Why I think Bitcoin price will increase at least 10x

Diogo Palma
Aug 22, 2017 · 4 min read

What is bitcoin?

If you haven’t heard of bitcoin up until now, boy are you in for a treat. Bitcoin is a digital currency and a digital asset that is the most famous application of the blockchain technology because of its recent crazy rally. What is blockchain? It is a database. This database is decentralized and maintained by a peer-to-peer network that validates and secures every transaction. There is no bitcoin CEO or bitcoin server, instead there are 4 Exahashes/second of processing power spread through the world. This is more than 11000 times the processing power of the world top 500 supercomputers combined.

What’s in it for you? What is the underlying benefit? Imagine a global currency, which allows transmission of value between various individuals or organizations in different places, without intervention of banks or states, with very low transaction costs. That is bitcoin. Wow, right?

Get this: there cannot be more than 21 million bitcoins ever, and already 75% of those have come to life. Every 4 years there is an halving, which means that the coins get mined at half the speed, which means that will take about more 100 years to mine the remainder 25% of the coins!

Here’s more information on how bitcoin works if you want to go deeper:

Philosophy behind money

Should Bitcoin be considered money or currency? Bitcoin, like gold, can be both. Be aware, money is different from currency. Money is value, currency is a representation of that value. There is a certain amount of value in an economy and we divide that value between people through currency (euros, dollars, etc.). Aristotle thought about this long ago and came up with the key features of money. Money has to be:

  1. Durable — it must endure time, it cannot be perishable. The value of money should be similar across time;
  2. Divisible — it must be divisible into smaller parts, so that any trade can be made. This is why live stock was not great money, if you split a sheep in 2 the sheep will (eventually) die;
  3. Portable — you have to be able to take value with you in order to transact in a market or in a foreign land;
  4. Intrinsic value — money itself should have liquidity and an underlying value, it should have supply and demand.

The key asset that falls straight away in this category is gold, right? It is durable and has great metal features, you can divide it in smaller parts like coins and take them with you, and as long as those coins are the same weight and size they should be worth something and the same.

Bitcoin fulfills these characteristics as well, they are durable because are sustained by the most powerful P2P network there is, you can divide it up to 8 decimal digits, you can port them through a range of devices that ultimately you can take with you, and lastly miners had to “mine” the coin so there was a lot of factors involved to give it value (it took equipment and hashing power, power consumption, and is being secured by the network).

The problem with money and currency today

The key problem today is that we completely have corrupted the concept of money on our society. Currency doesn’t really represent value anymore, just in the U.S. alone there are 1.5T $ in circulation, while the world gold reserve is estimated to be something around 7T $. And currency can always be printed if required as it was in the quantitative easing initiatives that took place in the United States and Europe.

Adding to that, gold became a distant asset, when you usually invest in gold you buy a voucher that says you own gold in a vault somewhere, but you don’t fully own it, you can’t divide it and you must rely on others to maintain it or sell it.

In the face of a strong and pumping economy, maintaining value is not a big issue, but people in developing countries and economies struggling with hyperinflation, such as Venezuela, have a real problem to maintain their wealth. In this reality, their value can rapidly be impacted by policies, by economic shockwaves and other external effects. Here’s an example:

Supply and demand

So, it looks like there is a market for Bitcoin after all. Bitcoin is competing with classic assets like Gold, but also with other very tangible assets such as land. And how big of a market is this one? As mentioned above, the world reserve of gold is estimated to be 7 trillion dollars. Since there will be 17M Bitcoin in circulation before 2020, if Bitcoin was to harness 10% of that market, each coin would be worth roughly 41k$. Bitcoin’s market cap is currently at 70 Billion $, that’s 1% of the global gold reserve.

One Bitcoin might look expensive now, but the ones that bought it at 30$ probably were thinking the same, and how did they do? They would have multiplied their money by 136x. That is a lot of money. However, if Bitcoin gets more adoption, there is still a great opportunity to grow your money.

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