Congratulations, Bitcoin, you have our attention.
The value of Bitcoins has risen 666% over the last twelve months. If that sounds unholy to you, it’s probably because you didn’t own any. Time has proven that Bitcoin’s capacity to act as an unregulated—in practice, un-regulable—store of value is something that people want. That means that people will very likely continue to buy it, pushing its value higher in the long-run. That doesn’t mean that Bitcoin won’t go through periods of unrealistic price rise, followed by collapse, then slow-run up before hitting unrealistic prices again. In fact, a Cryptocurrency is uniquely susceptible to bubbles, as there is no method of judging its value other than its price.
As I have always said, Bitcoin has no fundamental value, though the statement has been misinterpreted, just as the meaning of “fundamental value” is, itself, misinterpreted. What this means is that if the investors of the world believe the fair value of one Bitcoin to be only $10, the price will quickly fall to $10. It is equally true that if the investors of the world believe the value of one Bitcoin to be $100,000, the price will quickly rise to $100,000. This is not true of stock, as stock gives its owner an actual claim to both the current assets and future earnings of a company. Those are real, tangible things, the value of which can clearly be expressed as a specific number of dollars, even if traders and experts differ as to exactly what that number is.
Instead of my standard disclaimer, I should explain that while I have decades of experience in the stock market and some actual insight into why stock prices rise and fall, I’m just an opinion columnist when it comes to Cryptocurrency. Still, we opinion columnists are allowed our opinions, so here’s mine.