I have been thinking this for some time now, but it was good to hear my same thoughts echoed out loud in the national media by Aswath Damodaran.
Who the heck is Aswath Damodaran?
I'm glad you asked!
Aswath Damodaran is a finance professor at NYU and is known in trading circles as;
"The Dean of Valuations."
When he speaks, people listen, or else they get the dunce hat. (just kidding about that last part)
Aswath declares himself as neither a bitcoin bull nor a bitcoin bear as he thinks both sides have a valid arguments.
However, much like me, he thinks there will ultimately be 3 paths for bitcoin to go down down. Ironically, only one of them is bad in my opinion.
Path #1
Bitcoin becomes widely accepted as a means of transaction.
This is the dream scenario for the biggest bitcoin bulls out there. However, it has a long ways to go to reach this stage. It will have to become much more stable than it currently is, it will have to be accepted globally by governments, and the technology will have to be improved to scale to this kind of wide spread usage.
If this were to happen to the point where bitcoin was actually competing against other generally accepted currencies, a much higher price would be justified, especially given its limited supply.
Path #2
Bitcoin becomes akin to digital gold for the younger generation.
In this scenario bitcoin is seen as a store of value for those that don't trust the central banks, governments, and fiat currencies. It can also be seen as an uncorrelated asset that doesn't track many other investments, a perfect way to hedge.
This was the path mentioned by Tom Lee and his team as their basis for bitcoin reaching $25k per coin within the next 10 years, and that was only talking about capturing 5% of the gold market.
If this scenario were to play out, one would expect bitcoin to behave much like gold does currently. Seen as a safe haven when times are shaky and falling in price when times are good.
Path #3
Bitcoin turns into the modern day Tulip Mania.
This one would obviously be the least desirable outcome for bitcoin bulls.
In this outcome, bitcoin would be like a shooting star attracting new capital far and wide as it shoots up in value. However, once the easy money stops being made traders leave and look for something else, letting the price drop even faster than it ran up.
Keep in mind that money could just shift to a different cryptocurrency in this scenario.
My thoughts:
Personally I think we are still too early in the game to have an educated opinion on which path it ultimately chooses, however, it still can be fun to postulate never the less.
I think Path #2 is the most likely path for bitcoin in my opinion. I don't see Bitcoin replacing major currencies or competing with them mainly because I don't see governments giving up that kind of power.
Bitcoin might be used in niche markets much like it is now, but ultimately I think it will mostly just be used akin to digital gold. An alternative investment that isn't really correlated with any other assets and widely held by the younger generation.
The younger generation already believes in it, so it won't take much convincing to get them to consider it as an asset class.
Like Tom Lee says, if Bitcoin just takes 5% of the gold market in the next 10 years, it is worth $25k per coin. In that context it doesn't really have to do any currency replacing to be a wildly successful investment, even at current prices.
What about you guys, which one do you think is the most likely path bitcoin ultimately chooses?
Let me know in the commment section below.
Sources:
https://twitter.com/AswathDamodaran
Image Sources:
https://twitter.com/AswathDamodaran
http://www.lunadais.com/career-path-align-life-purpose/
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Definitely path #2.
Someone who has created these 3 path seem to have a very shallow understanding of blockchain technology, and its potential, capabilities.
Both Path #1 and #2 both has valid reasons to happen, while #2 seem to have the most odds to be a major route of these two. But at the same time there are SO MANY MORE other path to be realistic (As we see it from today) Many more will arise with time going, some of those routes we do not even imagine today.
#3 IMHO simply does not stan the water. It is just like another BS crap from Jammie Dimon.
I'm sure the holders of tulip bulbs thought the exact same way.
You seem unwilling to even entertain the idea.
I agree with onealfa in that it seems Bitcoin has more than three possible future routes. I guess it is connected to blockchain technology, but I don't understand the connection between the blockchain and Bitcoin's price. Can anybody help me understand how more blockchain development leads to higher Bitcoin price (if it does)?
