Whats the best price target on Bitcoin?, I would think that $100 would be a perfectly reasonable target.
Unfortunately, so would $1,000.
Or $2,000.
Or $5,000.
but” so would $0.
That’s right: $0.
Nada.
Nothing.
6 reasons bitcoin could drop to $0
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1: A sating of demand. At some point, everyone who could ever learn about or use Bitcoin will know about it,
and many of them will own it. Given the lack of awareness about Bitcoin among the general population,
as well as the complexity and “friction” involved in owning Bitcoin, we are a long way from this point.
2: A drop in the price of Bitcoin (for whatever reason). Another thing that could cause demand for Bitcoin
to drop is a Bitcoin price crash. If Bitcoin prices crash, many of those who already own them will not
want to own them anymore–and they’ll jettison them. This will cause a further price crash,
which will further reduce demand. Etc.
3: A Bitcoin counterfeiting or hacking or theft scare. Bitcoin aficionados will smugly tell you that Bitcoin
“can’t be counterfeited.” Please. Anything can be counterfeited. To counterfeit something, you don’t have
to create the actual thing. You just have to create something that fools other people into thinking you
have the actual thing. If there’s a computer system out there that can’t be hacked or fooled by a very
clever hacker, I haven’t seen it yet. Meanwhile, even if the Bitcoins themselves can’t be faked,
the systems that account for them can certainly be hacked. This has already happened. And if someone
figures out a way to steal or delete or otherwise destroy all your Bitcoins, you will be much less likely
to invest in them.
4: A government crackdown on Bitcoins. If Bitcoin gains general acceptance, governments may begin to frown on it.
After all, general acceptance of Bitcoin would usurp the governments’ sole authority to create legal money.
Governments don’t like having their authority usurped.
So they may begin to enact laws that prohibit the use of Bitcoin.
5: An increase in the supply of Bitcoins. Bitcoin aficionados will also proudly assert that only a certain number
of Bitcoins will ever exist (21 million, if memory serves) and that no more can be created.
Again, keep dreaming. The supply of Bitcoins as currently defined may, in fact, be limited.
But there’s nothing stopping the folks who created Bitcoin (or anyone else) from creating a new equivalent
or better Bitcoin. Aside from the fact that Bitcoin appears to be well designed,
there is nothing special about it.
6: A better Bitcoin (or even just another Bitcoin). This is a very real risk, one that Bitcoin enthusiasts
don’t spend enough time worrying about. Again, there is nothing special about Bitcoin.
Although awareness of it is growing, it’s still complicated and hard to use. And monetary philosophers
are already pointing out that the “finite supply” of Bitcoins may, in fact, be too small,
limiting their usefulness. So if Bitcoin can gain traction, then so can any other electronic currency.
And if another electronic currency begins to displace Bitcoin,
the “finite supply” argument will go out the window.
There might soon be a nearly unlimited amount of a better Bitcoin.
So the “fundamental” value of Bitcoin can only be estimated the same way the fundamental value of gold,
can be estimated–which is guessing at what someone will be willing to pay for it at some time in the future.
If the government comes in and declares Bitcoin illegal,
or if someone figures out how to hack or counterfeit Bitcoin,
or if Bitcoin speculators suddenly wake up one morning and collectively panic,
Bitcoin prices will plummet. And there will no “fundamentals” for the value of Bitcoins to fall back on.
That’s something to keep in mind as you watch the Bitcoin frenzy build.
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(that being said, I predict 1 bitcoin will be $100,000+ by the year 2021... once all bitcoins exists.)
