What makes people think Bitcoin will hit $1,000,000?? Are they right?
As of the day of writing, Bitcoin is swinging between $18,000 and $19,500. Here I will be laying my personal thoughts regarding cryptocurrencies, their valuation, and yes, my views on the current and upcoming hype around it. I am in no way responsible for your investments, profits, or losses. Still with me? Good!
The story of bitcoin began on 18th August 2008 when the domain bitcoin.org was registered. Few months later, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published by Satoshi Nakamoto. It is important to note that Satoshi Nakamoto is just a pseudonym and the real developer of this masterpiece is yet unknown. Multiple people have claimed to own the title of Satoshi, but the community hasn’t accepted anyone so far, and that probably will be the case. Anyway, coming back to bitcoin, development of bitcoin, or any cryptocurrency is an ongoing process. In case the developers come up with a new feature, or identify a flaw, they improve the code, patch it up, thus improving the system overall. In case the developers or nodes that run the blockchain (the technology behind cryptocurrency transactions) disagree on the new piece of code, the cryptocurrency can split in two forks. One should know that bitcoin is completely open-source, which means, the software is free to view, use, copy, modify, and sell. This caused a plethora of cryptocurrencies to be born in the coming decade. Today there are many currencies with different technologies, algorithms, and features.
During inception, bitcoin obviously had no real value, being just a piece of software, used only by some geeks curious about the technology, or someone who stumbled across it on the internet. The motto of Bitcoin being a mode of payment never really took off, as earlier it was not valuable at all, now at $20,000 it simply is too costly to make general-purpose transactions. How did this happen? How can something not physical hold any value whatsoever?? That’s the question everyone has (most of us at least). And the answer is quite simple!
A cryptocurrency in this regard is just like any other currency, stock or precious metal. It holds value because there are people who believe it has value. Imagine a scenario, where people in UK burn their pounds in the streets, protesting against their government to discard their current currency system and adopt Euro as the only official currency for all purposes. That would cause the GBP to lose a lot of value overnight. The currency would lose value because the people no longer want to believe in it. Similarly, a cryptocurrency is valued based on how much do people want to buy it for. If no one wants to buy it at $20,000, the price will drop. If there are people who believe it will reach $100,000 they will buy now in the greed of profits, causing the price to rally up. SIMPLE SUPPLY AND DEMAND. I myself started delving into the world of cryptocurrencies in 2015, when the price was around 250$. I have been following the crypto-world quite closely since then. Back in 2015 the all-time high for bitcoin was around $950. I never thought I would see BTC as high as 950$ again, and boy was I wrong!!!
In December 2017, Bitcoin cemented a new all-time high at around $19,750. Considering that in January 2015, the price per bitcoin was less than $200 this is a 100x growth. This is the growth that has caused all these aforementioned articles estimating ridiculous gains to pop up all around the internet.
In 2018, the prices fell sharply and this trend continued in 2019, with prices going as low as $3,200
Now there are multiple theories and calculations which estimate Bitcoin’s next long-term ATH to be $30k, $50k, $100k, $500k, some people even say it’s going to hit one million! SO shouldn’t you invest right now? Go all-in? Sell your organs to buy some digital cash? Sign your soul off in expectation of 100x returns?
Hold your horses! (Or bulls) There is one golden rule trading in cryptocurrencies:
INVEST ONLY WHAT YOU CAN AFFORD TO LOSE
I’m not criticizing any articles or price pundits here, they might very well be true, there’s definitely a chance where you earn millions in a relatively short time, but there is an equal chance of all your dreams to go kaput, and you losing everything you invested.
What are my plans for this?
As of today, I believe the market is out of sellers, and in the long run, Bitcoin will be reaching new heights which will astonish us once again. But I am going to be as cautious as I have ever been.
Most exchanges have a stop-loss system in place for traders, to minimize their losses. I am not teaching trading here in this article, but I’d strongly recommend reading about the stop-loss/limit process. I extensively use it to avoid going too deep in a loss while making gains consistently.
Just to make it even clearer, and answer the question I have promised to answer in the title of this article, ‘Are the people who think bitcoin will hit $1,000,000 right?’
The answer is: There’s a good chance they are wrong, in my opinion, BTC has potential, but 1 million seem very far, and other altcoins are way more mature, and better. But no one can be absolutely certain about it. I could very well be wrong. The outcome is: these speculations shouldn’t affect your life negatively. It would certainly be wise to invest a small amount of money (something you won’t mind locking away for 10 years) but DON’T sell your kidneys, seriously, don’t.