"There is currently about USD 50 million in the bitcoin system, and just over six million coins in circulation, valued at $8 each. Up until now, demand has largely been driven by enthusiasts.
The value of a bitcoin can’t be held constant — if 12 more million dollars is exchanged into bitcoin, the value of a coin will rise to $10. The more people who want to use the system, the more people will need to exchange a portion of national currency for bitcoin, and the more money will go into the system. The more money there is in the system, the more a particular bitcoin will be worth."
This statement lacks economic sense. The total market capitalization of bitcoin ecosystem is $50m doesn't mean that $50m has been transacted. If I accept your offer of $800 per bitcoin, the market cap based on this transaction will become $5 billion instead.
Therefore, the author has severely over-estimated how much money that people have put in to the market. He is probably thinking "So there are $50 million investment here, my savings are so insignificant that I don't have to count the risk."
Thanks I didn't catch that myself.
Sounds awfully much like real estate where suddenly everyone was feeling rich because some idiot bought a house for too much money. (in this case aggravated by the fact that the idiot put zero money down.)
This statement lacks economic sense. The total market capitalization of bitcoin ecosystem is $50m doesn't mean that $50m has been transacted. If I accept your offer of $800 per bitcoin, the market cap based on this transaction will become $5 billion instead.
Therefore, the author has severely over-estimated how much money that people have put in to the market. He is probably thinking "So there are $50 million investment here, my savings are so insignificant that I don't have to count the risk."