Is It Too Late To Invest In Bitcoin?
Is it too late to invest in Bitcoin? Many people hear about Bitcoin and are intrigued by it, but they see the Bitcoin price and think it’s too expensive, and that they missed the boat.
But, Bitcoin differs fundamentally from traditional assets. When contemplating an investment in Bitcoin, the current price tag should not be the sole determinant. Like any other asset, assessing Bitcoin’s intrinsic value demands due diligence.
However, the approach to understanding its value diverges from conventional asset valuation methods. Unlike stocks, Bitcoin doesn’t generate revenue, earnings, or cash flows. Hence, standard metrics like price-to-earnings ratio, price-to-sales, or cash flow yield little insight into Bitcoin’s value relative to USD.
There are analytical models designed to gauge whether Bitcoin’s current price is justifiable and to project its future trajectory. Notably, Metcalfe’s Law and the Stock-to-Flow (S2F) models point towards similar price trends.
According to Metcalfe’s Law, Bitcoin’s price could reach $100,000 by January 2024 and ascend to an astounding $1 million by 2028. The S2F model, on the other hand, is even more optimistic, predicting a valuation of $288,000 by the end of 2021.
These models might seem ambitious, and all models are usually wrong, until they’re right, and vice versa. Remember, they’re just models.
There’s yet another metric to consider when deciding if it’s too late to venture into Bitcoin, and it’s essential for potential investors to be well-informed before making any financial commitments.
The S-Curve Analysis Points Bitcoin To The Moon
When Metcalfe’s Law and the Stock-to-Flow models aim skyward, the S-Curve model stands right beside them. While the S-Curve doesn’t give us an explicit price, it heralds mass adoption and the ensuing exponential growth.
The S-Curve is the quintessential adoption blueprint for budding technologies. Interestingly, the time required for a new technology to reach 10% adoption is about the same as moving from 10% to a whopping 90%.
Initially, the S-Curve depicts a period of slow adoption, driven solely by pioneering innovators.
Next, we see the early adopters. These are individuals a tad more cautious than the innovators but still ahead of the curve. As this phase wanes, a tipping point emerges, signifying the widespread inevitability of the technology in question.
Post the tipping point, the early majority hop on board, drawn by the prevailing momentum. They are trailed by the late majority and finally, the holdouts, essentially rounding off the curve with near-complete adoption.
Positioning Bitcoin within the S-Curve suggests a meteoric ascent over the forthcoming decade. So, ponder this: is it really too late to invest in Bitcoin?
S-Curve and Network Effect: Win Win
Bitcoin doesn’t just exist in isolation – it’s powered by a network effect, much like many transformative technologies. Comparing Bitcoin to the rise of personal computers reveals striking parallels in how both the network effects and the S-Curve unfold.
Metcalfe’s Law, which lies at the heart of the network effect, posits that the value of a network is proportional to the square of its number of connected users (n²).
Take the telephone as a prime example. A lone telephone is a paperweight. But as soon as my friend gets a phone, and then my parents, the telephone’s utility skyrockets. The more people connect, the more indispensable my phone becomes.
For Bitcoin, this network effect is a value amplifier, encouraging a steeper ascent along the S-Curve.
Let’s rewind to 1976 when Apple launched its first PC. Initially, the network effect didn’t pack much punch in the PC market.
The real PC revolution ignited around 1980. Throughout that decade, adoption was measured, but by its close, about 10% of Americans had a PC on their desks.
From 1990 to 2000, PC ownership swelled from that initial 10% to an impressive 90% of American households, propelled in part by the burgeoning internet.
Imagine, had you invested in a leading PC manufacturer prior to 1990, your portfolio might have ballooned. Microsoft, for instance, soared by 9,562%, while Dell’s stock skyrocketed by a staggering 89,000% during that golden decade.
As history shows, groundbreaking technologies tend to trace the iconic S-Curve. Bitcoin, it seems, is scripting a similar story.
Is It Too Late To Invest In Bitcoin? We’re Just Entering The 10-90% Phase
Rewind to before 2017, and the narrative around Bitcoin wasn’t pretty. Dismissed as a passing trend, a scam, or currency for the unsavory, it faced its fair share of cynicism.
Fast forward to today, and approximately 8% of Americans are Bitcoin holders, a leap from a flat zero in just over a decade. Yet, the perennial question lingers: Have we missed the boat on Bitcoin?
The short answer? Not by a long shot. If current trends hold, we’re poised to see billions more flocking to Bitcoin.
Drawing parallels with other revolutionary technologies, a projection surfaces: by 2031, Bitcoin could be a staple in 90% of households.
Consider this: the current Bitcoin price tag hovers around $13,000, correlating with only 8% of Americans having a stake in it. But we shouldn’t forget – Bitcoin isn’t just an American sensation. Globally, an estimated 100 to 200 million people already have a slice of the Bitcoin pie.
Fast forward to 2031, and we might be looking at a world where billions transact in Bitcoin. And as with all things governed by the network effect, its value is set to soar exponentially.
The Bitcoin Narrative Is Changing As Corporate America Buys Bitcoin
In the world of disruptive technologies, the S-Curve serves as a reliable roadmap to innovation. The juiciest gains? They’re typically found in the curve’s imminent phases.
While Bitcoin’s current global adoption hovers around 10%, this places us at the nascent stages of its adoption journey. And if history teaches us anything, it’s that such trajectories tend to speed up dramatically.
The winds of change are palpable. Recall 2017, when Jamie Dimon of JPMorgan dismissed Bitcoin as a mere “fraud”. Fast forward to today, and JPMorgan extols Bitcoin for its ‘considerable long-term potential’, even touting it as a rival to gold in the alternative asset arena. Talk about a narrative U-turn!
This sentiment isn’t an isolated one. Financial behemoths like Fidelity are not just embracing but actively creating Bitcoin infrastructure. They’re poised to roll out Bitcoin custody services for institutional players.
When PayPal announced its Bitcoin service, many heralded this move as a tipping point in lending legitimacy to the premier cryptocurrency. This rapid narrative progression mirrors the swift movement up the adoption curve.
Today, it’s not just the individual investor who’s bullish on Bitcoin. Hedge funds, established custodians, publicly listed companies, wealth management entities, and family offices are all jumping aboard the Bitcoin train. And the retail sector? They’re not trailing far behind, with their pace set to quicken as the S-Curve ascends.
Is It Too Late To Invest In Bitcoin?
At a glance, $13,000 for a Bitcoin might seem steep. But it’s more insightful to consider the cryptocurrency’s market cap. With a cap of $244 billion, and dividing by the current circulating supply of just over 18.5 million, we get our Bitcoin price.
Imagine if Satoshi Nakamoto, Bitcoin’s creator, set a cap of 21 billion instead. Our current price would be a mere $13 per Bitcoin. Perspective is everything.
I’m bullish on Bitcoin, anticipating a surge due to institutional interest in the coming years. Yet, its price will eventually stabilize post the 10-90% adoption phase of the S-Curve.
While I champion Bitcoin’s potential, it’s crucial to remember the world of finance is unpredictable. This piece isn’t a call for investment – my views are shaped by my own stake in Bitcoin.
Given global financial trends, a decentralized, uncorrelated asset like Bitcoin seems appealing. It isn’t too late to consider Bitcoin, but be prepared for potential volatility along the way.