In this second part of the post on Bitcoin, I hope to explain where the demand for Bitcoin is coming from, and how it will likely be used in the future of the crypto space before making a few closing comments on recent market dynamics and where the future of Bitcoin might end up in the long term.
I wrote an extended article a few months ago about where I though the demand for Bitcoin was coming from, which you can find here. In summary, I highlighted three main sources, which I still think are relevant today.
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The Casual Encounter is the demand that arises from people seeing the explosion of the crypto market from afar and wanting to try to get in on the action as some poorly conceived get-rich-quick scheme. This source of demand has declined significantly over the past few months as the market has done all but collapse down to price levels not seen since before the major boom back in December; nevertheless, I still think this group plays a meaningful role in aggregate demand for Bitcoin.
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The Institution is the demand arising from CBOE’s futures contracts and other institutional applications of Bitcoin throughout the markets. This source will likely continue to rise as time goes on and Bitcoin continues to become more mainstream.
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The Market & The Community go hand in hand as a result of Bitcoin being used as a middleman asset to exchange other types of altcoins. This group differs from the casual investor because most of the people utilizing Bitcoin in this way have taken a special interest in blockchain and cryptocurrencies and understand more of the foundational value proposition that the technology brings other than just being a get-rich-quick scheme.
If you’re interested in exploring these groups further, have a look at the article I wrote on topic.
Moving on to the future of Bitcoin, the current popular opinion is that Bitcoin will be used more as a crypto “gold-standard” than a daily medium of exchange. In short, this means that many altcoin assets across the crypto space will be priced and traded in Bitcoin just as many assets in traditional international markets are priced and traded in US Dollars.
My personal opinion is that this theory will hold true in the short term, but will likely begin to fall apart as next generation stable coins take hold and offer a reliable way to safely store digital value. If you’re interested in having a look at what I consider to be one of the most promising candidates for such a stable coin, here’s a link to the Nomisma foundation.
Finally, Bitcoin is currently experiencing a pretty severe market contraction, which many people anticipate will continue over the short term. The asset is recovering from the inflated highs it reached over the winter, topping out at over $20,000 per coin. Taking a long term view, it seems not altogether unlikely that Bitcoin will recover to $20,000, and even exceed that value well up into the $30k and $40k range. These predictions are operating under the assumption that Bitcoin will continue to maintain its place as one of the largest and most fundamental cryptocurrencies in the space, and that the diminishing supply of the asset as it approaches 21,000,000 coins in circulation will exert a deflationary pressure on the coin which will cause the price per to increase significantly.
So there you have it: over two parts, I hope this synopsis of Bitcoin has been a helpful crash course on the largest and most historically influential coin on the market. If you have any questions or comments, leave them below! 