What is Bitcoin? A coin? An active? A merchandise? Many people have different opinions about what Bitcoin is and what it can do. Some say it is the future of money, others that it is a speculative bubble, and still others that it is a way to break free from the control of governments and banks. But the truth is that Bitcoin is simply a code. It is nothing more than a series of letters and numbers in a database. We forget that Satoshi Nakamoto was a programmer and one day he sat in his chair and created a computer program. What he actually did was invent a way to send and receive information without intermediaries or censorship. That’s Bitcoin: information.
Imagine that a person becomes interested in Bitcoin after reading about it on social media. There he meets thousands of things. In general, it is a narrative created by libertarians, anarcho-capitalists and conservatives in a very anti-system spirit (anti-government, anti-bank and anti-dollar) and in favor of personal liberties, individualism and technology. Of course, the average bitcoiner is generally ignorant of these influences. He believes that Bitcoin is something new and evident. He thinks that Satoshi invented it and that the community recognized it. As simple as that.
Then, that person feels identified with that ideology or, in most cases, motivated by the promises of wealth. So he decides to invest in Bitcoin. He checks his bank account and sees how much he can invest. He takes that money and sends it to a BTC seller. What is really happening? Well, it is sending electronic money (information) created and managed by banks and governments in exchange for a code (information) generated and managed by citizens, algorithms and computers. Numbers on one side and numbers on the other. And based on those two elements, something that we normally call the price of Bitcoin arises. This code represents a rate (monetary value). It’s that simple and that complicated.
The price of Bitcoin depends on supply and demand. That is, how many people want to buy or sell that code. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price falls. But what makes people want to buy or sell Bitcoin? Two factors come into play here: expectations and liquidity. Or, put another way, faith and strength.
Expectations are the beliefs that people have about the future of Bitcoin. If they think it’s going to go up a lot, they’ll want to buy it. If they think it’s going to go down a lot, they’ll want to sell it. These beliefs are formed by the information they receive, but also by the emotions they feel. For this reason, there are people who are dedicated to promoting Bitcoin on social networks, creating content that generates enthusiasm, confidence and hope. These are the redditers, tiktokers, youtubers and tweeters who spread the idea that Bitcoin is a revolution, an opportunity and a rebellion. His goal is to create a community of followers who feel like they are part of something big and who are willing to invest in Bitcoin.
But faith is not enough. You also need strength. That is, money to buy Bitcoin. Because no matter how much a person believes in Bitcoin, if they don’t have money in the bank or in their pocket, they won’t be able to buy it.. And if nobody buys Bitcoin, the price doesn’t go up. Therefore, liquidity is also important. The more money there is in circulation, the easier it is to buy. The price goes up when more people are willing to shell out their dollars for that code. And for that to happen, two things are needed: expectations and liquidity. Faith and strength.
Suppose we want to create a grocery garden in our backyard. What interests us is production. That is, harvest fruits, vegetables and herbs to eat. For this, we have the land, the water, the tools, the seeds and a lot of creativity and good aesthetic taste. We might think that it is just a matter of time and luck, assuming that we put in the work, that sooner rather than later we will be eating the fruits of our company.
Now, if our project is social, the variables are different. Let’s say we want to organize a baby shower for a friend. The quality of the meeting and the gifts will not only depend on the love and appreciation that we have for the friend and the organization that we do. It will also depend to a large extent on the economic capacity of the community of friends. Faith and strength. If we have a lot of money, we can buy nice and useful things for the baby, rent a fancy place and hire a caterer. If we have little money, we will have to settle for more modest things and do everything ourselves.
Many people obsess over the Bitcoin price and follow it like it’s a soap opera. But they forget that Bitcoin is not a magic currency that moves by itself. Bitcoin is a code that works with a pair. That is, it is compared with another currency, such as the dollar, the euro or the yen. And that pair is formed with the help of supply and demand. In other words, it depends on how many people want to buy or sell Bitcoin and at what price.
But To understand the supply and demand of Bitcoin, it is not enough to look at social networks or the news. You also have to take into account the macroeconomic aspects that affect the other currency in the pair. For example, monetary policy, production, the cost of credit, spending, etc. These factors influence the value and stability of traditional currencies and therefore their relationship with Bitcoin.
Many who promote Bitcoin on social media have a very biased view of the world. They are libertarians who used to love gold. And gold has always been a refuge from a rotten and decaying system. Therefore, they believe that macroeconomics does not count. That the system is going to collapse and that people will turn to Bitcoin. That Bitcoin is the panacea and that its price will only grow. But this is a very simplistic and lying narrative. Macroeconomics matter. And a lot. Because macroeconomics affects the pocket of bitcoiners. Because it modifies, whether they admit it or not, their purchasing power.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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