Bitcoin price consideration
I think that many people to easily fall in to trap of oversimplification topic of bitcoin price. I think that therms low or high price are used improperly
As far as I can see it there are two main component factor which determine bitcoin price.
adaptation ( strong factor ) + speculation ( weak factor ) = bitcoin price
In my opinion to determine if bitcoin price is high or low, one has to evaluate how many coins is in possession of speculators and how many of them are stored by adapters.
When most of coins stays in speculators hands it is sign that bitcoin is overvalued and it is time to consider selling or at least to stop buying , obviously something opposite
happen when most coins are in adapters hands. In my opinion it is completely irrelevant how many digits the current price has. So what we really need to do is evaluate ratio between adopters and speculators stash.
My observation about recent climb in value. In january when production of new bitcoin drop by factor of two, what happened then was mismatch between bitcoin emission and adaptation grown.
I think there is some permanent increase of adaptation which is probably proportional to current adaptation base, plus some factor of media hype. After halving there was rapid decline in coin production, the supply couldn't keep up with demand so price started to increase, it causes inevitable interest in some speculators circles and those attention have additional huge positive impact on price , but where a lot of coins bought by price 10 $ hit the market, speculators couldn't kept up . as a result we saw huge decline in value , as we saw later decline wasn't so huge, most probably adapters at some point regain power over market as the result of all that we see stabilization around 120
I predict that as long as speculators have huge chunk of coins we do not see any substantial rise in value. Because price stabilization more and more speculators will probably withdraw their funds to some other markets , those gaps will be replaced by adapters to the point where we see mismatch between bitcoin creation and demand again and another rally.
But lets do some simplified maths
gov - government attention
mh - media hype
ar - adaptation rate
sc - peculator coins
swf - speculators withdrawal factor
bc - bitcoin creation
at any point this equation determine demand
( mh + ar - gov ) - bc - sc * swf = d
when d is negative price will fall when positive will climb
so make comparison between 2011 and 2013
2011 : 2013
mh < mh - ( + 2013 )
ar < ar - this is probably proportional to current adoption level( + 2013 )
gov < gov - sauron eye is watching more and more closely( - 2013 )
bc > bc - ( + 2013 )
sc * swf - can't really evaluate this but I have feeling in my guts that speculators have less bitcoin than in correspond period in 2011
( + 2013 ) - means positive impact on price in 2013 in respect to 2011
( - 2013 ) - means negative impact on price in 2013 in respect to 2011
Above clearly shows that price will climb sooner than in 2011 if only government do not play some very nasty tricks
Enclosure:
I am sitting on some bitcoin, I consider myself as adopter
I use bitcoin mostly as hedge against irresponsible rule of government and central banks
In much lesser extend I hope to use bitcoin for money transfer( in my opinion it is only reasonable between countries at least on current stage )
for daily trade I am using fiat
Topic: Bitcoin price consideration (Read 596 times)
Jump to: