This article explains why doubling the number of bitcoin investors will more than double the price.
In the 12 months to September 2017 the number of bitcoin investors rose by 43%, yet the bitcoin price rose ten-fold.
I have done alot of very deep research on bitcoin trends in terms of number of users, and the supply and demand changes. This research is published in my steemit articles.
It is clear from my research that, unless there is a major global ban, the number of people holding bitcoin is going to increase by more over the next 12 months than the increase of the last 12 months.
First let’s look at how new users affect the price of an imaginary crypto currency.
Example 1
If a coin has 100 users willing to invest $100 then the logical market cap should be $10’000. If there are only 10’000 coins, then each coin should be worth $1.
Example 2
Now imagine 100 new users arrive willing to invest $100 each into the coin. You would think that the market cap should now become $20’000, and the coin price should therefore be $2. Wrong!
This is false logic, because it implies that each of the first 100 users sells half his coins, (selling 50 each, or 5000 in total), so the new users can buy. The reality, is that only a small number of the original users will be sellers.
Let’s assume that only 10 of the first 100 investors care to sell. The other 90 early investors are willing to stay invested at any price.
Now we have a supply of 10 X 50 = 500 coins to feed the 100 new investors willing to invest $100 each. The new price of the coin will have to be $20. ($10’000/500 = $20).
As you can see, by using the assumptions in the example above, doubling the number of investors would result in a coin price which is 20 times higher.
This explains the large rise in price of bitcoin, despite the not so large rise in the number of new investors (in the year to Sept 2017 there were 43% more investors). Basically many of the early investors, didn’t feel like selling, even after a ten-fold price rise.
In the month of October 2017, the monthly increase in new investors was accelerating. The October numbers imply that the number of bitcoin holders will increase by more than 100% in the next 12 months. This is a 100% increase of a much larger number than the number of 12 months ago. It’s like going 100==>143==>286.
So the number of new investors in the next 12 months could be 3 to 4 times the increase over the last year.
The primary motives for selling could be spending needs. But who invests their shopping money in cryptocurrencies?
You might sell because you found a better performing investment. (Please tell me what that is?)
You might sell because of FUD. Great! Now you are back in fiat. Enjoy the lack of volatility as long as you can. Bitcoin’s volatility is like crack cocaine. You just have to come back.
What do all these new investors mean for the price of bitcoin? At what price would you sell? What would you do with the money?
Very important:
I want to reward those who actually read my blog. If you read this far, just use the word “hodl” in your comment and I will reward you. If on the other hand you are a regular comment spammer, leave me a few words along the lines of “Awesome post”, or “Thanks for sharing” and so on and it will entitle you to a free flag.
The below chart illustrates bitcoin’s “Price memory feature”. As each $1000 milestone is passed, the price $1000 lower looks like a good buying level. Two months later, it’s history.
It is so pesimistic to see $70000 only in 5 years. I see $ 70k-100k per one BTC coin in 1.5-2 years. Maybe even by the end of 2018
Extremely ambitious and optimistic. Hopeful that your are right! Will add if/when there is a correction.
I thought I understood your example, but then I probably over thinking it. Isn't the price of a cryptocurrency just MC/# of coins? Why wouldn't the marketcap be 20k in example #2? Regardless, BTC is a strong HODL.
Marketcap has no relation to the amount of money people invested. It is numberofcoins X lastpricepaid.
OK so MC does not represent how much money everyone has put into it?
As a simple example, if someone paid 20k for BTC today then MC would become 20k multiplied by numberofcoins. If so, then I think I had it backwards where price is determined by MC.
hodl
Asside from that, you had a great point in your research and its true!
When you have bitcoin and you wanted to avoid the correction as fud spread, in no time, you will be going back to bitcoin again!
Indeed, IMO bitcoin will continue to soar as many more people didn't know how bitcoin works!
I think, 50% more of the world population, didn't know about bitcoin, and growing bitcoin price offer more room to grow!
Resteem for great article!
Approximately 1 in 800 of the world’s adults own any bitcoin. That should be 1 in 400 adults in a year’s time.
Hah. Looks like I'm the only one who read all of your post. Hodl! Clever...
I spent a solid hour giving a monologue to my brother's girlfriend today about BTC, ETH and STEEM. By the end, everyone else was gathered around trying to grasp all of the Blockchain/cryptocurrency/Steemit knowledge in a nutshell, but I think I got them to see the light. I told them...
I also set my Mom with her Exodus wallet and taught her how to make her first transfers from her exchange. She has no emotional attachment, so she's actually doubled her holdings in ETH in just a few months, and even caught the exact bottom of a massive dip to literally the dollar before it rebounded and never returned. It's crazy that she's capable of doing this given that she's not technical at all. She simply took my advice to invest a small sum then, which has grown a lot since.
Wait until the next few 12 months as you say and it'll be an incredible adoption swing to the market cap and prices.
It’s looking like this yearmight be the year crypto finally hits the mainstream!
hodl
The growth we’re seeing in crypto is beyond anything I could have ever imagined. Even my clueless co-workers are beginning to talk about it.
Unless something unforeseen happens, I honestly think Bitcoin could hit 6 figures this year. It really seems to be growing that fast.
The market will remain standing and the calculations are correct, it will not pass like the bubble. It will be stronger and stronger like steel. hodl. Only people with vision understand this great truth, although the comparison with the crack and cocaine market sounds a little abrupt, it is the sad reality. the smartest will always be up.
My friend @marsella-2017, the price action we are seeing now is certainly going to go into future history and economics books. I wonder what the will say.
It’s good to see you helping others who are less fortunate. https://steemit.com/spanish/@marsella-2017/compartiendo-con-el-viejo-hilario-parte-1
It is the beginning of a favorable history for all those who have opted for cryptocurrencies. It's great
the taste of financial freedom can be seen in the distance, but a day will come.
On the other hand, it is great to be able to help the less fortunate, and it is much easier when we have the support of a man whose heart does not fit in his chest. and from time to time he feels generous. is the best.
I am studying the possibility of convincing him to be a witness in Steemit. it would be great.
I had promised the translation of this story.
https://steemit.com/story/@marsella-2017/stories-of-a-commercial-diver-back-to-my-office-6
What happens if I say, do a typo, and type hodi, instead? - does that count?
...and this is very unfair to anyone with dyslexia, to be honest.😂
I always allow a maximum of 99 spelling mistakes in the comments, so a small mistake like that is hardly going to hurt. But on the other hand, writing something like “Awsoem pots, kep up teh good wrok” is a fail.
that was lucky then, that was second comment....
It seems like you got a pattern there, I wonder how much will it go on... How do I know how much should I hold and when is it too late to invest?
If you invest small amounts gradually, you will know after each investment whether it makes you feel nervous. When it does, you’ve already invested too much.
Makes sense, it is easy to see you got more experience than me about this. Congrats, I hope I will be some day that pretty successful, but who knows :)
Nice article - the maths intuitively makes sense!
I am buying each month, alongside some other coins, with no plans to sell anytime in the near future, if at all -hodling.
If the price does go crazy, however, then I will need to work out a way to generate an income from these investments. No doubt the market will evolve to enable that
Cheers
It will soon be possible to generate an income from holding bitcoin. Next month we will have futures. In 2018 options and ETFs will follow.
You can use options to generate an income. The risk is that you don’t know what you are doing and you come a cropper, (don’t get on a horse of you haven’t learned to ride).
This involves writing an out-of-the-money call.
You can limit the risk of losing your bitcoin with a buy-write strategy. For example, you could sell the January $ 10’000 call for say $800 and buy the March $11’000 call for $800. It’s a wash until January expires, but then you can sell a call for February to bring in $800 and then sell another one for March to bring in $800.
The actual numbers could be anything, depending on the underlying moves, but in the illustrated example above, your net profit would be $1600 over 3 months, or around 64% annualised.
Today the only way to generate an income is to join a mining pool. The risk is that you are in an unregulated area dealing with shadows.
Thanks for the reply! Will keep an eye on the evolution of options here. I sell a lot of put options in traditional stocks and indices - as credit spreads
I don’t like selling calls as it is betting against the long-term market trend and I don’t want to get called away, I want the options to expire worthless. Puts I have been doing for 4 years or so now and have always managed to roll out and/or down fairly easily when the underlying asset has dipped a bit too far
Not sure I would want to get into it with bitcoin - I guess the premiums would be huge, but would take some serious monitoring given the volatility.
Still, will be interesting to see how it evolves. Maybe it is as simple as buying and staking some coins - OKCash, Smartcash etc - I have a small amount of each and enjoy the volume appreciation as well as the price appreciation
Cheers
The assumption is that only a small fraction want to sell. That mentality is driven by other factors. The reverse could be true as well, if 90% of the first 100 want to liquidate their holdings, then the price drops.
This is all just supply and demand curves. That said, I will just hodl my coins.
