So, how does this apply to Bitcoin in the coming year? The world is becoming increasingly uncertain, with COVID-19, record debt levels, rising inflation, socioeconomic inequalities, and rising geopolitical tensions. In turn, Bitcoin’s monetary policy and general structure are among the few things on the planet that will not change in the next ten years, 20 years, or even 30 years. Consider those 30 years in a broader macro context for a moment. The 30-year US Treasury yield is around 1.7 percent per year. Suppose we buy a 30-year treasury bond today and hold it until 2051. In that case, it will return 1.7 percent per year, or roughly 66 percent compounded.
The treasury returns refer to as risk-free. However, we can’t predict the purchasing power of those dollars in 30 years. Nobody knows. If you want to know how far away 2051 is, consider that 1991 in 30 years in the past. As a result, Preston Pysh and Greg Foss predict that bitcoin will eventually eat into global bond markets. It makes little difference that bitcoin has no risk-free yield when an increasing number of bonds yields negative in real terms. And what are the chances that $1,000 worth of Bitcoin will likely return more than $1,660 in 30 years for a long-term investor? If you agree that it could be much higher, even if you assign a probability that Bitcoin will die completely, you may be onto a position size issue.
The price is simply a snapshot in time of the buyer and seller meeting at the margin to agree on the most recent price for acquiring the use of this battery for a certain amount of bitcoin. Every participant’s holding view as a two-dimensional function of how much bitcoin they own and how long they’ve had it. Given that supply is fixed. The only factor determining price is demand – both from new buyers who do not yet own bitcoin and from existing holders who continue to accumulate and hold – i.e., how long is that period? It’s nearly impossible to predict future demand from newcomers, let alone continued hodling demand from current bitcoiners.
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