12- Bitcoin’s price
“Money money money”
Ohhh, Bitcoin’s price.
My friend, lie not! I know for a fact, that’s the exact reason you are here.
I am not judging, I am only messing with you.
Be honest, though. Was I right? Is Bitcoin’s incredible price performance the main reason you are approaching this world?
There’s nothing to hide. In fact, I must confess: that was the case for me too.
And we are not alone. I am pretty sure that 9 out of 10 Bitcoiners started out like this: with the desire to “make money”. I’m calling you out, guys.
We all know, or have heard, of that person who invested a few thousand, and now they became a millionaire.
It’s the indescribable allure of money. It’s in our nature, and don’t forget what we talked about, back in the introduction of this guide. “It’s the greatest incentive, the biggest mover for human behaviour."
It’s inevitable: when someone tells you “bro, you can ‘10x’ your money”, or something along those lines, we are immediately hooked.
Our mind starts racing, dreaming, picturing some idyllic scene of a new life where we finally made it: we got rich.
I was the same. A friend recommended I “check out crypto”, and so I did.
I was enthralled. All I could do was spend my days googling “Bitcoin price prediction 2030”, or “can Bitcoin go to a million”.
I kept telling myself “just reach 0.25 BTC, wait a few years, cash out, and happy days!”
I am laughing, and cringing, as I write this.
But I am not ashamed: it’s just funny, laughable now.
That’s because, as a Bitcoiner, your journey will change you.
No longer will you be interested in “making money” –well, not only, at least– and new realms will be waiting to be discovered, once you go down the rabbit hole.
“Number go up” is merely the beginning of your path: that’s what we all unapologetically do.
But you’ll see that Bitcoiners are not only passionate about finance; they are often proficient in history, ethics, politics, philosophy, and much more.
That’s because money encompasses a plethora of topics; it digs deep into the human condition, and it explores our very souls.
You are here to understand what’s behind Bitcoin’s price, so let’s get started.
If you are not into markets, investing, and all that stuff, you may find it baffling.
Who “decides” on Bitcoin’s value? Why does it change every day, and why does it move so sharply? The answer is quite simple, really.
When demand is higher than the supply, a product’s market value will certainly increase.
Supply & demand
Bitcoin is not a company, nor is it a consumer product.
It doesn’t come with an “MSRP”, a fixed price attached.
Its value is constantly moving, and it depends on several factors, of which the chief one is the elementary concept of “supply and demand”: the core of any open market.
When a valuable item is particularly requested, but its supply is limited, its price will naturally increase. This is what happens when, at any given moment, there are more buyers than there are sellers. If Bitcoin holders are not willing to sell at current prices, “the market” will try to convince them by raising the offer.
On the other hand, if a product has a vast supply, but the public isn’t interested in it, that’s when its value decreases. If fewer people are currently purchasing Bitcoin, the market tries to lower the prices, so that it can bring more buyers in, by trying to attract them with a more favourable deal.
It’s a delicate balance, and its dynamics are obviously more complex than this.
Supply and demand is closely related to the evergreen theme of “perceived value: the essence of money”.
By buying a certain product, in this case Bitcoin, it is generally agreed that the item carries some amount of value. If it didn’t, no one would be interested in it.
Over the years, as more and more people accumulated it, the “supply and demand” needle moved to the point where the market, as an entity, “had” to increase its value by more than a million percent, in order to “convince” holders to sell it.
The next time you hear someone say that Bitcoin has zero value, ask them to send you one for free!
Bitcoin’s value is constantly on the move. It rises or it falls suddenly: why is that so?
Up and down. And up again.
I hope you enjoy rollercoaster rides, because you are in for a multi-year one.
“Volatility” is the word that perfectly describes Bitcoin’s price action. It’s pure madness; just take a look yourself.
This is one of the reasons Bitcoin gets a bad rap: its value keeps swinging in a very unpredictable and violent fashion. “It’s like gambling”. “Too risky, too volatile”. That’s what they say, although they are obviously not seeing the whole picture.
In traditional markets, such as the stock market, a daily -3% or a +2% are considered huge moves. In Bitcoin, that’s child’s play: here, we are used to regular -10% daily “dips”. Even more, of course.
We went over some of the craziest crashes: -30%, -50%: that’s pretty normal.
That’s why “traditional finance” tells you to “only invest money in Bitcoin that you are ready to lose”.
For me, it’s the exact opposite. “Only keep money in the bank that you are ready to lose”.
