Bitcoin has fallen below the support level one after another, where is our faith?
The decline of Bitcoin this week is still fierce. On November 25, Bitcoin fell below the $4,000 and $3,500 mark in one day.
At this time, investors whose confidence is on the verge of collapse will be coerced by various contradictory views such as conspiracy theories, bubble theories, belief theories, Ponzi schemes, etc., and do not know what to do.
What is the future of Bitcoin?
A long-term Bitcoin holder who entered the market in 2013 said on Reddit, don’t trust anyone, do your own research, and do your own critical thinking.
To answer what the future holds for Bitcoin, let's first ask a few more fundamental questions: Where is Bitcoin worth? Has this value been reflected now? Will it be challenged again in the future?
Bitcoin has been evolving as a means of payment
As Satoshi Nakamoto pointed out at the beginning of the Bitcoin white paper, Bitcoin is first and foremost an end-to-end payment technology that solves the trust problem.
As a means of payment, Bitcoin has made a lot of progress since its birth in 2008. For example, the Lightning Network (Lightning Network), which was launched on the main network in February this year, is an offline network designed to solve the problem of Bitcoin expansion, enabling Bitcoin users to conduct transactions with lower fees and higher efficiency.
Bitcoin is also gaining popularity in retail as a means of payment. According to data provided by NetCents, a digital currency payment company, the retail transaction volume of Bitcoin has increased from an average monthly value of $9.2 million in 2013 to an average monthly value of $190 million in 2017. The number of retailers accepting bitcoin payments is also increasing, with an increase of 30.3% in 2017 alone.
Infographic source: Netcents
Of course, Bitcoin’s share is still very low compared to existing means of payment. Bitcoin currently has an estimated 5.8 million active users, while PayPal has 235 million global active users, and Visa has 336 million U.S. users and 736 million international users.
As a store of value, Bitcoin may be threatened by centralization trends
The second layer of value in Bitcoin is the store of value. People put their wealth in a store of value and expect that at some point in the future, the same wealth can be restored. The decentralized design of Bitcoin makes Bitcoin theoretically possess some of the characteristics necessary for value storage, such as security, low inflation, and low transaction costs.
However, from a more realistic point of view, the stability of Bitcoin's price is completely unable to support its value as a store of value. From the perspective of future expectations, the emergence of a centralization trend will also weaken the significance of Bitcoin as a store of value. Because as far as the current development of blockchain technology is concerned, the efficiency of decentralization is obviously not as high as that of centralization, which leads to the unstoppable trend of centralization. A few people have mastered most of the computing power, which is already a status quo of the entire Bitcoin network.
Bitcoin computing power distribution
Chart source: Bitcoin.com
If one day, centralized capital power allows the entire network to gather computing power to oligarchs, then the decentralization of Bitcoin will be out of the question. At this time, the value of Bitcoin as a value store is very problematic, because if the computing power predators guard against themselves or are attacked, the asset security of Bitcoin holders will be wiped out. (The recent BCH bifurcation incident revealed the devastating blow of centralization to the digital currency network)
What exactly does Bitcoin's value depend on?
The two values of Bitcoin were mentioned above, but from a more realistic point of view, there are still a small number of users who currently use Bitcoin as payment or value storage (after all, there are many uncertainties in both), and Bitcoin is to a greater extent Still considered a speculative asset.
At present, the price of Bitcoin is mainly affected by supply and demand. Demand is mainly affected by users' psychological expectations, but supply cannot be adjusted with price changes. Therefore, the current price of Bitcoin mainly reflects investors' psychological expectations. This is why Bitcoin and other digital currencies are more influenced by news than other investment targets.
Of course, at the beginning of the bitcoin crash last week, someone listed a timetable of previous bitcoin crashes, and matched it with the price of bitcoin at that time, to illustrate the point that no matter how bitcoin floats, the price is rising steadily . But like any speculative asset, Bitcoin's past performance is not indicative of future price movements.
How Bitcoin will go in the future depends on its popularity as a means of payment or a store of value, but if this popularity is only supported by faith, it is no different from speculating on tulips; so the value of Bitcoin is greater To a certain extent, it depends on the development and landing of the technology itself.
Therefore, as an investor rather than a speculator, what needs to be paid more attention to is whether Bitcoin has made substantial progress in improving efficiency, ensuring asset security, and ensuring privacy.
