• Mitch

Have I Already Missed the Time to Buy Bitcoin?

As the price of Bitcoin continues to rise, one of the most common questions is: "Am I too late to buy into Bitcoin?" First of all, it's important to note that you can buy less than one Bitcoin. Just like one dollar is divided up into 100 cents, one Bitcoin is divided into 100 million satoshis (or sats for short). Even if you can't afford 100 million sats (aka one full Bitcoin), you may still be able to afford thousands or even millions of sats. For example, today you could buy 10,000 sats (or 0.0001 Bitcoin) for about $4, or 2 millions sats for about $800.

That being said, it's easy to see the price go up and feel like you missed the boat. However, we believe things are just now starting to heat up for Bitcoin, especially in the long-run. We were buying Bitcoin when the price was under $10,000, and we continue to do so with the price recently going above $40,000. So what is driving the price of Bitcoin so high, and how could it continue to rise beyond these levels?

Supply and Demand

The price of any asset is driven by supply and demand. If the supply of apples doubles, the price of apples at my local supermarket will drop. On the other hand, if everyone in my city decides to only eat apples (i.e. demand increases), the price will rise. The problem with projecting future prices is these two factors of supply and demand are difficult to predict. Bitcoin is unique in that its supply is on a known schedule; it is embedded in software code that cannot be changed by any person, company, or government. This code states that the new supply of Bitcoin is cut in half every four years. When Bitcoin was first launched in 2009, there were 50 new coins created every 10 minutes. In 2012, the new supply was cut in half to 25 coins every 10 minutes, and then in 2016 it was cut in half again down to 12.5 new coins per 10 minutes. In May 2020, the most recent halving occurred, meaning there are now only 6.25 new coins created every 10 minutes. We can see this in chart form below:

Five years ago, it only took one week to create 25,000 new coins. Today, it takes nearly a month for the same number of coins to be mined. In other words, the new incoming supply of Bitcoin is becoming increasingly scarce as time goes on.

Let's compare how Bitcoin works with something like the price of cars: if there's a huge increase in demand for cars, there would initially be a shortage of cars, and the price would temporarily shoot up. However, the car producers can react by manufacturing many more cars. Once this new supply of cars is available, the price will come back down. Now imagine what would happen if the new supply of cars was strictly limited: only 1,000 new cars could be created each year. There simply wouldn't be enough cars to go around to all the people who wanted cars, so the price would go up (and not come back down). What if we go even further and cut the annual supply of new cars in half, so that now only 500 new cars could be created each year? It may lead to a mania in the price of cars as people start to realize that owning a car is becoming increasingly difficult.

This upward price mania is effectively what has happened to Bitcoin in 2012-2013, 2016-2017, and thus far in 2020-2021. The supply of Bitcoin stays constant for a 4 year period. Then, all of a sudden it is cut in half. The impact is small at first, but as more and more people learn about Bitcoin, there are an increasing number of buyers chasing a decreasing amount of new supply. We are beginning to see this play out for the third time in Bitcoin's existence.

The exponential growth of Bitcoin's price is a bit hard to grasp for those who are new to the space, so let's see what it looks like with charts. Here's a chart of Bitcoin from 2010 to 2014 - I've circled the exponential growth phase in red:

And here's another chart showing Bitcoin's price from 2010-2018. Notice how the exponential price increase from 2013 (circled in red) now looks insignificant. The 2017 exponential growth phase is circled in blue.

Finally, here's a chart that catches us up to today's price levels. I've circled the two previous exponential price rises (2013 in red; 2017 in blue), as well as the current exponential price increase in green. Notice how the first chart is just a blip on the radar, and the second chart is starting to look insignificant.

