One of the most fundamental reasons why I believe that the value of Bitcoin will continue to appreciate is because it is much easier for people to start believing in it than it is for people to stop.

Bitcoin believers tend to believe in it strongly and sometimes even irrationally. For many people, it is like a religion. For many more, Bitcoin has a continuous influence on their way of life not dissimilar to other modern systems of belief such as climate change and veganism. To varying degrees, Bitcoin believers will weather potentially any storm (decreases in its value, attacks in the media, etc.). Qualitatively, Bitcoin believers are quite strong.

Quantitatively, outside of Bitcoin’s still relatively small base of believers, there are many more people who do not sufficiently understand Bitcoin than there are people who do understand it but do not believe in it. If the last decade is any indication, a certain and probably high percentage of those who do not yet understand Bitcoin will quickly and easily come to believe in it once they do.

Having observed these dynamics of the Bitcoin belief system, I am near certain that non-owners are coming to believe in Bitcoin faster than owners are losing their belief. In other words, the outside population is buying into Bitcoin faster than than the inside population is selling out. This trend seems poised to continue indefinitely. As long as it does, so will the appreciation of Bitcoin’s value due to the increasing demand for the limited and finite supply.

One can think of Bitcoin as having a natural network effect where the owner population is expanding exponentially in comparison with an extremely low churn rate among its existing owners. It is this sort of network effect that has given rise to the most valuable companies of our time. Bitcoin is not a company but it stands to benefit just the same.

Quants can do all the fancy analysis they want but the simple fact of the matter is that Bitcoin is worth nothing without people’s belief in it. If people stop believing in Bitcoin, its value will plummet. If more people start believing in Bitcoin, its value will continue to appreciate. Because Bitcoin’s value is sustained solely by people’s belief in it, it seems to me that any prudent investor who makes a bullish case for Bitcoin should seek to support this most basic underlying assumption which says that the overall belief in Bitcoin is growing and will continue to grow. That is the assumption which I have sought to support with this piece. 

In closing, it is worth stating clearly that money has no real value other than that which people believe it does. As long as people believe Bitcoin is valuable, it will be. Today it seems evident that Bitcoin believers are quickly accumulating and scarcely abandoning the asset. So long as this continues to be the case, and it seems more probable that not that it will, Bitcoin’s value will rise.