In the last year, the value of Bitcoin has gone from $1,000 to over $19,000. A lot of people are making a lot of money.
So what’s the deal?
What’s happening is that the cryptocurrency market is booming. The companies that make and sell cryptocurrencies are growing much faster than the price of cryptocurrencies themselves. If you just look at the numbers, it looks like this:
The number of new cryptocurrency companies has been rising steadily since 2012. The number of new cryptocurrency users has been rising steadily since 2011. The number of existing cryptocurrency users is up sharply.
In other words, there are more people investing in cryptocurrencies than ever before.
But if you look at the actual cryptocurrency market cap, which is a measure of how much money these companies have raised, you find that it has not grown as fast as these other numbers do. In fact, though it started growing in 2013, it’s only now starting to grow quickly again.
What’s happening here is that the market isn’t being valued properly. It hasn’t yet caught up with all the new investments in cryptocurrencies made over the last few years.
I’m not a professional trader. I have only used technical analysis for a few months and have tried to keep an open mind about all of them. Cryptocurrency market cap is an important concept that you need to understand if you want to invest in it. If you do not know the cryptocurrency market cap, then let’s understand it with some examples.
We can take the example of bitcoin today. The market cap of bitcoin is $124 billion USD. But bitcoin does not really have a lot of value. It is worth something, but that value is caused by people believing it has value; if everyone stopped believing that, it would go away, and become as worthless as a bunch of fiat currencies such as the dollar or euro or yen or pound sterling (which are also called fiat currency).
Bitcoin price has gone up by more than 1,200% this year, which means it has gained more value than $124bn in 2017 alone. Bitcoin price can rise or fall by 20% in the blink of an eye. But since its inception, bitcoin has shown a consistent growth trajectory in terms of the number of transactions made on its network and its value against fiat currencies (USD).
Cryptocurrency markets are highly volatile. The price of Bitcoin, for example, has risen from less than a dollar in 2013 to more than $19,000 today. It is currently trading at around $14,000.
Cryptocurrency markets are also highly speculative. People who invest in them do so because they think the price will go up; they don’t expect it to go down. In fact, if you look at the history of Bitcoin, you can see that its price has risen steadily over time even though its number of users has grown steadily less and less.
While there are many explanations for this phenomenon—some economists say that the rising value of Bitcoin comes not from the usefulness of cryptocurrency but from speculative demand—the basic idea is that the more people use cryptocurrency the more valuable it becomes. If popularity were the sole reason for its rising value, then it would be reasonable to assume that as soon as things got too popular people would stop using cryptocurrency; instead there is no sign of that happening anywhere in the world.
When the price of bitcoin started to rise, or some other cryptocurrency, people started to wonder if it was a bubble. That’s because bubbles are a kind of boom, and booms have a tendency to go bust.
First, though, we need to understand what “bubble” means. Bubbles are not just one thing; they are many things: greedy investors who think they can make money out of thin air; people who want to make money out of thin air but have no idea how; people who don’t know what price they should pay, because they have no idea what they are buying; people who don’t care whether their investment works out or not.
There is also a more general sense in which a bubble is something that doesn’t make sense: it includes failed projects, frauds, and other examples of gullibility.
It’s hard to predict how well a new technology or idea will take off, but in the case of Bitcoin, the first real cryptocurrency, it’s true that nobody could have foreseen that it would become a huge success. In fact, no one could have foreseen that anyone would even want to use a cryptocurrency.
In 2008, when Bitcoin was created, it was just trying to solve a problem no one had thought about before. But by 2017 there were at least 2.5 billion people around the world who wanted some way to move their money from country to country easily and safely. Bitcoin was the solution for some of them—until it wasn’t any more. And now there is no obvious replacement for it as a worldwide payment system, so we can expect that at least some people will return to using it as a way of moving money.
But because no one really understands how cryptocurrencies work, and because nobody can tell what happens next in this kind of market, we can’t know exactly what the price or value of Bitcoins or other cryptos will be in five or ten years. So if you’re interested in investing in cryptos, I recommend doing something else while you wait.
This is a new breed of currency, which can make you rich overnight.
In 2008, when Satoshi Nakamoto invented Bitcoin, this was the biggest bubble in history, and it’s only getting bigger. It’s a kind of digital cash that can be used anywhere in the world.
It’s not just a currency; it’s an almost pure form of wealth. The value of Bitcoin has risen 24 fold since it launched in 2009. And its price has risen more than ten-fold this year alone.
Bitcoin is like gold, but with no central bank controlling it. When we have seen such spectacular gains in precious metals as gold and silver over time, we have been able to predict the direction of their price movements. But with Bitcoin we don’t know whether it’s going up or down next month. It is unpredictable, and because it is so hard to buy and use, it is very volatile.
Bitcoin has grabbed people’s attention with its volatility and the prospect of big gains from fast trading. It is definitely something to watch out for if you want to make money from a market where there are no rules or limits on how much money you can make or lose.
So here we are in a wonderful world. A world where you can pay with the same currency that your grandparents used. A world where everyone has a chance to profit from the innovations of others. And for those who see the promise in this new form of currency, there is an opportunity to get rich by not being greedy and by anticipating trends in the market. For it is inevitable that no matter what happens, someone will be there to capitalize on it, and they’re willing to take a loss now so that they can make money later.
If you have a calculator and some basic understanding of how the stock market works, then you understand exactly how this works. Take two hundred dollars’ worth of Bitcoin and buy one dollar’s worth of Google. The value of Bitcoin will drop by fifty cents. But if you then go home and put your one dollar’s worth of Google into Google, it will rise in price by fifty cents, because there will be one more person buying it than selling it (i.e., there are more buyers than sellers).
In our own small way, we are all getting rich by not being greedy and anticipating trends in the market.