“It’s a feature, not a bug”. That’s how Michael Saylor famously defined volatility, in the context of Bitcoin.
See, you should shift your perspective. Volatility, at least in a Bitcoiner’s eyes, translates to “room for growth”.
Yes, Bitcoin can crash hard but, on the flipside, it also shoots up incredibly high.
Look at assets such as gold, real estate, bonds, and all that.
Those have been around for literal centuries; they had many years to “settle down”. The market figured out their value a long time ago, and they now move only slightly up or down..
Check out their yearly performances: they usually appreciate between 5% and 10%, max.
On the other end of the spectrum, you have Bitcoin, which increases, on average, by 60% (cumulative) each year. That’s enormous, and no other asset comes close
Our favourite form of money has ridiculous downside AND upside potential, because the market is still in “price discovery”: it’s trying to evaluate it, as it’s still so young. And you must embrace it, if you wish to keep your mental sanity.
The day will come, when Bitcoin, possibly surging to “world’s reserve currency” status, will become stable, “boring”, with a predictable price action.
But that day is still very, very far away. Until then, get ready for a gut-wrenching ride. Welcome!
The zel-like HODLER is unphased by market shenanigans, because he diligently studied the Bitcoin fundamentals.
A test of discipline
Everyone is a genius in a bull run.
When Bitcoin is up 150% year-on-year, you are on top of the world. “I was right!”. You feel validated, and you may FOMO in, buying more. It’s all good.
But can you face a 50% crash? That’s where true Bitcoiners are forged. Can you HODL through a multi-month bear market? Are you able to “ignore” market panic, doomsayers, and haters? If your net worth suddenly halved, would you still stand strong?
Remember where you are. At the dojo, discipline and humility are the foundations of our practice. And it’s the same exact thing in Bitcoin.
I did warn you, didn’t I? Your ego will be tested, your spirit may be broken, and your conviction challenged. But for those who are capable of withstanding the storm, a handsome reward awaits.
Tough times will come – that’s guaranteed. How you deal with it will set you apart.
This is why it’s absolutely essential that you study Bitcoin.
When things get ugly, casual holders, traders, and uneducated investors immediately “panic sell”.
“Faithless is he that says farewell when the road darkens”
Another LOTR quote for you. My pleasure.
The iron-willed and learned Bitcoiner, however, rejoices. A market downturn is oftentimes welcome news.
“Buy the dip”: that’s what we say.
Shift your views, from “crash” to “Bitcoin at a discount”. If the chart shows you a daily -8%, you shouldn’t despair. On the contrary, that’s when, if possible, you should get some more. The best asset in history is on sale; time to stack some SATs!
Cheap SATs? Yes please.
“When in doubt…
Just zoom out”.
Easily one of my favourite expressions.
I know, I made it look like it’s all fun and games, but yeah, the truth is that sometimes it really is hard to stay positive, when the market collapses for seemingly no reason.
You believe in Bitcoin but, apparently, the world doesn’t agree with you, when the price crashes.
Look, I am a Bitcoin Maxi. I store basically all of my money in Bitcoin. It’s harsh, at times: let’s not sugar-coat it. You may get carried away with negativity, and that’s understandable.
That’s when you must take a breath, and zoom out.
Open your “crypto” app, and check the Bitcoin price chart. If you focus on the weekly, or monthly action, you are going to get stressed.
-17% in a month. Ouch.
But wait for the next image…
It goes up, then down, then down again, and some more. It comes back up. A little more, before it dips. But then, it surges once again. Damn, that’s nerve-wrecking.
Instead, open up the multi-year chart. What do you see? Ahh, yes! A long, upward green candle.
That’s your BTC therapy. Ignore the short-term noise, and keep in mind: Bitcoin went from being worth $0, all the way to $100,000. That’s your mantra. Yes, the road is extremely bumpy, but in the end, we are only going up, period. Even during the most spectacular bull runs, Bitcoin had to go through some severe crashes, before exploding to new highs.
It’s part of the game. Are you playing?
Up, up, up.
So, when should you worry, as a Bitcoiner, if I am here, telling you to stay calm and relaxed during a market crash?
For me, there is only one instance when I would seriously consider panicking.
The biggest threat, I believe, is a negative change to the Bitcoin protocol.
If that stays intact, I am happy. I can stomach a -50%.
But if significant changes are ever made to the system, that’s when I start sweating.
