A lot of people are talking about the Bitcoin Bubble lately. Personally I tend to shy away from these sort of talks since they never seem to come to an agreement in the end. Now I’m no economist, my trading skills are limited to what I’ve learned online and in practice and I definitely don’t trade anything but Bitcoins. But I have been watching the Bitcoin arena closely for most of 2013 and I believe we might be in for some “good” trouble.
Fact #1 – Bitcoin is booming into people’s day to day life
Let’s face it, it’s hard to avoid Bitcoin these days. Even if you’re my mom you still hear about it on the evening news, in the papers and almost everywhere you go online – Facebook, Reddit, Twitter, you name it. In an earlier post I stated that the term “Bitcoin” is being searched roughly around 1M times per month. The was on November 2nd. Today, 2.5 weeks later I believe that this number probably doubled due to the latest explosion in Bitcoin prices (but we will see about that in a month or so). So from a worldwide population of 7.125 billion I think it’s safe to assume that at least 5 million people are currently looking into Bitcoin (%0.0007).
Fact #2 – People who want to get into Bitcoin usually aren’t aware that you can buy just a part of it
Go online and look at what amount newbies are looking to buy. It’s usually 1 BTC or more. Most of them aren’t aware of the fact that you can buy fractions of a Bitcoin. Also, psychologically speaking, no one wants to hold less than 1 BTC… it just doesn’t sound cool :) This means that once we hit 21 million people who wish to own Bitcoin we’re screwed since no one would like to part from their only Bitcoin in the whole wide world. Actually, we’re screwed way before that….mostly due to fact #3.
fact #3 – There are far less then 21 million Bitcoins to be held by the general public
This is mostly due to the fact that in time there will be more Bitcoin exchanges, changers etc. They will have to keep reserves, since Bitcoin can’t be printed out on demand. This is the distribution of the roughly 12 million Bitcoin that have been available on October 26th 2013:
As you can see, there are at least 1150 players in the market that hold 6M of the total Bitcoins today (50%). This means that the common man currently seeks to buy Bitcoins out of a pool of only 6 million Bitcoins….and did I already mention that 5 million people are searching for Bitcoin worldwide today and want to buy roughly 1 bitcoin each?
Also, mining Bitcoins is getting more and more difficult. The last Bitcoin (#21,000,000) is set to be mined in the year 2140. This means that it’s going to take a lot of time to dig out the remaining 10 million Bitcoins that are currently not in the system.
Why I believe this is not a Bitcoin bubble
Take diamonds for example. Their price can vary from $1,000-$27,000 depending on their quality. And what makes them so valuable ? The fact that people think they’re rare, same goes with gold. Bitcoin is about to get very rare very soon. Just a few days ago one of the major Bitcoin dealers ran out of Bitcoins. With more and more people looking to get in and less and less Bitcoins becoming available since it’s becoming more difficult to mine them the price of Bitcoin, although fluctuating, will rise again in the near future. So if you don’t have your Bitcoin yet….now would be a good time.