I'm thinking of BTC as early day web with text, images, flash videos and hyperlink. My view of Bitcoin is that it's a prototype or a Minimum Viable Product. It would end up more like one of those old FPS multiplayer games which pioneered a whole genre that's still being played by a tiny community of people. BTC is a stepping stone. Most crypto coins in the Top 100 are far superior to Bitcoin. Eventually BTC will loose the mojo of its first mover advantage and eventually be phased out in favor of faster, cheaper, private coins with tons of extra features like Dash, NEM, PIVX or some other yet to be created coin.
Bitcoin is a technology; a software. It's like Windows XP or dial-up internet. Technology always get old and get replaced. Period. BTC will end up like those old multiplayer games. We'd see BTC running few nodes and doing few Mega hashes being presented to the world like a part of a digital museum. I think this would happen in 10 years +/- 3 years.
I agree what you said
In 10 Jahren gibt es ..............................
in 5 Jahren gibt es ................................
wer weis das schon?
I don't think it can be a combination of 1 and 2, they seem mutually exclusive to me.
A good store of value is typically something that goes up in value, or at the very least is not inflationary, so it's not something you want to spend. I could buy some things with my Bitcoin but I would never do that because I think it will be worth much more in the future.
So if Bitcoin (or anything really) is a good store of value then it's not a good currency, and vice versa.
I definitely think it will be either #2 or #3 for Bitcoin and some other cryptocurrency which is pegged to something like the dollar that could take off as a global currency. SBD are a great example of that.
I hope it's not #3 but I think that's definitely a possibility. At some point Bitcoin will reach a certain level of market saturation where there's not a whole lot of new money coming in. Your guess is as good as mine whether or not it will stay at that level or if there will be a mass exodus.
I should add that another reason I think #2 is much more likely than #1 is that Bitcoin as a store of value doesn't really threaten governments or banks very much, so they are much less likely to overly regulate it or shut it down. Becoming a currency obviously does threaten them much more so it will be much more difficult for any decentralized crypto to really crack that space.
My Reply to the statement "Bitcoin ... will be worth much more in the future.":
Yes, this is valid today. TODAY. ONLY TODAY.
Now Fast-forward in time some 30+ years, and imagine BTC is worth $2-3 MLN . Would you still (then) think "it will be worth much more in the future." ??? I think the answer is obvious.
As obvious is also another thing- the validity of such statement will slowly go away.
Not overnight, but day after day, YEAR AFTER YEAR, DECADE AFTER DECADE. Spending will grow, slowly, continuously. So will the level of acceptance, popularity, market saturation, etc etc.
List goes on and on.
Yes, at some point Bitcoin will stop going up in value, or will increase at a much slower pace. But by then (as you said it could take many years) another crypto (or even something else entirely) that is better suited and designed as a currency will have taken over that position, so Bitcoin will either remain a store of value or collapse.
Bitcoin apart from being a currency does not have much value added to it. Every crypt in future will be rising based on demand, and adoption. And demand ultimately drives adoption. However, apart from that one of the key that drives both demand and adoption is value like steem.
So I think, in future as you said, these newer crypt which have some value behind will rise, its only a matter of they being traded directly instead of in terms of BTC.
Path 1 is ruled out. Many better alternatives. Path 3 is possible transiently and would end up with path 2, where people consider BTC as store of value.
Thanks for sharing these views with us. I am still on the same standards I shared with you the other week. I can't help but think that governments won't like competition and the Central Bank even less. but I also believe the youth of our age are becoming more and more aware of the discrepancies and general injustice surrounding the ways of money these days. These states of affair keep on pushing people's will toward our cryptocurrency paradigms and allow for them to anchor themselves into our world economy. thus, the strongest and most adaptable cryptocurrencies will pervade more and more strongly. That is why I can't help but think that a technology as powerful and advanced as the advent of Bitshares will not go unnoticed and only gain in strength and exposure as time goes by giving by the same token more power to us all while flattening the curve of the financial system most humans currently live in and with.
Namaste :)
What about the 4th option, Bitcoin becomes aware.
Path #1 will not occur without a fight (more like a war). The world order controlled by the evil banksters will not just sit idly by and allow this "upstart" to unseat them from the wheels of power (as much as I'd like to see that happen).
JFK tried it and got a bullet for his troubles.
good post
The three paths listed seem to be comprehensive. But comparison to Tulip Mania is not valid for may reasons.
Path #2 is the most likely outcome. And justifies putting 10 to 20% of your net worth into BTC. With plans for a triple in the next 5 years or so.
