An Essay On Bitcoin Pricing




The concept of bitcoin is really fantastic. Groups of people join together sharing power and computer power and by virtue of the blockchain and its characteristics, you create more coins. As far as sharing or using the coins you still are able to use the blockchain system to send the coins around to vendors and anyone who has a wallet or accepts the coins. Also, to make it easier, there are massive decimalization abilities. 

So why does Bitcoin cost a lot of money now? Well in all actuality the Blockchain system is probably worth $10-50 billion. Maybe even $100 billion if there turns out to be a game changing enterprise adaptation. And while the coins are currently part of a much larger asset bubble and self perpetuating market being manipulated by those market makers – it also has a value because it was the original vehicle on which blockchain was created. Maybe the real value is $150.00 a coin. It's almost impossible to gather a sober cash settlement price now due to the complexity of the decentralized market combined with cartel type control and the utility value a BTC transfer offers. 

Remember the Bitcoin exchange Mt. Gox? Well in case you don't know about it a virtual wallet company - which is one way to store cryptocoins - went bust. Venture capitalists and  money managers came in and bought a lot of bitcoins. Those coins have been put to use in many fashions and that (Wild Wild West) activity has created a premium and a false supply and demand issue which is therefore driving up the price. Plus, the various trading venues regurgitate the pricing every day are all attributing to the price inflate and not ironically, are owned by large Bitcoin asset holders. 

The Utility Factor
Bitcoin also has a utility - smuggling factor that has increased the price due to the perceived lack of clearing risk. However, payments and transfer activities to wallets can be tracked. Does Bitcoin have a utility factor? It absolutely does and there has been quite a bit of market saturation in addition to the ease of payment Bitcoin and Blockchain offers. Right now, Bitcoin is the most famous complimentary currency on the planet. What is a complementary currency? A simple example would be Delta Sky Miles. If you had a lot of miles and you could buy groceries with those miles, you would likely use them to buy things. Maybe you could even give some of the miles to your nephew for graduating high school. He then could use the miles to buy a new pair of sneakers from New Balance online. However when the shoes come in they are too big, so he takes his shoes back to the New Balance store however (this time a physical location). The store processes his return, he gets a new pair of shoes and the store owes him a small refund from shipping fees he incited online, they pay him the difference in US dollars. From that scenario Sky Miles have just gonna full circle.  

While you're unable to do that today with airline miles, if a portion of the world started excepting Delta Sky Miles and then Delta allowed Sky Miles to be traded between parties freely, you would have a system in place. The only real difference on this system is it would be completely controlled by Delta Airlines. Part of the beauty in the design of Bitcoin and Blockchain is that it is not controlled and it is decentralized. But that still allows for cartel like pricing mechanisms and physical hoarding. 

Think about what's going on in North Korea right now. Think about what's going on in India with currency reforms and then let's think about what's going on in China where individuals are trying to take money offshore without the government finding out. Every single one of those scenarios create an argument for the use of Bitcoin. And since money is tied to it and perhaps desperation and greed, premiums are being paid to use the vehicle to transfer.

Global trade and shipping are the next utilities that will use blockchain heavily and since bitcoin is in contract form on the markets -  there is a chance that we could see real integration between corporate balance sheets and the blockchain or bitcoin financial products.