Since it’s all the rage right now, I’d like to announce that I’m launching my own cryptocurrency next week.
Let’s call it “kingcoin”.
No, that’s too self-serving.
How about “muttcoin”? I’ve always had a soft spot for mixed breeds.
Yes, that’s perfect – everyone loves dogs.
It’s going to be the biggest thing since fidget spinners.
Congratulations! Everyone reading this will get one muttcoin when my new coin is released next week.
I will distribute 1 million muttcoins evenly. Feel free to spend them wherever you want (or wherever someone accepts them!).
What is this? The cashier at Target said they won’t accept our muttcoin?
Tell those who doubt that muttcoin has scarcity value – only 1 million muttcoins will ever exist. On top of that, it’s backed by the full faith and credit of my desktop’s 8GB of RAM.
Also, remind them that a decade ago a bitcoin couldn’t even buy you a pack of gum. Now one bitcoin can buy a lifetime supply.
And like Bitcoin, you can store muttcoin safely offline, away from hackers and thieves.
It is essentially an exact copy of Bitcoin’s properties. Muttcoin has a decentralized ledger with uncrackable cryptography and all transactions are immutable.
Still not convinced that our muttcoins will be worth billions in the future?
Well, it is understandable. The fact is that starting a new cryptocurrency is much more difficult than it seems, if not downright impossible.
This is why I believe Bitcoin has reached these heights despite everything. And because of its unique user network, it will continue to do so.
Of course, there were setbacks. But each of these setbacks ultimately led to higher prices. The recent 60% drop will be no different.
The Bitcoin Miracle
Bitcoin’s success is based on its ability to create a global network of users who are willing to transact with it now or store it for later. Future prices will be determined by the rate at which the network grows.
Even in the face of wild price fluctuations, Bitcoin adoption continues to grow at an exponential rate. There are now 23 million open wallets worldwide chasing 21 million bitcoins. In a few years, the number of wallets could grow to include the 5 billion people on the planet connected to the Internet.
Sometimes the motivation of the new cryptocurrencies was speculative; other times they sought a store of value away from their own local currency. Over the past year, new apps like Coinbase have made it even easier to onboard new users.
If you haven’t noticed, when people buy bitcoins, they talk about it. We all have that friend who bought bitcoin and then wouldn’t shut up about it. Yes, I’m guilty of it – and I’m sure quite a few readers are too.
Perhaps subconsciously, holders become crypto-evangelists, as persuading others to buy serves their self-interest in increasing the value of their holdings.
Bitcoin evangelism – spreading the good word – is what miraculously drove the price from $0.001 to a recent price of $10,000.
Who would have imagined that its pseudonymous creator, fed up with the global banking oligopoly, would launch an intangible digital resource that rivals the world’s largest currencies in value in less than a decade?
No religion, political movement or technology has witnessed these growth rates. On the other hand, humanity has never been so connected.
The idea of money
Bitcoin started as an idea. To be clear, all money—whether fictitious money used by primitive islanders, gold bullion, or the US dollar—started as an idea. The idea is that a network of users values it equally and would be willing to part with something of equal value for your form of money.
Money has no intrinsic value; its value is purely external – only what others think it is worth.
Look at the dollar in your pocket – it’s just a fancy piece of paper with a one-eyed pyramid, a portrait with dots and signatures of important people.
To be useful, society must see it as a unit of account, and merchants must be willing to accept it as payment for goods and services.
Bitcoin has demonstrated an unusual ability to reach and connect a network of millions of users.
A bitcoin is only worth what the next person is willing to pay for it. But if the web continues to expand at an exponential rate, limited supply dictates that prices can only move in one direction… higher.
The bottom row
Bitcoin’s nine-year rally has been marked by huge bouts of volatility. There was an 85% correction in January 2015 and several others above 60%, including a whopping 93% drop in 2011.
Through each of these corrections, however, the network (as measured by the number of wallets) continued to expand at a rapid pace. As some speculators saw their value decline, new margin investors saw value and became buyers.
Abnormal levels of volatility are actually what helped the Bitcoin network grow to 23 million users.
Hey, maybe we just need some muttcoin price volatility to attract new users…