I come to the conclusion that the extreme bull and bear markets of bitcoin are a feature and they speed up the adoption process.The average person does not know this, but the 2017 Bitcoin bubble was not the first time we saw this significant price rise and rapid decline. There have been countless other bubbles.
$1 -> $30 -> $2.30 (x 30 -92%) - 2011
$2.30 -> $250 -> $62 (x 108 -75%)
$62 -> $1,150 -> $154 (x 18 -86%) - 2013/2014
$154 -> $780 -> $475 (x 5 -39%)
$475 -> $19,700 -> ? 3,142 ? (x 41 -84%) - 2017/2018
Like I said, these massive price advances along with the massive declines are exactly how bitcoin adoption will continue to play out.The bull markets bring in the network effects including: technological development (developers), investment (ICE and Fidelity), and security (miners).The bear market drives out all who really do not understand what Bitcoin is. So they sell and deeply regret it later.The thousands of people who understand that the characteristics of bitcoin are far superior to all alternative forms of money and that Bitcoin will continue to go through bull and bear cycles for the foreseeable future are called the hodler's of last resort.They have their stash of bitcoin that will never be sold until full adoption and they continue to buy more bitcoin when it seems cheap.
In fact, many people think price gaps down are bad for Bitcoin. I have come to the conclusion that they are wrong. In fact, the further bitcoin's price falls in a bear market the faster bitcoin adoption will happen.If a large holder of Bitcoin decided to sell 1 million bitcoin the price may gap down temporarily to 1 cent. This would be super bullish for bitcoin because the long term hodlers of last resort would be able to by 1/21st of the entire supply of bitcoin very easily.Because these Bitcoin will almost never be sold it effectively takes more bitcoin off the market and creates kindle for the next bull run.
In a bear market, the price will stop falling once supply finally matches demand.During this time, the supply is high from two things:
1) speculators who jumped in at the end of the last bubble and still don't understand what bitcoin is
2) miners who are mining bitcoin and selling to cover their electricity costs
The demand is from the hodler's of last resort. Those people/businesses/governments who understand bitcoin and are bullish on it long term.You can see that this base of hodler's of last resort is growing because each low in bitcoins bear market is significantly higher than the previous low.Once the supply finally matches demand, the price will stabilize, weak hands stop selling and the price begins to move up.The key part about this is while demand starts increasing again, the supply remains LOW. So when more curious speculators and traders come back the price begins to rise very quickly yet again.
Looking at the past bubbles this is exactly what has happened over and over again...
Scarcity results in supply shortages that cause price increases, price increases attract attention and drive adoption, adoption is people learning about the fundamentals of bitcoin and becoming hodler's of last resort.
This is the cycle that has happened over and over again, and it will continue until full adoption of bitcoin.
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