![]() The “demand” for Bitcoin that results is thus 100 million X $300, or $30 billion of Bitcoin market cap. They don’t really care too much about the value of Bitcoin in terms of dollars, because they are only holding $300 of it. Their individual holdings are going up and down, as they buy and sell things, but on average it is $300. Let’s say that, over time, 100 million people – only about 1/70 th of the world’s population – acquires $300 each of Bitcoin, for transactional purposes. ![]() Once they acquire $1000 or so of Bitcoin, they trade it for $20 Federal Reserve notes, which they consider a more reliable store of value. Given the stark volatility of Bitcoin, perhaps they don’t want to hold onto this for too long. They start with $100 of Bitcoin, and gradually get more as payment for goods and services. Or, maybe they are sellers who want to see if accepting payment in Bitcoin is good for business. Maybe they just want to try it out, and see if it might be used to their advantage. ![]() Perhaps the seller insists on it, or perhaps it would be better than alternative means. Let’s imagine that some of these millions of people decided to acquire $100 of Bitcoin, not as a speculation, but simply as a means of payment. Other options for these people consist largely of in-person transactions involving paper money, and perhaps gold or outright barter. It can be used by anyone with a smartphone, which includes millions – perhaps, billions – of people in places like India, Afghanistan, rural China, Cambodia, and all of Africa, who do not have bank accounts, and perhaps don’t want to have one. It does not make use of the banking system, and does not leave a paper trail. It is a nearly-costless way of transferring value over long distances, and (supposedly) anonymously. Bitcoin has proved itself to be quite useful for certain things. ![]()
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