——Answering the concepts in the article “Invite Satoshi Nakamoto to Welcome the New World”
Zhu Weisha Modified on September 7, 2024
After the “Invite Satoshi Nakamoto to Welcome the New World” series was published, readers reported that the article involved too many concepts and covered too many fields, and many concepts were not understood. They hoped that I would explain the concepts and terms in detail. Here are some explanations for easily confused concepts and relatively new terms to discuss with readers. Continue from the previous section.
5. The price of Bitcoin is determined by demand
Bitcoin is a commodity, and the rise and fall of its price is determined by demand. Demand is generated by use. Demand is significant when there are many uses, and the price rises when the supply remains unchanged. It is much easier to predict demand than to predict stocks.
Gold has industrial uses, such as the gold-plated connector of the connector does not rust. The use of jewelry is more to show nobility. Note that the concept of nobility includes the scarcity of gold. The central bank uses gold to hedge the inflation risk of fiat currency because gold maintains value, which is a value storage.
What are Bitcoin’s uses? Ethereum has made payments, privacy payments, and all other applications that can be thought of. Ethereum’s market value is less than half of Bitcoin’s, but such uses do not only support Bitcoin’s price.
Supporting Bitcoin’s price is the value of stored value, which lies in the invariance, stability, and security of the Bitcoin system, which is suitable for stored value.
How big is the market for stored value? Gold currently has a monopoly, which means it occupies 85%- 90% of the market share, about 13 trillion US dollars of the market share.
Suppose Bitcoin replaces half of the gold market, which is more than 6 trillion, according to the proportion of gold. In that case, the public will keep half, the central bank will hold 20%, and industrial use and institutions will keep 30%, which means the central bank will have more than 1 trillion US dollars of Bitcoin. The key is why the central bank should keep Bitcoin.
Is there any other demand? If you can make money by reserving Bitcoin, this market is enormous. Satoshi Nakamoto’s not selling Bitcoin itself is a reserve behavior.
6. Bitcoin is scarcer than gold
Bitcoin’s production method imitates gold, but it is not just a copy. It is scarcer than gold and boasts better currency properties. Its total amount is limited; transmission is convenient, easy to divide, cannot be counterfeited, and is easy to identify. Gold, a consensus evolved by humans, is the current king. But with its potential to surpass gold, Bitcoin is just one step away from seizing the king status.
7. Bitcoin should be anchored to economic development
The Federal Reserve anchors the dollar to inflation and adjusts the issuance of the dollar according to price increases. This is divided into core prices and non-core prices. The public generates economic development and should be regulated by the market, not by an organization. The Federal Reserve’s regulation is God’s power, but not God’s hand.
In the Bitcoin standard, Bitcoin anchors economic development, and the regulation at this time is market regulation, just like the current trading method of pricing the dollar through the market. No currency anchors the development of the world economy; Bitcoin reflects this development. This is the biggest demand for Bitcoin.
8. Bitcoin, unlike stocks, has no price ceiling
It means that its value can continue to rise as long as there’s demand. This concept fuels optimism and imagination, creating a unique investment opportunity.
There is a saying in the stock market that buying stocks is buying the future. If you look forward to future increases, you will buy in advance. Generally speaking, after analyzing stocks, analysts will give the stock’s rising target, which constitutes the rising price top. Bitcoin does not have such a top because it is a commodity and will increase if there is demand. Bitcoin’s grand narrative creates this demand.
9. 24-hour trading, fast response to economic risks
Foreign exchange is 24-hour trading, but the stock market is not. Bitcoin is also traded 24 hours a day. The Federal Reserve generally releases data when the stock market is closed. Currently, the stock market cannot reflect it immediately, but Bitcoin can. In addition, the volatility is significant, which attracts speculative funds.
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