As much as I would like it to, Bitcoin cannot replace fiat currencies for several fundamental reasons. The fact is no-one in their right mind would spend their bitcoin now, if they truly believe it will significantly increase in value in the long term, which if you are investing in Bitcoin, you must therefore believe. Modern capitalist economies are built on consumption, which requires consumers to spend money. Bitcoin does not incentivise this at all. The inflation and low interest rates of Fiat currencies do. For example I own Bitcoin and was out in town the other night with some friends for a few drinks. Low and behold I find out that the bar accepts Bitcoin. However I did not choose to pay in Bitcoin because I believe the bitcoin I would spend today, will be worth a lot more in the future. Therefore as a currency this does not work. It does however fit the profile of a digital Gold and a means to store value. So I feel we will take route no.2.
Thanks for the informative post!
Your post proves Bitcoin is a currency. Bad money drives out good. You kept what you felt was "good money" and did not use it for spending. Your hoarding behavior for Bitcoin proves you believe it is a valuable currency.
Im not sure if that proves it's a "currency" rather than an investment. The irony is, bitcoin was suppose to be an alternate grass-roots form of currency, but because of the way the cryptocurrency market works, it ends up being more comparable to buying and trading stock. It's like owning property in a booming area. You aren't going to sell, because you know holding onto it, it could triple in 4 years. That doesn't make the housing market a currency, it makes it an investment based on the fluctuation of the bubble and the market.
It will go mainstream for a short period, then it will be heavily sabotaged and other cryptocurrencies will take its place, some better and some worse. The main one to replace btc will be controlled by government with plenty of limitations to save us from something like "what happened to bitcoin" and "terrorists."
I think scenario two is the most likely-- BTC is too slow, pricey and bulky (less no.of transactions even with hardfork). But due to demand and network effect, limited supply it will be digital gold and storage of wealth to new generations.
Great post!!
#1
This is something that will take many years to accomplish, Crypto are way to volatile right now to use as an actual currency.
Imagine having a webshop and selling a few goods. Only to see that BTC has dropped with %20 that week. Their goes your margin
#2
I'm not really sure how a 'currency for young people' would work out. If you say it like that, then it looks like the worst startup idea ever. Because younger generations aren't generally the people with the most money.
**If the want BTC to be value/Make money with BTC, you need the older generations investments to justify the price.
#3
Every time someone new talks about BTC, they walking compare it to the tulip mania.
I think a comparison to the dotcom bubble would be a lot better.
After all their are some strong crypto's out their who have a solid tech. And some useful applications in the real economy.
*if you bought amazon, apple and microsoft in the '90. Then you were golden. But the majority of startups at the time were huge failures. So it's a high risk, high reward game.
Instead of the tulips, which weren't value value to begin with.
I feel like it will be none of them. In the long-term, I believe a more advanced cryptocurrency will dominate the markets. Bitcoin isn't ready for daily usage and it probably won't ever be.
It's not a tulip mania either. Simply an early version of a great technology.
Yeah, I think #1 is virtually impossible, but still could happen in the event of a major international collapse of the current financial system. Unlikely, but possible.
I agree that #2 is the most likely short to mid-term path (less than 3 years). Bitcoin mining is currently quite profitable and it is not as hard as it used to be to acquire mining hardware. Right now, an Antminer S9 can be bought for about $1500 USD and will mine about $400 per month worth of Bitcoin, creating ROI in about 4 months. This will cause the network to grow. With the next block halving not till about 2020 or so, and the market showing resilience in the face of attempts of governments and banks to trash it and stamp it out, moreover the price being at record highs and it becoming much preferred as a way to transfer funds internationally vs. Western Union and MoneyGram in may places, and with Japan making it fully legal and accepted, I think Bitcoin has a bright future. The upcoming hard fork is likely to produce gains for holders, so I think that is part of what is continuing to drive the price up, but there are many other factors and despite the record highs, I think there is still far more upside potential than downside for Bitcoin in particular at this time. Still, anyone investing in mining hardware should diversify to some degree and not just buy Bitcoin mining hardware, but should diversify into Ethereum and Litecoin and Dash hardware. Buying and holding Bitcoin is still a good, simple strategy to ride the wave, I think. You just don't want to buy more than you can afford to lose and not cause yourself any serious distress.
