Analysis: Bitcoin's Value Logic and Its Prospects

Bitcoin was born in the global financial crisis of 2008. The global financial crisis that broke out in 2008 made some people question the government's ability and the legitimacy of the central bank. Governments around the world for the financial crisis have generally used quantitative easing dominated by the Kane period theory. In fact, all taxpayers pay the bill through inflation. This approach has aroused the anger of more people. Since the Industrial Revolution, the gap between the rich and the poor has widened further, and various polarized thoughts have surged, including both extreme left and extreme right.


In this context, Bitcoin was born, and it is sought after by more and more people.

So is Bitcoin worth?

We believe that bitcoin has value if it can find a use, and bitcoin has no value if it cannot find a use.

What is the use? Becoming a currency is the original intention of the Bitcoin system design, and of course it is also a use. However, Bitcoin's own fixed ceiling design is one of the factors that make it difficult to become a currency. If the consensus of Bitcoin expands and a strong credit is formed, the price of Bitcoin will rise strongly, causing most holders to sacrifice their coins and not participate in circulation, which may make Bitcoin eventually become an asset instead of currency. If Bitcoin's consensus is not expanded, then the price of Bitcoin may maintain a dynamic equilibrium. If Bitcoin's consensus collapses, its price will naturally shrink, forming a strong negative feedback, and eventually it may return to zero.

So is the price of bitcoin based on supply and demand or something else? If there is no consensus and credit basis for the price of Bitcoin, and it is based solely on supply and demand, then Bitcoin is an asset, not a currency. Its asset price still depends on its use.

It should be said that Bitcoin did not have any value at first, but it had a certain price. The initial price of Bitcoin was the electricity cost of mining. Some people have calculated that in 2009, it took 5 cents to dig out a bitcoin. This price is determined by cost. Later, there were 25 bitcoins for 2 pizzas, and the price was discovered by the transaction.

Later, Bitcoin found its own use, such as a tool for dark web transactions, or a tool for money laundering. Regardless of whether the use is legal or compliant, there is value in using it, which in turn generates a corresponding price. Of course, the premise of such a tool is that there is consensus within a certain range, and the generation and formation of prices is an extension of consensus.

Does Bitcoin have a future? From the outside, the number of Bitcoin consensus people and the strength of their beliefs determine the future of Bitcoin. If there is a large consensus and a strong credit base, Bitcoin may become a global currency. However, as discussed above, its fixed ceiling design limits its possibility of becoming a global currency. If the consensus is small, Bitcoin may also be circulated within a local scope. Such a locality may be a local area or a segmented business area. In addition, if this consensus is strong, it can drive more people to form consensus and form positive feedback. Conversely, if this consensus is weak, it may eventually lead to the demise of the belief in Bitcoin.

In addition to belief in Bitcoin, its strength is bound to be related to its possible uses. If Bitcoin has a wider application, its consensus will naturally be strong. If Bitcoin's use is narrow or not at all, then people's consensus on Bitcoin will inevitably weaken, and even consensus will die.

Therefore, the government's attitude towards Bitcoin is crucial. If the government allows or even encourages the circulation and trading of Bitcoin, the possibility of forming a strong consensus on Bitcoin is even greater. If the government suppresses the circulation and transaction of bitcoin everywhere, resulting in bitcoin being able to circulate only in unseen areas, then the possibility of bitcoin forming a consensus is small, and the belief may even collapse.

This kind of government regulation does not just depend on a government. In today's globalization, it must be the combined efforts of governments around the world. If the opinions or attitudes of governments are not consistent, or the pressure is uneven, it will result in an imbalance in the global use and circulation of Bitcoin.

However, from the perspective of the government, the government will also consider suppressing costs and gains from suppressing them.

Bitcoin supply will be halved in 2020, and its price may continue to rise, but it may also collapse. There is also a possibility that the probability is still fluctuating within a certain price range. There are three reference indicators for judgment, one is the relationship between supply and demand, the second is the mining cost, and the third is the possible use of Bitcoin, which is the value support point. From the perspective of supply and demand, although the acceleration of bitcoin supply is decreasing, its total supply is still increasing, and other conditions are unchanged, its price should go down. From the perspective of mining costs, competition in computing power around the world will become increasingly fierce, which will directly drive up the price of Bitcoin. From the point of use, it is the most difficult to judge, at least at present, it is not clear to see the corresponding application scenarios of Bitcoin. The possible use of Bitcoin is directly related to the demand side of supply and demand, but its use is also closely related to the degree of government suppression. Therefore, its price involves multiple factors. The relationship between these factors is not a linear relationship, and it is more likely to exhibit multiple nonlinearities. Variety.