Home Cryptocurrency News The rational cryptocurrency investor’s case for buying bitcoin – Quartz

The rational cryptocurrency investor’s case for buying bitcoin – Quartz

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Determining an intrinsic value for bitcoin is difficult, in large part because it’s different things to different people. For some, bitcoin is a digital collectible they hope to hold onto forever (well, at least until it’s worth $100,000 or more). For others, bitcoin is a currency, as real as the US dollar or the euro. The truth is, there isn’t a universal truth about bitcoin’s nature, so a combination of speculative value and use value get wrapped into the cryptocurrency’s global price.

Longterm holders rarely sell bitcoin. In effect, when they purchase bitcoins, they remove the coins from circulation indefinitely, betting that eventually, they will be more valuable than they are today. These passive holders could be compared to passive stock market investors. They simply buy and wait… and wait some more. When the price dips, they sometimes purchase a few more units.

But by practically removing themselves from day-to-day trading, they leave bitcoin’s price to be determined by a small sliver of active traders. This frenzied bunch is responsible for setting cryptocurrency prices each day. Short-term traders move rapidly between different assets, hoping to score profits on arbitrage opportunities. They attempt to capitalize on panic selling after hacks, and cash in when bitcoin rebounds.

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