Why the 10 year old Bitcoin ‘Bubble’ absolutely refuses to burst ?!
A lot of people including many stalwarts of the old economy ( like Warren Buffet ) are genuinely and completely befuddled by the unprecedented and continuous price rise of Bitcoin that has left the Dotcom bubble and even the Dutch Tulip mania far behind biting the dust. Some others like Jamie Dimon of JP Morgan are being a bit disingenuous when they denounce Bitcoin — at some level they probably understand the disrupting potential of the technology and Wall Street is somewhere on top of the disruption list. But this write up is mainly for the majority of the people who want to understand how something that came out of the blue and has no physical form at all continues to become ever more valuable and exhibits almost a bubble like price rise for the last 9 years.
A simple way to explain this fantastic and non-stop price rise ( from just USD 500 last year to USD 11000 now ) is with the Whatsapp analogy : Even 4 years back, Whatsapp was bought over by Facebook for a whopping 20 billion USD. Its present valuation is probably close to a mind boggling 50 billion dollars ! So what is it that makes a small piece of software more valuable than most blue chip companies of the world and richer than most of the richest people in the world ?! On Android Playstore, the Whatsapp download measures just 65 MB in size — take printout of it all and it equals maybe a big fat book in physical form. How does this book manage to be more valuable than entire sections of industries like steel, shipping, real estate….which have huge physical assets ?! What makes it so valuable ? What does it really do ?! Well…given internet, Whatsapp transmits messages and information from any place on the planet to any other — instantly, securely and free of charge — free from any snooping, censorship or government control. And that's exactly what Bitcoin does for Value. Instead of just information, the bitcoin network can transmit from a few cents ( that you may want to donate to a charity in Africa ) or, your entire life’s earnings or, millions or even billions of dollars in the same way — instantly, securely and free of charge — free from any snooping, censorship or government control.
And that's exactly what Bitcoin does for Value. Instead of just information, the bitcoin network can transmit from a few cents ( that you may want to donate to a charity in Africa ) or, your entire life’s earnings or, millions or even billions of dollars in the same way — instantly, securely and free of charge — free from any snooping, censorship or government control. Whatsapp transfers merely Information whereas Bitcoin, transfers VALUE ! In simpler words, Bitcoin transfers human effort itself of which Money is just a tokenized form. Comparing use case and utility provided by Whatsapp and Bitcoin and, their current valuations, it makes for a strong case that even at 11000 USD, Bitcoin is hugely undervalued.
Admittedly, banks have been transferring Value for quite sometime now since modern financial era began a century ago but, they are as as slow, expensive, cumbersome and restrictive in transferring this Value as the Postal Telegram was for transmitting messages !
And just like Whatsapp obviated the need for Telegram — which does not exist as a service anymore — Bitcoin ( and Cryptocurrency ) ecosystem is poised to make Banks redundant.
It will be a lot more difficult though because what is at risk is not just banks but the entire politico-governmental system of the world as, political power is a function of the economic power to control and print Money. Bitcoin takes that away. At some point — which may be imminent — such rapid rise of Crypto might scare the world’s governments — led by US ( whose USD hegemony is directly threatened by bitcoin ) into some kind of concerted action to clamp down on crypto. I won’t be too surprised if like China, more countries go for banning exchanges — short of banning internet, that's the only way for them to play spoil sport.
If ( when ? ) that happens, it will at best be another speed bump ( a major one though ) in the inevitable rise of Crypo-economy. Coz the day is not too far into the future when fiat-to-crypto ( and vice versa ) exchanges will no longer be required coz by then, the whole world will be running on crypto currencies and, fiat money will be consigned to where it rightfully belongs — history books 😊
