I see a lot of people still speculating on Bitcoin using “technical indicators” and talking about “support levels” and throwing around charts based on things like the “Elliott Wave analysis”. This just doesn’t make sense to me… I don’t believe you can’t analyze Bitcoin like equity or a fiat currency (yet). We are way too early to use such an analysis. Bitcoin’s maturity is like gold during Emperor Augustus’s reign (30 B.C.) where he set the price of gold at 45 coins to the pound.
Bitcoin today is essentially using 1 token for both rewarding the supply side and the demand side (to consume the service). For a crypto economy (the network) to work it may ultimately require 2 tokens (an “asset token” for the supply side and a “payment token” for the demand side) –much like there is in today’s fiat economy.
Bitcoin’s 1 token approach, in theory, is great because for the supply side to provide its service it has to take payment in a combined token, so it has to be in the user’s hands for them to consume the service, so this creates the pressure to sell the combined token as the network grows. Everyone in a crypto network gets to participate from the value created instead of just one segment. The net result is that a user can’t be a passive accumulator of capital, they must be active for the economy to work. But unfortunately making users investors is asking them to understand the infrastructure. Theoretically, it would be great if users had skin in the game because they would have an emotional connection to the infrastructure–But that’s not realistic or scalable. Power users can participate, but it’s a choice.
In the real world, the users of a system don’t want to take any risk. For example, when you get into a taxi in NYC you don’t have to worry if Uber is going to have any impact on the value of your taxi medallion. Humans don’t want to think about the risk of ordering pizza with tokens that may eventually be worth millions of dollars. It’s just simpler for human nature. The 2 tokens must be separate because the transaction velocity of capital is very low, and the transaction velocity of a currency is very high so as an economy grows exchanging gold or land (a barter system) is just not going to work. So, we need currency (separate from capital) to accelerate economic growth. Reminder: Capital appreciates with economic growth (it’s scarcer) and currency depreciates with economic growth when we print more of it to keep up with inflation to keep prices stable.
Unfortunately, without good governance, this leads to an economy where the people who acquired the asset tokens early become increasingly concentrated over time as the economy grows. Governance is how do we manage, control and manipulate the data to find a single source of truth.
So, it’s early. Real early. To determine value this early you need to keep an eye on the layers and how capital/currency, supply/demand are interacting and most importantly how governance is evolving between layers (one example, how to fund the development of the base chain) across each base layer currency. …And in the end, the base layer (the store of value) will become a commodity and a lot of the value moves up the crypto stack (so why waste any time doing old school chart analysis on a layer that will eventually become a commodity—that is if it is successful at all—and given the power of Central Banks that may also be questionable…).