But I believe that #3 is mostly likely to happen in the long term (3+ years), considering that Bitcoin is facing major scaling problems and has no other use than a store of value or money transfer method. I think we may well see much larger gains for Ethereum and especially Ethereum-driven application tokens, such as Aragon, Augur, Golem and SALT. All the Ethereum ICO madness is just getting started! But one should keep in mind that all these Ethereum-driven applications and tokens require you to spend Ethereum to really make the best use of them, so this means that each one that succeeds will create a greater demand for Ethereum. The big issue is that these blockchain applications are mostly in Alpha and are for the most part essentially useless at the moment.
And that's why Steem is so great! You can actually USE your coins for something! Woohoo!
Option 1, as a means of payment, is a problem right now. These forks aren't solving the problem that BTC is slow and expensive to use. I could see a situation where I use it for large purchases, such as buying a car, it's an easy way to make those large purchases. But, using it to buy a coffee is a hassle, there are currently fee-free and fast methods to do this. My best bet is option 2, as a sort of gold, with the benefit of being able to exchange it P2P. As for the price, this is the hard part to predict. Some stability would actually build confidence in the coin.
Paths #1 & #2. The Keiser Report yesterday suggested that Crypto gains might be an inverse reaction to the possible hyperinflation that all the main central banks are delaying with intrest rate collusion, so that no major FIAT can devalue against another FIAT. Are all the main FIATs devaluing against BTC?
It's not really the governments that will decide the fate of BITCOIN but businesses. As businesses start accepting BITCOIN as a valid method of payment, competitors will follow.
In Dubai one can now buy real estate online by paying through BITCOIN.
On Qnet.net which is an online store using network marketing you can buy stuff using BITCOIN.
So it's gonna be a combination of 1+2 in my opinion
Great post :)
I think number 1 is very unlikely aswell.
Governments would never let Bitcoin get as far as taking over or replacing over Fiat currencies.
Yes I'd love it too and so would you but it's very unlikely to happen.
Not only government wouldn't let it happen but it's the fact there are better coins out there than Bitcoin.
Bitcoin is only the highest priced due to it being the first coin.
When the light shines on other better coins with less fees then money will shift over to them.
Anyway...
That's enough from me.
Have a great day to all :)
The governments can't stop it guys... that's the whole point. It's not up to them. The Collapsing old system will push people to BTC, and for that reason it really can grow much much bigger..... and it will....
Path 2, digital gold, is my prediction. Other coins better for transactions. And the blockchain behind it is no tulip craze; it’s money 2.0 and the new democratized system for secure contracts, Internet of things, micro payments for creative work, tamper-proof voting, and more.
Hopefully we can become a trusted store of value, that would be cool. Day to day transactions im not so sure, as its an ageing tech
It's already trusted, by those that understand it.....
Check out my latest post to see how to make free Bitcoin
https://steemit.com/bitcoin/@karanjain/how-to-earn-bitcoin-or-litecoin-or-dogecoin-or-for-free-without-mining
Path 4: with its unparalleled hash power, but limited tx/s capacity, BTC becomes the reserve currency of the digital world, the gold standard so to speak.
To some degree that has already occurred. I would say some combination of #1 & #2 is the most likely scenario.
The academics and economists are fighting over the definition of bitcoin, but the fact is that bitcoin is all-in-one asset class, that can be used in different ways depending on the individual's needs and context.
Bitcoin is everything; a currency, a store of value; a means of exchange for the digital age; a global, censorship-resistant monetary asset.
interesting message good content thanks
I think its going to be a combination of one and two -
def a store of value like gold but also a currency. I think there will be some level of regulation that some of the larger economies will play around with. I think however those will be limited on account of political unrest.
I am hopeful that actual public servants continue moving into different places of power and populists moves start dictating policy. Such as what is happening in Czech right now.
If thats the case (which I am hopeful of) the free market will have its way and path #1 will happen...
we will se
Great post my dear friend.best of luck.
Agreed.
I think that it will take Route 2. It will take so much financial value and investment that soon we will be seeing the currency be legalized. good my humble opinion
I reckon more like $40,000 if you follow the market chart patterns.