Let’s say that, for some strange reason, they managed, through consensus, to implement a new version of Bitcoin, where the total supply is doubled; or, even worse, is entirely removed.
That would turn BTC into digital fiat. Needless to say: I’m out. Goodbye.
But if the protocol remains the same, which is what made you fall in love with this currency, then you have no reason to freak out.
Ask yourself: “Are blocks still being mined every 10 minutes?” “Is the blockchain still publicly verifiable?” “Am I still able to operate a node and to contribute to the network?” “Is Bitcoin still decentralized?”
If the answer is “yes”, then you are good. It’s fine.
The market will keep doing its thing, and you must meet it head-on.
Market dynamics
Ok. We have seen how supply and demand drive the market and how it has a real impact on Bitcoin’s price. More sellers=lower prices. More buyers=value increases.
But what exactly is behind it? I mean: what makes people want to sell their Bitcoin?
And why do we have times when everyone wants to buy it, while no one is willing to sell?
There are, as you may imagine, several forces at play here.
However, and this is something you may not expect, one of the driving causes is represented by…emotions? Yes, emotions, feelings.
Don’t forget that markets are entirely, for now, made by people, for people.
And what are we subject to – and victims of – as humans? Emotions: they surprisingly play a massive role in financial markets too.
When optimism is in the air, thanks to favourable social and political conditions, people tend to be more willing to invest their money on assets.
On the contrary, market participants turn “bearish”, when things are not going well.
Generally speaking, markets are averse to risk, and they much prefer stability. That’s why a large slice of investors immediately press the “sell” button, when instability creeps in.
“Macroeconomy”, together with geopolitics, also largely contribute to determining Bitcoin’s current value.
When the world goes through a catastrophic event such as a global recession, a financial crisis, a major war or conflict, you can bet markets are going to take a hit. That includes Bitcoin, which is not immune to such events.
On the other hand, positive news such as “interest rate cuts” are always associated with big rallies and price increases. Good reports about inflation, jobs data, global commerce and more broadly about the economy, are most likely going to trigger optimism and thus market “inflows”, where more and more people are happy to buy assets.
News, laws, policy changes centered around Bitcoin, whether they are positive or negative, are also very impactful.
When China banned mining in 2021, it initiated one of the worst crashes we have ever seen. But when Donald Trump spoke favourably about Bitcoin, making promises on the introduction of a national “Bitcoin reserve”, that’s when the legendary $100 000 threshold was first broken.
Let me be frank, however. As a Bitcoiner, and not a speculator or a trader, I really can’t be bothered with these things. Sure, Bitcoin takes up most of my day, and I am always up-to date with what’s going on.
But there is only one factor I really care for. Only one metric I look at, when I come with my very own price predictions.
It’s “global adoption”.
When evaluating the current state of Bitcoin, I don’t really look at its price. I ask myself : “how many people around the world are actually using Bitcoin?” “Is BTC being integrated in the current financial system?” “Are pro-Bitcoin laws being implemented, or are governments trying to kill it?” “Are we getting closer to the day BTC becomes the new standard?”
If the answers are mostly positive, then I know we are in a good spot. The rest is somewhat irrelevant, at least in the short term, and you should not be too caught up with it.
Bitcoin’s current price is not a reflection of its real worth, but how much the world presently understands it.
This is an important distinction.
“If the world knew what I know about Bitcoin, its price would already be in the millions”. That’s Saylor, once again.
When you truly understand the fundamentals, and realize just how valuable this thing is, that’s when you will start “ignoring” the current market’s price. One day, most people will get there.
And you will be staying in a comfortable front-row seat, because you were smart enough to figure it out before them. Cheers to you.
“To infinity and beyond”
This may sound crazy to you, but after hundreds of hours spent studying Bitcoin, I am absolutely certain that its price will keep increasing forever. Yes, forever.
One million, two, five, ten. And then more.
I am serious. And no, you shouldn’t make decisions based on what I, a total stranger on the internet, just said: instead, study Bitcoin, and come to your own conclusions.
How can I claim those absurd numbers? It’s easy, really. I’d say it’s mathematical.
As the fiat ship sinks, the Bitcoin rocket is launched into space.
For one, Bitcoin is engineered to be deflationary.
Its fixed supply of 21 million units, together with an increasingly slower “production” rate of coins (the halving process) will inevitably result in its value appreciating over the years.
Besides, and this is where it all comes together, Bitcoin’s price is denominated in fiat.
That’s not a small detail, mind you.
