Will Bitcoin end like a tulip?

Behind the existence of any currency, there will be strong support, such as national credit or precious metals. Now some people believe investing in Bitcoin is anti-inflationary because of the openness of decentralization. Bitcoin, like gold, does not generate cash flow and has no equivalent conversion. How to measure its true value? In addition, many countries are developing their own encrypted digital currency. It may be hard to understand why large investment institutions invest in such assets?

Actually, it is a problem to understand the nature of credit. The country is a subjective product of the consensus of the people, and national credit is the credit of the central bank. After all, it depends on how much people trust the central bank. The credit of the country is the expression of people's consensus. It is the same in nature as Bitcoin's and it is not special at all. When it comes to national credit, many people think about the People’s Bank, the Federal Reserve, the European Central Bank, etc., but why not think about the central banks of Zimbabwe and Ecuador? At this time, compared the consensus of the endorsements of the central banks of these two countries with the consensus of Bitcoin, it is not always sure who is strong and who is weak.

When talking about national credit, we can't just think of the 2US, Europe, China, Japan, and the UK. There are so many countries in the world, the central bank of each country has its own credit, even though the credit quality of some countries is really not very good.

The same is true for precious metals. Precious metals do not carry any interest. They are valuable because everyone else thinks it is valuable. This is exactly the same as Bitcoin. Some people say that Bitcoin's code can be copied everywhere to create new coins, so Bitcoin is not scarce, unlike precious metals. However, the new currency created with the same code is completely different from Bitcoin. The two parties are not on the same chain and cannot be used with each other. The value of the new currency created by copying the code depends on the ability to create consensus.

Whether the current Bitcoin is anti-inflation, this issue can indeed be discussed. Not anything with a limited number is anti-inflation. There are too many limited things in the world, gold, silver, crude oil, stocks, and real estate can all be said to be limited in quantity. When inflation does come, what position does Bitcoin occupy in this ranking? Whether investors in panic are taking away liquidity or injecting liquidity? It is not easy to judge. When the inflation panic some time ago, Bitcoin also fell along with the Nasdaq index. But as the consensus on Bitcoin continues to increase, Bitcoin's ability to resist inflation is also increasing.

As for the encrypted digital currencies developed by various countries, they are two different things from Bitcoin. The development of various countries is mainly electronic cash, which is completely controlled by the central bank. At most, it uses blockchain technology, which is fundamentally different from Bitcoin, a community-autonomous and multi-center man-made asset.

Bitcoin is limited in quantity and is not suitable for circulation as a currency just like gold. So the seigniorage can also be stopped. Bitcoin itself has no competitive relationship with the central banks of the United States, Europe, China, Japan, and the United Kingdom, and will not pose a threat to the sovereign currencies of major countries. Its appreciation comes from the continuous expansion of the consensus circle. However, Bitcoin and other digital currencies constitute a certain degree of competition with the central banks of small countries. If the central banks of small countries operate indiscriminately, in the past, people often had to avoid using the central bank’s currency through physical transactions. But now, many people in developing countries have one more choice, at least they can exchange products and services through electronic assets, that is, digital currency.

Finally, the question of tulips. Although Bitcoin may not collapse-of course it also depends on how a collapse is defined. Some people think that it collapses when it falls from $60,000 to $20,000, then this is still possible. But as an asset condensed by consensus, Bitcoin does have no intrinsic value-the definition of intrinsic value is very strict. The British pound, U.S. dollar, and RMB have no intrinsic value because they do not produce any utility by themselves. It must be exchanged. This is fundamentally different from crude oil. Because crude oil is really usable, unless crude oil is completely replaced in the future, otherwise crude oil will always have intrinsic value.

There is a theoretical possibility for an asset without intrinsic value, that is, one day everyone suddenly denies it, and the market value drops to zero. But from the perspective of our history, this possibility only exists in theory, and basically does not happen for no reason.

As for the application, Bitcoin is not suitable for daily shopping now, because the price of a single Bitcoin continues to rise, and the transfer fee is also rising, so that each transfer will cost dozens of dollars, and even international transfers do not account for anything. The advantage of handling fees. I think the greatest possibility for its future is the same fate as gold: locked in the safe. Gold is deeply locked in the national treasury, and Bitcoin will be deeply locked in the cold wallets of several large companies as asset collateral. Generally, no one wants to really mention it. Everyone’s transactions and investments are issued through these companies. And the miners use extremely high computing power to compete for the bitcoins generated by the transfer fee.