Why Bitcoin Needs Higher Prices

The price of Bitcoin has rise for it to go any higher. I’m kidding and serious at the same time.

Bitcoin isn’t tethered to fundamentals like say a privately held business or a publicly traded company. If a company generate $2 in cash flow per year, there is a limit to how high a potential buyer will go. Bitcoin isn’t burneded by any such data and paradoxically, the higher it goes, the less risky it becomes.

Assume a business is generating $2 a year and has a nominal growth rate. A very attractive purchase price would be $2. At $6 it gets a little more risky. At $10 you have less margin for error. At $100 you’re never going to make your money back. And at $500, you just flushed 5 Benjamins down the toilet.

Bitcoin is this business in reverse. Bitcoin is stronger at $40,000 than $20,000. It’s stronger at $60,000 than $50,000. It’s unlike any other asset in that its only limits are people’s imaginations.

Bitcoin is a story. Not every zealot tells the same story, but what they all share in common is the desire for this story to spread. The surest way for this to happen is for the price to go higher. The fear of missing out is the most powerful narrative in the world.

I know some people view Bitcoin as a currency, but that’s not at all how I see the story spreading. I could be wrong, but I think the idea of it disintermediating the banks is over. I understand that Bitcoin is an efficient way to transfer money, but how many times have you sent Bitcoin to a friend? How many times have you received it? I’m open minded to the idea that one day this gains mass adoption, but right now that doesn’t seem to be the case.

Bitcoin will live or die by its ability to convince people to believe in it. And the best way to convert atheists into true believers is with higher prices.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.