Will Bitcoin drop to zero [O] dollar ?

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Much of the investment case for Bitcoin   rests in its limited supply. There are currently 
18.6 million bitcoins in the market and a total   of 21 million can ever be created, which 
will not happen until 2050. Therefore,   as income and Gross domestic product grow faster 
than the Bitcoin supply, each Bitcoin will be   worth more in real terms. Theoretically, you 
will be able to purchase more goods and services,   with the same coin so its price has to keep 
going up. In that regard, it functions like gold,   but Bitcoin is much easier to store, exchange 
into regular currency, or transact with.  The problem with that logic is that virtually 
everything in the world has limited supply.   The Law of Conservation of Mass says mass is 
neither created nor destroyed, ever. The key on   the supply side (we will get to the demand later) 
is how easily substitutable a good or an asset is.   The service Bitcoin offers is store of value, 
exchange into fiat currency, and transactions.   There are over 5000 cryptocurrencies, many with 
limited supply, that offer the exact same service.   In fact, many are better.

Since 
Bitcoin is by now old technology,   it is slow, expensive, difficult to scale and 
its electricity consumption is preposterous   (apparently Bitcoin consumes more electricity 
annually than the entire country of Argentina).  Therefore, while the specific currency Bitcoin 
might be of limited supply, the services it   offers are actually of unlimited supply, since 
creating cryptocurrencies is incredibly easy.   To give you another analogy, the supply 
of eggs from any one farm can be limited,   however, since all eggs have the same use-value to 
consumers, the price of any egg in the store will   be roughly similar.

Just because your particular 
farm will only ever produce 22 million eggs, it   does not mean anyone will ever pay more for them.
We all know that fiat money has no value on   its own, it is just paper or worse bytes on the 
cloud. What makes the Dollar or the Euro valuable,   is that there are goods and services that you can 
only buy with that currency. If you want a German   car or a Pfizer vaccine, you need to hold euros or 
dollars, respectively. The value of the currency   in real terms is directly tied to how many goods 
and services are produced in a certain economy.  The value of Bitcoin is similarly entirely 
dependent on what I will call for short the   “Bitcoin Economy,” or the amount goods 
and services bought using Bitcoin.   Bitcoin is mostly used in a limited number 
of transactions, sometimes illegal, in an   effort to circumvent regular payment channels 
that are closely monitored by authorities.   As far as payments are concerned, Bitcoin 
is incredibly inefficient – as it is slow,   expensive, highly volatile, and most importantly 
not recognized by authorities in any country.   There is a huge cost to businesses of 
constantly converting back and forth   to the fiat currency and experiencing 
massive price swing in the meantime.   Also, as we discussed, in the supply section, 
there are numerous other alternatives to Bitcoin,   that are actually more efficient and 
there is no switching cost for users.   Therefore, the Bitcoin economy is destined to stay 
small and even shrink.

In fact, that is exactly   what is already happening. Usage of Bitcoin peaked 
in late 2017, as you can see in the chart below.   People then quickly realized, there is very 
little use value of Bitcoin as a currency.  So our theory tells us if there is 
little use or demand for the currency,   the price should track that.
In 2019 when the Bitcoin hype   was largely forgotten and demand was more 
closely based on the use of the currency,   you can see the price tracked 
transaction volume very closely.

In the absence of speculators bidding up the 
price of the currency, its price is entirely   determined by how many goods and services are 
being sold in Bitcoin. As you can see that   price seems to have been a little below $10,000. 
Note, I am not saying BİTCOİN is worth $10,000,   I am convinced it is worth $0 in the long run, 
as no one will have use for it. However, the   chart tells us that given how many Bitcoins there 
were and how many services were sold in Bitcoin,   the clearing price at the time was $10,000 in 
the second half of 2019. This is much like the   oil price, which is determined by how much 
oil we are currently using. However, as the   world economy transitions away from fossil fuels, 
oil prices fall, and may one day be close to $0.  Starting in 2020, people again convinced 
themselves Bitcoin has unlimited value and   created a bubble, helped by social media hype.
I cannot forecast how high the BİTCOİN price will   go or when it will crash.

