I have a simple view of bitcoin. In the long-term, it’s is the purest demand-based asset. The supply of everything else can increase. If the price of gold goes up, people mine more gold. If the price of Apple goes up, the company issues more shares. USD and treasury bonds also increase without limit. The supply of bitcoin is fixed at 21 million no matter what the price does. While the supply is fixed, demand increases every year as bitcoin gains trust. That’s why I believe that price is guaranteed to go up over time if the bitcoin network maintains its security and integrity. Ultimately, bitcoin is destined to absorb most of the global debt market (100s of trillions).

While long-term prices are up only, I’ve seen two factors cause extreme short-term price fluctuations.

The first is the amount of leverage in the system. Traders buy on margin to drive the parabolic price increases and their eventual liquidations drive the extreme drops. Once you understand bitcoin and have lived through these cycles, you start to celebrate these drops as an opportunity to buy.

The second is that the financial system often sells fake, paper bitcoin to folks who don’t know any better. For example, buying bitcoin ETFs in the USA means you’re buying a futures contract. Also, centralized exchanges are often bad actors. For example, FTX sold $1.5 billion in “bitcoin” to clients but FTX never actually had any. This suppresses the price by redirecting demand from the true spot market. These factors seem to be resolving over time as people become educated and realize what bitcoin is. For example, because of FTX, most bitcoin is now held in cold storage.

I think bitcoin will have periods of strong correlation to assets like tech when global liquidity is pumping. And as bitcoin matures, it will become a safe-haven when financial crises occur because it can’t be seized or go bankrupt.

We’re in a unique time period right now. Bitcoin flushed out all the speculative longs from the last bull cycle and over 70% of coins are held by diamond hands who expect that this cycle will end well above $100k. We also have banking crises, debt crises, and the prospect of bailouts and increased fiscal spending. All supportive of the price, but I still think it’s possible we get one last dip in the summer, if the liquidity crunch in the US outweighs the increased liquidity coming from other countries. We’ll know soon.

Watching the price is like watching my favorite sports teams. It’s entertainment but doesn’t really make a difference. It’s best to just use bitcoin as your long term savings account.