If you learned anything, by reading my guide, it’s that fiat is essentially worthless. You know it continues, inexorably, its march towards a scripted, predetermined, by-design death.
That’s inflation, of course.
We have a 100% certainty that every fiat currency is doomed to collapse, little by little, and lose most of its purchasing power.
That’s not me guessing. It’s the plain truth, demonstrated time and time again.
And so, as fiat goes down, Bitcoin must go up–the two are inversely related.
“Bitcoin has no top because fiat has no bottom.”
There you go. Another amazing quote.
We don’t need a crystal ball. We don’t need to try and foresee the future. We know for a fact where paper money is going. And we know that Bitcoin goes the opposite direction. Simple as that.
The best buying strategy
Ok, so, apparently, we shouldn't be too concerned with Bitcoin’s price and short-term swings.
But that begs the question: how do I know what the best time to buy is? Should I wait for the market to crash, so that I can buy at a discount? Should I make a large purchase, or is it better to buy smaller amounts more frequently?
As a beginner, this can potentially stress you out quite a bit. After all, if you know a thing or two about investing, you have probably heard the expression “buy low, sell high”.
This doesn’t apply to Bitcoin.
I encourage you to see BTC not as an investment or a trading, speculative asset, but as a savings account. Remember: you are selling your fiat and you are converting it to a strictly better form of money. “Selling” should not be in your plans.
The best buying strategy doesn’t involve any complex market knowledge, chart analysis, or any other particular expertise. All you have to do is to plan how much and how frequently you wish to acquire Bitcoin.
It’s called D.C.A: dollar-cost-average—a tried and tested method that works like a charm. It’s the easiest, most hassle-free way to approach your “stacking” phase.
You essentially buy Bitcoin no matter its price.
Don’t try to time the market: you’ll fail.
Sounds dumb? Maybe it does, at first. Why would you buy regardless of its current price? Why should I not wait for the next crash?
If there’s one thing I want you to take away from this chapter is that Bitcoin is extremely unpredictable.
Nobody has any idea about it. Finance Bros, Crypto gurus, finance experts alike. No one knows.
And so, why would you take the risk? There is no point in trying to time the market; for all we know, there might never be another crash.
What if tomorrow Amazon announces they will start accepting Bitcoin payments? What if a major country declares BTC as legal tender?
Yep, the price is likely to double in a matter of days.
And you “missed the bus”. You will lose faith and you may “give up” on Bitcoin altogether, missing out on a life-changing opportunity.
Instead, take all of these worries away, and embrace your DCA strategy, which is proven to perform extremely well for assets like Bitcoin.
Make a plan based on your finances and your general living condition. Decide exactly how frequently and for how long you want to commit, and execute.
For many, including myself, the easiest way is to cut a percentage out of each payslip and put that towards Bitcoin. How much? That entirely depends on you.
There will be weeks when you will “lose”.
When your scheduled buying day comes, Bitcoin may be rallying. But you must buy anyway, because in the long run, it will all balance out.
Over the months/years, small amounts will stack up nicely: a house is built one brick at a time. You should be patient and play the long game.
Trust me: 15 years from now, you won’t really care whether you bought at $100,000 or at $110,000. When Bitcoin is priced in the millions, this won’t matter.
Please don’t make the mistake of thinking you “don’t have enough money”.
You don’t need a large capital to start with. Remember: you are not investing, you are saving money.
Have you ever put 10p in your piggy bank as a kid? It’s the same with Bitcoin.
Can you “only” afford $10 per week, and therefore you think it’s not worth it?
Think again, my friend: those $10 per week, over several months/years will add up, and your future self will thank you for it.
Is $10 too much? You can do $5!
Bitcoin is for everyone, no matter what your financial situation looks like.
A single coin is divisible in 100 million units, SATs. Don’t think in terms of whole Bitcoins, but rather Satoshis.
To say “I bought 0.00001 BTC” is underwhelming. It sounds like a very insignificant number.
Instead, say “I just acquired 1000 SATs”. Sounds better, right?
This is called the “Unit bias”, and it’s one reason many people are intimidated by Bitcoin and decide to stay away from it: one whole unit has become so expensive it’s now out of reach for 99.9% of the people. If they read this guide, they would know that’s just silly and that it doesn't make any sense, but alas, that’s how it goes.
The unit bias is just one of the many myths surrounding Bitcoin, and that’s exactly where the next and final chapter will take us. Mythbusters, BTC edition.
