There Just Aren't Many Bitcoins Available For Sale

The people who think that Bitcoin has "nothing" behind it won't like to hear this statement:

Bitcoin is a scarce asset.

There are currently roughly 18.62 million Bitcoins in circulation. Based on current prices, this gives Bitcoin a total valuation of a little over $900 billion dollars.

Of these 18.62 million Bitcoins, an estimated 4 million Bitcoins have been lost and cannot be recovered. Lost your password to your Bitcoin wallet? Those coins are gone forever. There are countless people who were involved in the mining of Bitcoin early on in the cryptocurrency's existence that can no longer remember the password to their wallets. In some cases, they can not recover tens of millions of dollars worth of Bitcoins.

On top of that, you have the "whales", many of whom have no plans to sell.

According to Bloomberg, an estimated 40%+ of the total outstanding number of Bitcoins in circulation are held by "whales". These are individual investors, companies and institutional investors that hold the cryptocurrency without any intention of selling anytime soon.

On top of that, you have the publicly traded companies that are now looking to diversify their balance sheets (in order to hedge against inflation) by buying Bitcoin.

Microstrategy did it and now owns billions of dollars worth of Bitcoin.

Tesla followed suit and recently purchased $1.5 billion worth of Bitcoin in order to help diversify their balance sheet.

You can expect more companies to follow suit in the near future, especially given the enormous sway that Elon Musk has.

Then you have the companies that are planning on facilitating the buying and selling of cryptocurrencies on their platforms, which means that they need a reserve of Bitcoin. This includes companies such as Paypal and Square, to name a few.

On top of all that, you have your smaller "HODL'rs" that have rode Bitcoin from its 2017 peak to its March 2020 lows and back up to almost $50,000. Most of these people are united in their claim that they have no plan of ever selling.

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When people speak about their bullishness of Bitcoin, they usually point to scarcity as one of the reasons that they are holding.

They are right - Bitcoin is a scarce asset, whether you like it or not. The reality is that there are just not that many Bitcoins in circulation, which is why the price is subject to such volatility. If somebody wants to buy with size, the price will skyrocket. If somebody wants to sell with size, the price will usually plunge.

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It's not hard to see why many people think that Bitcoin will continue to skyrocket in the future.



Filed under: General Knowledge