Help me theorize this thought experiment
Ok, here is what is bothering me.
THOUGHT EXPERIENT:
Lets say I bought bitcoin on Jan 2017 at 1000 and sold it on Dec 2017 at 20 000. I made a profit of 1900%. Crazy eh! That is all fact. Now the question is where did the 19000 dollars in my bank account come from?
I know for sure this digital coin was sitting in a folder on my computer for the whole time and it was not used to invest in anything. People are only telling me this thing is revolutionary and it will one day cost 1 million a piece.
Now everyone is making a digital coin and supplying a fixed amount to create demand. There is nothing else to it. It is like the 2000's when everybody was making dot com companies and offering IPO's. Now we have ICO's instead. See the similarities yet?
I used to hear people say "too many cooks spoil the broth" now the exact same thing is happening here. Even if Bitcoin was sweet, tasty broth, it no longer is.
I see a lot of these statements on the internet recently.
"Be greedy when people are cautious and be cautious when people are greedy" - Warren Buffet
"Bitcoin always bounces back"
"HODL on"
I am tired of this but i understand it is the millennials' investing strategy.
Ok, so you bought a coin at 1000 and sold it at 20000 the 19000 extra obviously came from the person who bought the coin from you who thinks its worth 20000 for whatever reason.
I suppose it is similar to buying a desirable sports car and keeping it for 30 years until it becomes rare and the demand for it increases.
Your comparison of cryptocurrency to the dot-com bubble is a bit off when you consider that the dot-com bubble lasted for four years before it sunk and had a lot larger worth than crypto has now. Cryptocurrency currently only has a $450 billion which is nowhere near the $6 trillion the dot-com bubble had before it burst and with cryptocurrency being such a low market cap it leads to the volatility you see in the chart you posted.
I think there are a lot of people blind to the technology behind the cryptocurrencies and are in it for just the potential gains. I invest in cryptocurrency because of all the real world applications this tech has and the potential profit. I wouldn't invest if it didn't have a real-world application.
I am merely stating facts here. Cryptocurrency has deviated from its goal of becoming a better monetry system and is now an investment scheme to make quick bucks or get rich in the long term. There are a lot uncertainities in thr future if u think about a world where people only use crypto to buy and sell. Something i cannot process is, how much does a coin has to be to satisfy the current economy?
Let say the world economy is 280 trillion. We will only have 21 million bitcoins in circulation. Each coin will be worth 13million. Now we already have some people who own 1million bitcoins, how will that be fair to the world? Someone owning 13 trillion? And also bear in mind the world economy is ever growing.
I see. I agree that the current situation is not what cryptocurrency aimed to achieve but the is due to the people more than the currency themselves. I think eventually there will be regulations that limit the amount of manipulation which drives prices and produce a less volatile market in the future similar to the current stock market.
As for the price of a coin, currently, I think the coins are driven by hype and fundamental value. Bitcoin has a fundamental value as a secure store of wealth and some price bonus from the hype of it being the original coin.
Currently, the richest 1% own 50% of the world's wealth already so there is no difference to the crypto world. I think it sucks that there is such a divide and certain people have more money than they need but I suppose that's just the way the world is.