Bitcoin: may the value rise!

Bitcoin is like nothing that has ever existed on this world. Ever. It’s a way to protect wealth from any assault, while simultaneously being able to transfer it to anyone, anywhere in the world, without any interference. You could be a millionaire and no one has to know, not even a banker or a government.

This week, Bloomberg really shined by inviting someone who actually looked into Bitcoin before starting talking about it:

He sees the potential, but at the same time acknowledges that we are in uncharted waters.

Many are nervous with the rising price. With its unique characteristics, Bitcoin can be seen as a commodity. And as most commodities, a 1000% rise in value is often a sign of bubble.

Unless…

Unless… you are talking about monetization. This is a process by which a commodity becomes money. Let me cite Konrad S. Graf, as he explains it in a better way than I ever could:

(…) In the case of a monetization event, though, the practical use-value of the trading unit (not only its price in terms of other goods or monies) actually does rise with the number of people using it and the depth of the market. To imagine how different this is from a classic asset bubble, it would be as if not only the price of bubble-era houses were rising, but also that their actual sought-after qualities as houses were improving spontaneously at the same time. Such houses might sprout new rooms with no one building them, with new paint jobs appearing mysteriously overnight without any painters having visited.

(I highly suggest you read the entire article; the insights are brilliant. Hyper-monetization: Questioning the “Bitcoin bubble” bubble.)

For money, the more the value rise, the better it is!

Let’s try to see it with a big company viewpoint. Would Amazon even consider to use Bitcoin if the entire market cap is less than its own cash flow? Of course not! So the first users are necessarily the small ones. They buy, use it, increase the price, and then the market cap can go to a billion. This in turns allow for medium enterprises to join the movement. They start accepting payments in the new currency and building infrastructure around it. This activity makes the currency more valuable and the price rises again… and again and again, in a self reinforcing feedback loop.

Let me repeat this again: for money, the higher the value, the better it is! Is there speculators trying to make a quick buck on Bitcoin’s back? Absolutely. Many of them don’t even understand how Bitcoin works. And yet, whether they want it or not, they increase Bitcoin’s market depth. They increase its value, making it more and more powerful. Each additional dollar in the price legitimizes Bitcoin, makes it more trustable and more acceptable.

At 0.10$, it was toy money. At 1$, a weird currency for anarchists and drug addicts. At 100$, it’s a worldwide experiment about money. At 1000$, it’s an obvious investment.