Success or failure.
Funnily enough, I think that's going on with Bitcoin investors right now.
Fear of Missing Out (FOMO)
The concept behind Bitcoin is great, don't get me wrong. And it's easy to envisage the world in which people send and receive money without a bank or government getting in the way.
It's all about belief.
If enough people believe it will work, it's a self-fulfilling prophecy.
However, when it comes to the price of Bitcoin it must be said that there is perhaps no way of knowing exactly what it is worth.
Even currencies are priced and traded relative to a basket of goods and services in other countries.
There is interest and security.
Bitcoin bulls might point to the hyperinflation in Zimbabwe, Argentina or Germany to remind us that currencies can be also wildly speculative.
Conversely, you could point to the Euro and see how intensely difficult it is to keep a single unit of currency relevant and stable to everyone.
Can Bitcoin reach $50,000?
I recently heard one pundit say Bitcoin will reach at least $50,000. Admittedly, they didn't know when.
Still, it will hit at least $50k, according to the pundit.
Of course, mining for Bitcoin is becoming more difficult and supply will eventually fall.
Maybe that's the thesis behind his price target.
But how do you value something that does not pay interest and has no clear arbitrage framework?
Is the valuation based purely on human emotion and our desire to go 'off grid' with payment systems?
Perhaps, but I'm not entirely certain human emotion can be valued.
Foolish Takeaway
I like the idea behind Bitcoin, Ethereum, and Ripple. But that's where I'll leave it for now.
Everyone knows the price of everything and the value of nothing. Unless you can definitively state why Bitcoin is worth significantly more than it is today, it's pure speculation.