People have already made 
(and lost) fortunes paying the Bitcoin lottery so   it is not always a losing bet. All I am saying 
is, the intrinsic value of Bitcoin is very low,   much like dot-com stock in 2000 and houses in 
2008. You can always try your luck, but you   have to understand the price you would be paying 
now is entirely divorced from any economic value.  Seasoned financial analysts know that the most 
dangerous words in finance are “This time is   different,” which people of course told themselves 
during the dot-com bubble and the housing crisis.   The excuse for Bitcoin this time is that 
the current rally is driven by institutional   investors and not just crypto enthusiasts.
To start off, it turns out institutional   investors are not piling into Bitcoin.

There is an 
excellent article on Forbes that goes into detail   on who actually is buying Bitcoin. In short, 
no reputable institution or pension fund has a   Bitcoin investment strategy. There are, however, 
very wealthy individuals and institutions,   most notably Tesla, which have put money into 
Bitcoin, evidenced by the fact there are more and   more accounts with over 1,000 Bitcoins (currently 
representing around $35 million in value).   These are mostly speculators and misguided 
souls who think they can ride the bubble and   not traditional investors who have found intrinsic 
value and are holding the asset in the long term.   No one's pension money is invested 
in Bitcoin, and rightfully so.  Some Bitcoin supporters recognize Bitcoin is 
currently extremely volatile, a poor substitute   for currency, and has little use-value. 
However, they claim the market will mature,   the investors will see it as a stable store 
of value, and everyone will end up investing a   portion of their portfolio in Bitcoin, much like 
in gold. In fact, a JP Morgan analyst recently   published a research piece with a $146,000 
BİTCOİN price target. The hefty JPM price   tag mostly hinges on the idea that Bitcoin will 
become widely seen as a substitute for gold and   claim similar size of investors’ wallets.

Gold, 
of course, has uses – in jewelry, medicine,   technology etc., which is why gold is valuable 
in the first place. Bitcoin has limited-to-no   unique uses, which is why it is worthless.
But let’s put that aside and play out the   scenario where everyone allocates a portion of 
their assets to Bitcoin. Allegedly there is $250   trillion of savings in the world, according to 
Credit Suisse's Global Wealth Report. If even   1% of that were channeled into Bitcoin that would 
mean $2.5 trillion invested into 22 million coins.   If everyone decided to allocate 1% of their assets 
in Bitcoin, $114,000 should be the market-clearing   price.

In fact, it could be higher, depending 
on how much supply there is for any given trade.  However, once the dust settles and everyone 
has their 1% invested in Bitcoin (no matter the   buying price), the price action is over. The only 
remaining use for BİTCOİN is the Bitcoin economy.   And according to the prior chart, the price of 
BİTCOİN was $10,000 in the beginning of 2020.   If another technology supersedes it 
in the future, then it's closer to $0.  Just because someone bought Bitcoin at an 
outrageous price, it does not mean someone   else will come along and offer the same price 
for it. Investors in GameStop learned that very   lesson the hard way. In short, even if everyone 
bought Bitcoin and the bubble took the price into   the hundreds of thousands or even millions, 
the price will always come back down based   on how much demand there is for Bitcoin goods 
and services.

And there isn’t much as we saw.  More generally, for a financial instrument 
to be considered an asset it either needs   to have future cash flows (like stocks 
and bonds) or it needs to have use-value   (like gold and oil). Bitcoin has neither and 
therefore has no place in asset allocation.   Professional institutional investors know that, 
and widespread adoption is not on the horizon.  Finally, possibly the most rational investment 
case for Bitcoin is – “I am happy to lose my   money.” This encapsulates reasoning such as – “It 
is only a small portion of my net worth,” “It has   higher upside than downside,” or “It is just a 
gamble.” Now, if you have accepted that you are   gambling, that is fine, but you have to understand 
that is the complete opposite of investing.  When professionals invest, they expect a positive 
return over and above what a risk-free investment   can yield. By now, you hopefully realize that 
the price of Bitcoin cannot be anything but $0   or very close to that. Therefore, the expected 
value of a Bitcoin investment is 0$ or -100%.   There is a higher chance that you will win the 
lottery, since there at least someone wins,   than realizing value from BİTCOİN in the long run.  Subscribe to our channel and open 
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