Speculating With Bitcoin And Steem

Can the price of Bitcoin, or for that matter any crypto, or even any asset, be predicted with anything other than sheer luck?

Many people claim to understand what Bitcoin is doing, they'll use terms like breakout and bounce along with a whole host of technical jargon, however does any of this mean anything? Is it worth listening to people who say things like, we've reached the bottom, time to buy?

First of all, in order to understand, we have to take a short look at value, and what it means in terms of price.

Value Propositions

Value is actually a fairly broad term, for instance the value someone provides when fixing your plumbing is different from the value of a dollar bill, and the value of a dollar, is not the same as the value somebody gets from owning a piece of art.

In many ways value is a subjective experience, for instance you might place value on being contactable throughout the day, whereas I might see that as detrimental.

Even fixed assets can be viewed through a sliding scale lens of value, one person may place a high value on a crystal they believe to have power, another views it as a worthless trinket.

Therefore when we say something has value, what we mean is that the average perception of value within a group of people, has risen to a particular level. Which leads us onto the matter of price, and what people are prepared to pay for something.

So value is the cornerstone of commerce, without value there is no pricing structure because there is nobody who wants to buy.

Supply And Demand

How much of an asset there is, divided by the amount of people that want to obtain it, is the second factor in price.

We see this in the art world when an artist dies, the market understands that the supply will forever be dwindling as it gets bought up and locked in collections. This means that without demand rising very much, there will be less of that artist's work to go around. This leads to a price rise, in some cases this can be instant.

Utility

Another major factor in deciding how much something will cost is its usefulness. If you can use an asset to carry out a task then that asset will have a value based on the frequency the task carried out.

For instance tools have value because we need them to build, maintain and fix things, hence tools cost money. If we could simply will a nail to drive itself into a piece of wood, then hammers would no longer have value.

Speculative

The final reason an asset gains value is through the speculation of the market. That is to say, if there are enough people who think something is going to become valuable, then these thoughts can often translate into value.

This is the shakiest foundation for value of all, because it is based purely on the whims of the market. Of course, speculation itself can be subdivided into different types.

For example you might speculate that a particular Star Wars limited edition toy will be worth lots of money in the future, based on other toys you've seen sell for high prices.

Or you may decide that the price of gold will fall when Musk Industries mines a huge asteroid finding twice as much gold as exists on earth.

This type of historical speculation is by no means an exact science, however it is at least linked to real-world events.

Total speculation however is not based on anything other than gut feelings, in other words, guessing. This is what anyone who claims to be able to predict the price of Bitcoin is doing, they are simply guessing and then passing on that guess as an informed opinion.

Crypto-Value

Bitcoin's value is originally derived from utility, in that you can use Bitcoin to pay for things. It's advantages are that it has relatively low fees, and is fairly quick and almost totally anonymous.

However there are many ways to pay for goods and services, so initially this was reflected in the price of Bitcoin, we all remember that 100 Bitcoin pizza.

Nowadays the Bitcoin price is driven almost entirely by speculation. In other words, people are buying and holding Bitcoin because they think it might go above the price they paid for it.

Of course this is a gross oversimplification of the Bitcoin market as supply and demand do play some part, however it is still a useful model to use.

Steem Dream

So what about the price of Steem, can that be predicted with any accuracy?

Short answer, no.

However we can indulge ourselves in some historical speculation. The video game industry is as huge as it is diverse, and a major part of that diversity comes in the form of in-game purchases.

So with that in mind, I can speculate that Steem's utility may well increase in the future because of the games that are available to play at that time.

Steem already has two of the biggest blockchain games there are. Drugwars and Steemmonsters. This could bode well for the Steem blockchain as that will give people a reason to hold Steem other than complete speculation.

Reality Check

In truth it is hard to say if the games on Steem will boost the price of its currency. There are inherent problems with placing games on the blockchain, which means it is the games that don't need constant, split-second feedback that are most suited for the 'chain. Unfortunately, it is those very same high-octane constant feedback games that tend to do well within the general gaming market.

I like the fact that the two most popular 'chain games are both sitting on the Steem blockchain, however there is a long way to go, the combined daily user total is around 5100 for both of them.

In order for the in-game purchases to have a significant effect on the Steem price, that daily figure needs to be an hourly one.

Conclusion

Bitcoin speculation is based primarily on guesswork, price speculation on coins like Steem, Eth, EOS, and NEO can be made largely by the future popularity of the applications on the various blockchains.

Cryptogee