The Price of Your Bitcoin Is 1000 Times Overvalued
How much does a bitcoin worth？
“Worthless. It’s just a Ponzi scheme.”
“Priceless! It’s the future of money.”
What’s the reasonable price of per bitcoin?
Can be give me a rough estimate?
To begin with, let’s talk about what’s behind the value of RMB.
Regulation of the People’s Republic of China on the Administration of Renminbi says that:
“The legal money of the People’s Republic of China shall be RMB. No entity or individual may reject the RMB payment for any public or private debt within the territory of the People’s Republic of China.”
What’s behind this?
Let me tell you a real story.
In Luohu District of Shenzhen, there were people from Hong Kong or Macau paying diner in Hong Kong dollar. The PBOC got so anxious to take actions against it.
Why did the PBOC make it such a big deal?
“RMB is the sole legal tender for both the Chinese nationals and foreign tourists.”
It’s all about a privilege called seigniorage.
A notion similar to seigniorage is inflation tax, redistributing real resources to the currency issuer. We are talking about great financial gain to the government here.
When Zimbabwe added China’s official Renminbi to its basket of currencies, it enabled Chinese yuan to compete with US dollar in African markets.
Put simply, the value of RMB=the scale of circulation of RMB=the reach of government control.
Now let’s move on to bitcoin.
I believe even Satoshi Nakamoto never imagined bitcoin would have developed to what it is now today. At the very beginning, the mentioning of bitcoin reminded people of “untraceable, anonymity, and max number of 21 million”. This isn’t the case anymore. Now it’s all about the price.
“Bitcoin price reached over ￥3000”
“It hit a record high ￥5000.”
“Bitcoin price rises to ￥8000, higher than gold.”
There is an emerging group of bitcoin experts predicting the price of bitcoin, saying whoever holds one bitcoin will become a millionaire in 10 years.
Well, maybe you should think of the following questions before you get so optimistic.
Are you buying coffee with bitcoin?
Are you buying pizza with bitcoin?
How many physical stores accept bitcoin?
What’s the annual amount of bitcoin be used for instant settlement of payment?
What’s the market cap of bitcoin？
As of today, the market cap of bitcoin tops ＄16 billion. But the hard fact is that the lack of businesses that accept the digital currency as payment has been holding bitcoin back from wider adoption. This may be an inappropriate metaphor, but for now it’s like bitcoin has only be used in one province of China. And as price is decided by circulation, than I’d say the price of bitcoin has been way overvalued, nearly 1000 times.
If more businesses had the ability to accept bitcoin, it might encourage consumers to start obtaining and spending it, and vice versa. This is a chicken-and-egg problem.
Note: The Chinese author of this article is Ou Chengxiao, often nicknamed”Ou Guru” for his successful investment in real estate.