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This completely ridiculous argument convinced me to buy Bitcoin and hold it forever
I invested in Bitcoin (CRYPTO:BTC) for more than 10 years now, but I have never had the conviction to hold on to my coins for a long time. After all, it is doubtful that coins will ever have any real utility like that of a precious metal, and there is certainly no major nation-state or equally powerful actor that supports their value or accepts them as a medium of exchange.
A couple of years ago, however, I heard an absurd argument that completely sidestepped all those concerns, and now I’m convinced that I will buy and hold Bitcoin forever.
Value is a social phenomenon
We use dollars as our main currency every day. Despite the fact that a piece of paper with a President of the United States written on it will never be intrinsically useful for any industrial productive purpose, there are many people around the world who recognize that such a piece of paper it is still precious.
In fact, people are so deeply convinced that dollars are valuable that they are routinely willing to trade time, effort, and other resources to acquire them. In other words, there is widespread social consensus that the pieces of paper known as dollars are themselves exchangeable for other people’s assets.
There is no such consensus on Bitcoin yet, despite its strides in becoming more widely accepted as a Bitcoin store of value. However, there is a popular stereotype that assumes the existence of a group of die-hard cryptocurrency enthusiasts who are absolutely convinced of the merits of Bitcoin regardless of what anyone else has to say about it, to the point of delusional.
Detractors will argue that such investors are hoarding Bitcoin out of a failure to discern that the digital coins are actually worthless because they are not useful for making most transactions for which dollars are needed. On this point the detractors seem to be right; If you’ve ever tried to use Bitcoin to buy a burrito, you’ve probably gone home hungry. The financial infrastructure to use it for everyday purchases simply isn’t there and doesn’t appear to be on the way.
But the bears miss a much more important point. People with a cult-like appreciation for Bitcoin are so convinced of its value that they are effectively immune to any attempts to dissuade them, no matter how artful, extensive, or factually correct the objections may be. They simply don’t care; their minds are made up and, if they are to be believed, their opinion on the matter is set in stone. They are practically indoctrinated, because they will always be willing to buy Bitcoin from someone who no longer believes in it.
The story continues
And if they can help it, they will never sell a single fraction of Bitcoin. In their opinion, as the difficulty of mining the coin increases over time due to the halvings encoded in the protocol, fewer and fewer new tokens will be added to those in circulation and the price will increase. So it is rational for them to buy it at any price, because in the future it will be higher.
In other words, the existence of these serious Bitcoin enthusiasts means that the coin cannot go to zero, since even if the price drops sharply, there will still be people who will want to buy it as long as they have the dollars or other currencies to do so. . Therefore, there is a floor for the price of Bitcoin.
They think this perpetual buying behavior will be rewarded in the long run. The group that exerts constant upward pressure on the price of the currency is responsible for providing a base level of demand that produces the desired price action. They invest and evangelize as conscious acts of self-fulfilling prophecy.
So far they have been generously rewarded for their belief. And, ironically, you don’t even have to believe in the merits of the Bitcoin protocol to understand why it’s a good investment: you just have to believe that fanatics exist and will take care of everything else.
There is no guarantee that it will go up forever
Could it really be true that a relatively small clique of evangelists is all Bitcoin needs to grow forever?
It doesn’t seem right. But it probably is. Every day more and more investors add coins to their wallets and there will never be more coins than the 21 million described in the protocol.
If diehards are taken into account, any growth in the population of investors in the currency means that prices will rise even if new converts are not so convinced. Of course, it is possible that investor belief is unstable. It is also possible that the value of Bitcoin will drop tremendously and then never recover, making it a terrible investment.
But the bullish argument is compelling because it recognizes that a currency’s direct utility may be a separate issue from its role as a store of value. Likewise, all something needs to be a store of value is for other people to believe that it is and behave accordingly. For Bitcoin, the belief is already there, that’s why I will slowly buy it for quite some time.
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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
This completely ridiculous argument convinced me to buy Bitcoin and hold it forever was originally published by The Motley Fool