Where does Bitcoin get its value from? It is an ever confusing question with no single correct answer because Bitcoin means different things to different people. Some say the scarce fixed supply which makes it rather rare to own is what gives it value. Some say the value comes from the event of halving of mining reward every 4 years making it even harder to obtain. And then there is bitcoin mining cost incurred due to computational power and electricity bills to keep the bitcoin network secure, which sets the floor selling price for the trading market. The average cost to mine 1 bitcoin at the time of this writing is $5,200. I think the value comes from all of above, and more.
In 2013, we had a large scale influencer marketing business running. We worked with 300 influencers and used their social media’s influence to drive traffic to content websites and e-commerce stores. The problem was it was difficult to run this business from Pakistan. Influencers were spread in different parts of the world. We had to make weekly payments (300 x 4 = 1200 transactions a month) to stay competitive in business and the banking infrastructure in Pakistan wasn’t just easy to run this kind of business at least in an automated manner.
While speaking of these issues at a conference in Mountain View, CA , I got advised by someone who had come from Germany to attend the conference. He asked me why do I not use Bitcoin to solve this payment crisis. That was the first time I heard of Bitcoin and had no clue what it meant. After looking it up on Google, I was blown away by the value this new invention offered.
Although we never used Bitcoin to solve that payment crisis, it made me believe that the value of Bitcoin also comes from utility like the one mentioned above. It solves a problem and that’s also Bitcoin’s value proposition.
Will Bitcoin trade above $100,000? I think so. Can I be wrong about this? Absolutely. I think there is a higher chance of me being wrong than right. Despite that, it still makes it an interesting risk/reward play.
Update: Here’s an analysis on Bitcoin price action by the very friend who first introduced me to it
Disclaimer: This is not an investment advice and should not be taken as one. I accept no responsibility for any loss, damage, cost or expense incurred by you as a result of any error, omission or misrepresentation on this site.