Editor's Note: This article comes fromStar Media STARMEDIA (ID: Star_Media1), Author: Xuesui, reproduced by Odaily with authorization.
Editor's Note: This article comes from
Star Media STARMEDIA (ID: Star_Media1)
Star Media STARMEDIA (ID: Star_Media1)
, Author: Xuesui, reproduced by Odaily with authorization.
In the past few days, I have been a little distracted by the billing and opening. I inserted the needles frequently in a day, in the morning, in the afternoon, in the evening, and in the middle of the night, several times a day. Physically and mentally exhausted.
There are many people who doubt the value of Bitcoin, including Warren Buffett. Even after eating Sun Yuchen’s meal, he has no soft-spoken affirmation of the meaning of Bitcoin’s existence.
Skeptics believe that when storing wealth, we must first understand the principles behind it, so as to explain its superficial characteristics.
The volatility of Bitcoin is one of the most overlooked characteristics of investors. Skeptics, including some bankers, generally believe that Bitcoin is too volatile to effectively store the value of personal assets. Moreover, If Bitcoin suddenly plummets tomorrow, the value of their assets will shrink greatly, and they believe that Bitcoin cannot exist as an effective savings mechanism.
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Not easy to fluctuate ≠ store of value
In conventional wisdom, volatility and store of value are often confused as being mutually exclusive. But it is not absolute. If an asset is highly volatile, it doesn't mean the asset will be an ineffective store of value. vice versa. If the asset is not volatile, it is not necessarily an effective store of value. The U.S. dollar is a good example: the U.S. dollar (at least as of today) has not fluctuated, and the store of value has not performed well.
Although the Federal Reserve has made a lot of efforts to slow down the depreciation of the dollar, it still cannot change the fact that more and more people are looking for new value storage targets. So how can an asset like Bitcoin be both highly volatile and an efficient store of value?
Revisiting Bitcoin Value Fluctuations
Consider why there is fundamental demand for Bitcoin, and why Bitcoin naturally fluctuates. Bitcoin has value, believers believe, because it has a fixed supply, and it is also volatile for the same reason.
When the market demand increases by an order of magnitude, because the supply of Bitcoin is fixed, but it cannot be issued to meet the needs of more people, and the consensus among market participants is not perfect, resulting in drastic fluctuations in the price of Bitcoin.
Just as Nassim Taleb wrote in "The Black Swan of Cairo": "Change is information. Without change, there is no information." As the scope of information dissemination continues to expand, it has attracted more attention, but similarly, relevant information Changes can also cause fluctuations in the price of Bitcoin.
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Value fluctuation and application
As the Bitcoin market consensus expands, it attracts the attention and discussion of more potential observers who then begin to understand the fundamentals of Bitcoin. Likewise, an appreciating asset base not only attracts more wealth, but also more capital to build infrastructure (eg, asset custody solutions, payments, mining, etc.). As with building infrastructure, developing an understanding of Bitcoin is a slow process, but this both drives adoption and further spreads knowledge and justifies additional infrastructure.