If the price of Bitcoin follows what it has done after the previous supply halvings, the blue circle above will soon become almost as tiny as the red circle. This lines up with price predictions from many industry leaders: CitiBank projects $318,000, Guggenheim says $400,000, JP Morgan claims $146,000, and the list goes on. While Bitcoin currently seems to be playing out similarly to past halving cycles, future cycles may not play out the same way as Bitcoin trends from a toy for nerds that no one has heard of towards a globally held asset that the majority of humanity owns.

Isn't This Too Good To Be True?

There are no guarantees in life, and Bitcoin is not immune from this fact. That being said, Bitcoin might feel too good to be true because it is such a unique opportunity. Humanity has rarely seen the rise of a powerful technology that the whole world can access at the same time. Almost every new technology is first available to the wealthy and well-connected before the everyday person can afford it. Televisions, cars, and computers were first owned by the ultra-wealthy, only later to be owned by the masses. Similarly, almost every new investment is first available to the top 1% before the general public has an opportunity to get in. In the early days, most companies are privately funded by venture capitalists and accredited investors. Eventually, these investments may become publicly available via the stock market, but not before the more well-connected wealthy investors have had their opportunity.

Bitcoin reverses this trend. It can be acquired by anyone with an Internet connection. In some ways, it is actually easier for an average person to store their wealth in Bitcoin than for someone like Jeff Bezos. While the average person can simply download an app and buy Bitcoin, Bezos would likely require a direct relationship with a large Bitcoin exchange, as well as a complex plan for securing and / or insuring his hundreds of millions of dollars worth of Bitcoin. While not fully available to all of humanity (not everyone has an Internet connection), Bitcoin is the most widely available early stage technology in our lifetime, and perhaps in modern history.

Again, Bitcoin is not a guarantee. In its early stages, the Internet was not a guarantee, and neither was the printing press when it was first invented. However, Bitcoin's globally decentralized nature does make it difficult to kill. It has no leader to attack or CEO to bribe. It is not a company that can get overleveraged and collapse during a recession. It is not reliant on one or two key customers, and it cannot simply be disbanded because a world leader doesn't like it. Bitcoin continues to exist because people and companies across the globe are using it and working on it, 24/7/365.

It is often said that humanity's greatest flaw is our inability to understand exponential growth. Even Nobel-prize winning economists can struggle with the concept, as seen by the below quotes from Paul Krugman:

"By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's." -- Nobel Prize-winning economist Paul Krugman in 1998 (less than 5% global Internet adoption)

"So far almost all of the Bitcoin discussion has been positive economics — can this actually work? And I have to say that I’m still deeply unconvinced." -- Nobel Prize-winning economist Paul Krugman in 2013 (Bitcoin's price: $762)

While Bitcoin is not a certainty, it is continuing to grow at an exponential pace, both in terms of price and number of users. The Internet followed a similar path in its early days. At one point in time, less than 5% of the world had Internet access. Because of these low ownership levels, the Internet was slower and less useful than it is today. Currently, around 60% of the global population is an active Internet user. Right now, global Bitcoin ownership is less than 5%. If the global network effects that escalated the Internet to widespread adoption are also working towards boosting Bitcoin to global ownership, we are not too late to get into Bitcoin at all. In fact, we may still be very early.


Paul Krugman Quote:

Paul Krugman Bitcoin:

Historical BTC Price:

Global internet users statistic:

Global Bitcoin users statistic:


DISCLAIMER: The information provided on our website, YourBitcoin.Expert, does not constitute investment advice, financial advice, trading advice, or any other type of advice whatsoever, and the information on our website should not be trusted as such. We present this information to you as general educational commentary. The information does not constitute investment advice or any professional financial advice of any sort whatsoever. We do not advise or recommend that you buy, sell, or hold any cryptocurrency, digital token, ICO, or digital asset whatsoever. We advise users to conduct their own due diligence / research and consult with a qualified financial advisor before buying, selling, or holding any type of digital asset or cryptocurrency. We will not be held responsible for any investment decisions made based on the information provided on the website. For the full list of disclaimers, please visit our Disclaimers page.

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