Bitcoin Growth, Volatility and “Pre-IPO” status

Bitcoin is a somewhat new cryptocurrency (compared to the currencies we are already used to), and while it has a lot of similarities to businesses and stocks, there are some differences as well that you should be aware of if you plan to get involved and invest.

Bitcoin’s Growth is Normal

Bitcoin’s growth, while people like to claim it is moving “too fast,” is actually about on par with where it should be. Consider it as what it is: a new service that revolutionizes the sending and receiving money online. In other words, it is very similar to things like Google Checkout and PayPal; or even credit cards. This means it has utility. And utility is what drives adoption rates. As more and more people find the value in Bitcoin, it will continue to grow – just like with any other business.

Bitcoin Growth Volatility and Pre-IPO

Bitcoin Growth Volatility and Pre-IPO

Bitcoin’s Volatility – What Causes it?

As stated, Bitcoin is still fairly new. While it’s been out over 4 years, that is nothing compared to most of the other systems we are used to. In essence, we can all be considered as early adopters. The big difference here being that unlike places like PayPal, anyone and everyone is able to get in the ground flood of Bitcoin. Along with this, everyone has their vote in the direction Bitcoin takes.

The volatility is being brought on by people joining and leaving the community. As more people join it, they bring money with them and invest. Those investments spread more money around the bitcoins themselves, which boosts their value. If there were 10 BTC and $100, each would theoretically be worth $10. On the other hand, if someone else brought in $100 more, now each coin is worth $20. The same works in the opposite direction, as well, being that if the person were to remove their funds the value of each coin would drop accordingly.

Bitcoin is Pre-IPO – A Look at Facebook

Before Facebook went into its IPO stage, it had private investors. The value of the stocks jumped up and down violently while these investors attempted to decipher what the community would value the Facebook stocks at (and therefore the value as a whole). As soon as the IPO started and ended, however, the price started to level out. While they still go up and down from time to time, it is nothing like it was prior to becoming a publicly traded company.

Bitcoin is just like Facebook in this manner – at least in how its stocks (in this case coins) work. There is still a somewhat small community gathered around Bitcoin (while it’s large in number, it’s small in overall comparison to the world). These are like the pre-IPO investors trying to determine what everyone else will value the coins at. As a result, while a bitcoin may be worth $460 today, it could be $700 tomorrow and $400 the day after. Once the community has grown in size, however, things will start to stabilize and the prices will not fluctuate nearly as much. This is what we will consider as the post-IPO stage. So while many focus on the current prices, they are not nearly as important as what happens after everyone else starts to jump on board; that will determine the price the coins will stay at and will, for all intents and purposes, revolve around.

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