How to read a price chart (hint: logarithmic scale)
Ok, first of all, ‘journalists’ should stop showing the price of bitcoins in a linear scale. You should never-EVER look a price/time graph in a linear scale, because what is interesting here is the movement in terms of percentage. For example, if the price of bitcoins goes from 10$ to 20$, that’s a 10$ increase, but also a 200% increase. However, if the price goes from 100$ to 110$, it still is a 10$ increase, but a less impressive 10% in terms of proportions.
Let’s look at the chart most ‘journalists’ use:
OMG!!! It’s skyrocketing! It’s a bubble!
Now let’s use a decent logarithmic scale, shall we?
A boring upward trend. And yet, this is much more helpful to anyone wanting to analyse the price movement. Notice how the last few months were in fact slow compared to previous years? But NOW it’s a bubble because NOW the mainstream media look at it. Yeah right…
Oh and they do a terrible job at it. They are completely and utterly clueless.
I cringed so hard watching this that my face hurts…
Bitcoin is more than a currency
Even those who get Bitcoin don’t seem to realize that it’s much more than just a currency. It’s a distributed public ledger. It’s an environment onto which you can bootstrap more financial tools. This is so important. I don’t know how to stretch this enough.
You can use Bitcoin as smart property. I’ve written on this subject in the past, and a there’s a bunch of more advanced theory available with a simple Google search. As a brief summary, imagine you could somehow attach a property/stock to a bitcoin. You could transfer the ownership to anyone, anywhere in the world.
Skipping a technological step
Most people don’t immediately grasp what it means to jump a step in technological evolution. Take the cellphones for example. For most occidental countries, there was the telegram and then the first phone lines. Operators needed to manually connect two wires together when people wanted to talk to each other. Eventually the system evolved and everyone had a phone in their home. This required physical phone lines to be installed almost everywhere and represented a huge capital investment.
Then came the cellphone. Slowly, people started to develop the technology and to use it, driving the price down. What did it mean for poorer countries? They could go, in their economic development, directly from harvesting crops to using cellphones without having to invest the huge capital necessary to install phone lines! They jumped a technological step and saved a fortune by doing so.
Now, imagine you could do the same thing, but for the whole property and stock market scheme. No need to erect a huge government adjacency to overlook every transactions. For virtual goods, you don’t even need to have a reliable court system in place! (Some don’t realize how developing a legal system in a country is a bewildering adventure. It takes an appropriate culture, a restrained government, peace…). And now the final touch: It’s also incredibly secure, because you have the security of the blockchain with you!
In summary, you have access to a market without borders, with low fees, with an incredible security, that cannot be frozen and that works 24h/24h.
Wealth is now force proof
For the first time in the history of mankind, force can’t be used to take wealth. How is that not the single most important evolution in all history?
Even if some people know you have 10 000 BTC, they can’t do anything about it. Sure they can torture you, but unless you give in, they have no way of getting to your wealth. Imagine that a government decides to take money directly from its citizens bank account (that would never happen, of course…). With Bitcoin, for the first time ever, they can’t.
You can transfer your bitcoins to anyone, anywhere in the world, without any 3rd party being able to stop or steal from you. Your wealth is now in your control.
“But I don’t like that it enables drugs, sex, and Rock ‘n’ Roll!”
Who cares? Bitcoin is here, it exists, it works and its resilient. Does it have all the necessary qualities to be a useful tool? Is it interesting for the wealth creators of this world? If so, your opinion really doesn’t matter. And that’s the beauty of it!
Oh, but of course, it’s a bubble!