Absolutely, if something happens, there may be a rush to sell. Imagine if they discover that bitcoin trading stops people from sleeping, or causes them to check their iPhone while working or driving. What if making money causes teenagers to buy a Lambo and crash it into a lamppost. All that could give bitcoin a bad rap.
Hodl! I'm a little torn right now as to how much further I want to go into bitcoin. I've owned several different coins at different times, the last one was last year when they were less than 1500 or so. I foolishly stopped buying for a while because I couldn't afford full coins and I thought the price would come back to earth, but I should have just joined the scaling and ultimately had nearly the same ROI as I would with a full coin. Thankfully it isn't too late to make meaningful investments.
By investing gradually, you will get to know how you feel. The danger is you own too much and are forced to panic on a bad day.
Yeah its a pretty unpleasant feeling, the most I ever lost at once was a few hundred US dollars when bitcoin dropped suddenly. The trick for saving your peace of mind I think is to not look at the price fluctuations very often if you truly believe that it is going up in the long term.
Every day there are new investors, the btc this year has been more recognized in the whole world, the new ones do not want to take out their currency, they just want to continue investing, it is my opinion, regards dear friend @swissclive, hodl...
Hi dear friend @Karlin, you are right. Every day brings us new investors. The old investors mostly dont want to sell, so the price goes even higher.
The price of of bitcoin at $8400 is just $39 below the all-time-record of a-few days ago. Every time it breaks higher than the previous range, it spikes as investors panic that they will miss the next big move up.
If it breaks decisively from the last range, then $9’000 or $10’000 before year end will go onto many investors radar screen as the next target.
BTC for this year 2008 promises a lot, is the best so far. Greetings, teacher and friend ...
Update:previous record of $8439 broken this morning. 6 hours later we are breaking $9’000. It seems unstoppable.
If I noticed that it went up strongly, that good for the big investors
“hodl” First Hello, have a nice day.
I started to enjoy your approaches, what you're doing is really fantastic, beautiful. The one who does not read your posts to the end is just a fool because he can lose a lot.
I want to ask you about the prognosis of other crypts in response to the price of Bitcoin (Ltc, Eth, Monero) - Thanks in advance @swissclive
I am sure some of the other crypts are very good and they have their stories. They all claim to be better than bitcoin, but the vast majority of potential investors just don’t care. They just want bitcoin, and nothing else. It’s like the next brand of smart phone. No matter what it claims it can do - faster, better pictures, higher resolution, and so on, - the public just don’t care. They want an iPhone.
So for me, I sometimes mess with the others, but I always find myself coming back to bitcoin. It’s the grand-daddy of crypto. It has the name recognition.
Thank you very much @swissclive
Hahaha "hodl"
Example 2 was very useful.
I had the idea that when number of users holding cryptocurrency doubles, the value also doubles.
Thanks for clearing that
“hodl” Thank You From My Heart
https://steemit.com/bitcoin/@dobartim/why-is-swissclive-one-of-the-best-expert-for-bitcoin-and-the-crypt
found you downvoting people. wanted to know why. i think you are correct. i do this as well. appreciate your work. seems you are doing it right. i don't think it is our place to judge the content, but that it is not bot hodl content.
Hay you said right that Bitcoin value and pass the level of 1000 and it become history and all these investors are really positive on Bitcoin and even though some of the investors as so positive that they can see the level of Bitcoin to $70,000 in next 5 years
hodl
The reasoning sounds good to me. Good job
Have we entered the second phase of crypto awareness/adoption? The total market cap grew by over 8 billion dollars from Thanksgiving afternoon to Friday morning. I imagine there were lots of conversations around the Thanksgiving dinner table in America about cryptocurrency.
you said Right
@arshi (35) well done! You are the first person to request a flag. For that I give you my flag at 100%. (You no doubt read the paragraph headed “very important” in my blog above.
Lol.
Am not having large amount of BTC but could become large in value when this all comes out. It looks very promising so I'll "hodl". Have a nice day.
u cant do this with me..... i am new ....so there is a mistake
Ok, unflagged. If you would have read the blog, you would have seen the “Very important” point, which invites you to do what you did if you want a flag. No more spam comments please, and good luck in your future posts!
many many thanks to u..... i am new so the mistake....i am extremely sorry to u.... and thanks for unflugged
I think Bitcoin can be up to $ 25,000 in 2018
@abdulmotin (32) You are spamming short comments saying the same kind of thing all over the place. You didn’t read my blog. Please refer to the “important information” and then you will understand why you get a flag.