As the Cryptocurrency markets begin heating up again, specifically Bitcoin, we knew it wouldn’t take long for the media to start dumping bubble and tulip tales back on the public. This time it comes from Bloomberg with a headline which reads ‘Bitcoin Risks Crashing to $900 If Dot-Com Mania Is Any Guide’.
So to save you reading the article here is the main basis of why Bitcoin will crash to $900:
While the creators of Bitcoin intended to limit supply to 21 million coins, forks mean that there are already more than 50 million outstanding coins based on the original blockchain. There’s also nothing preventing rivals from spawning an infinite amount of clones, he said. The number of tradable cryptocurrencies jumped 120 percent in the past year.
“Parabolically increasing supply is the primary limitation to cryptocurrency market-price appreciation,” McGlone said. “There’s strong gravitational pull toward $900, the average price since inception and the start of 2017.”
Now, while it is true that Bitcoin has had several hard forks resulting in new coins being generated, it is not true that this increases the supply of Bitcoin, it merely creates an entirely new cryptocurrency. These Bitcoin spin offs are separate assets entirely. While it is true that all Bitcoin holders prior to a hard fork also gain these new coins, they don’t add to the Bitcoin supply, they start a new supply on a separate chain altogether. The coins are not interchangeable, you cannot pay a Bitcoin payment using Bitcoin Gold or Bitcoin Cash and therefore how can it be determined that these forks increase the supply of Bitcoin?
With the majority of these Bitcoin forks being glorified scams with the sole purpose of making the ‘forkers’ a quick buck, their actual current market capital is false and in 99% of cases will likely decline to near zero levels over time.
To put it another way, you can quite easily photocopy a ten dollar bill, colour in some of the pictures and use a nice glossy paper for the print and call it Dollar Plus, however these new Dollar imitations are basically worthless and in no way add to the supply of real Dollars.
The Bitcoin protocol is open source, anyone can fork the code, whether they choose to use the legacy chain or start a new one is up to the ‘forker’. By being open source it ensures transparency and total decentralization of the code and thus allows the community to decide Bitcoins future. This is not a devaluing aspect of Bitcoin, in fact it is one of it’s most valuable attributes.
In no way are we saying Bitcoin will not have more low points, in fact it’s possible Bitcoin could go to $900 or even zero, but this won’t be because the chain has forked to much, this narrative is, to put it simply – moronic.