Greed is often more reliable than educated speculation.
Yep. 40k at least......
I think path 2 is the most likely with different coins taking over as the mass adoption transaction coin.
Hopefully we can become a trusted store of value, that would be cool. Day to day transactions im not so sure, as its an ageing tech
Hey everyone..i know this is maybe off topic but do you know anything about litecoin too?
I recently invested with website www.shopzoro.us and i received about 2 BTC back...so i am very happy now but should i reinvest it or sell it what do you suggest regarding bitcoins? Will it go up, down?
Thanks
It's very early days, as of yet.
In most recent memory, just look at how long it took for the Internet to go from "something esoteric for a handful and nerds and academics" to being fully mainstream. Even when we'd had the web for ten years, it was still a relatively select group (relatively speaking) using it.Or look at something like PayPal (representing non-bank money transfers)... it was years before people stopped thinking they'd get ripped off because no bank was involved.
Bitcoin-- or just "cryptocurrencies"-- are going to have a hard time moving outside of specialty niche territory until people want to USE them to pay for things. Right now, everyone is getting into cryptos because "oooh, they might go up in value!", not because they want to buy cars, shoes or coffee.And I think the cryptos-as-money user is a different person than the cryptos-as-investment user, in many cases.
I think "digital gold" is a good analogy... it'll become well known to the world, but remain somewhat niche-ish. If we reach $5 trillion market cap in 5-10 years, that'll be pretty good going.
I believe that the second road will be very late .. I will definitely refer to this
#2
It is #1 and #2 for now. As the tech grows , #1 can be a realistic goal anytime.
It seems the theme of bitcoin becoming the "gold" of digital currency continues to pop up. Its been my opinion for quite some time and why I will hold a small position for the very long-term.
Nice write up, quick easy read and that's what I like.
Personally I already see governments adapting to digital technology but only to keep it from "funding terrorists" and that's the reason Australia has gave the public for regulation.
If it is treated as gold as it should l, I believe that the industry of blockchain technology will strive and reshape the future to come.
Thanks for this post, was really great to read whilst I'm stuck in this car.
I am still on the same standards I shared with you the other week. I can't help but think that governments won't like competition and the Central Bank even less. but I also believe the youth of our age are becoming more and more aware of the discrepancies and general injustice surrounding the ways of money these days. These states of affair keep on pushing people's will toward our cryptocurrency paradigms and allow for them to anchor themselves into our world economy.
A simple strategy is to hold onto your BTC and keep them in a hardware wallet for good. With every fork, a new version of Bitcoin becomes available and gets added to the lineup.
That's great..
Hope all Bitcoin clones are going to die and make things more simple ;)
i dont see option #1 happening anytime soon. so for me, #2 is the most likely path for bitcoin. lots of people are actually doing this nowadays so as more and more people learn and adopt to the crypto world, they will follow what most people are also doing, and that is using bitcoin as a store of value and just HODLing it for the meantime as the price keep on increasing while the bitcoin team is constantly updating and improving to make the coin effecient and fast enough to be used as a means of transaction.
i dont see option #1 happening anytime soon. so for me, #2 is the most likely path for bitcoin. lots of people are actually doing this nowadays so as more and more people learn and adopt to the crypto world, they will follow what most people are also doing, and that is using bitcoin as a store of value and just HODLing it for the meantime as the price keep on increasing while the bitcoin team is constantly updating and improving to make the coin effecient and fast enough to be used as a means of transaction.
Thanks for this valuable information
I still believe in option one which could be possible if we get more mainstream exposure and the crypto-community expands beyond the current minority of nerdy cryptonauts. I use option#1 to a minor extent when I transfer bitcoin to my friends and back, taking advantage of not paying fees while sending money overseas.
We also have online shops and services popping up that accept bitcoin. Option two does seem quite likely, and even option three has justification: From an investors perspective it would be rational to take profits when/if bitcoin looses it's momentum and this might cause a cascade effect. Thank you for this awesome post.
hey please upvotes my post i need help
I have some concern to raise that how do bitcoin improves the economy in general if it is accepted globally, when its value does not depend on GDP and its issuance is limited to 21 million. How will it address growth and create wealth in an economy?