Right now one can buy a Bitcoin for around 27,000 dollars. A number that will seem low very soon. How long? Unclear.
I do not fully understand how Bitcoin works. Neither do the people that trade it. Or those that promote it. Or – no surprise there – the journalists that write about it for a living. Probably not entirely true. But sadly it is not that those who have the best grasp on the subject matter are the ones that have the biggest audiences. A general problem. One that we all created: We give bad and flawed sources to much of our attention. We know what bad info looks like. We click and subscribe anyway.
But back to the Bitcoin Bubble: There is a finite amount of them. They get created by an ever increasing calculation effort. If Bitcoin is above a certain price that is not a problem: If mining them makes you money (actual money that you can use somewhere) then people will do it. All bitcoin transactions go into one unique ledger. This is a problem. One that is built into the design of the ‘currency’: If your beautiful new digital currency is limited to -let’s say- 10 transactions per seconds for the entire globe you have a problem. One that has been with Bitcoin since day one. People being people still promoted for a while that you will buy your Pizza with ฿. Many some poor souls did. They regret that today.
But we don’t buy food with gold either. So couldn’t Bitcoin be an awesome (new) way to store value? There is a problem with that way of thinking as well: Gold just sits there. That’s why humans like it. No batteries need replacement. It does not corrode. It is today what it was a 1000 years ago. Trading it means essentially moving it from one place to another. Today it often does not really mean that. But essentially Gold (if it then exists) can be used in that basic mode.
A Bitcoin trade does go into the central ledger. One that is only valid as long as there is mining of new coins. Which will become more expensive. As long the price keeps going up that works. There will be the point that mining new bitcoin will be more expensive than the price would justify. Which also means that there will be no further transactions. Currently people have around 400 billion dollars worth in Bitcoin. Since they want to use that money someday they need to find new people who ‘invest’ in Bitcoin.
One could probably calculate where that max price limit is. The Bitcoin curve will not look predictably simple. It will eventually end, and there will be no more trades. Until then it will have the shape of the edges of a saw while going up. How many of these saw teeth there will be I do not know. As I said I don’t know how Bitcoin works. At the current price you might make money depending on the tooth shape we are, and if there will be future ones.
But eventually it will come to a crashing halt. And then there will be nothing. Absolutely nothing. Maybe you have a screen shot of your holdings. If you print it you can hang it at your wall. But it will otherwise be worthless.