Bitcoin's Value Puzzle: The Game of Hype and Real Value

Bitcoin, a digital currency that first emerged ten years ago, has now become a star in the financial market. Its price fluctuations are so large and wide that they often make people stunned. Many people have set their sights on the value of Bitcoin. However, as the market continues to change, more and more analysts and investors have begun to question whether at least half of the currency price of Bitcoin per dollar is just the value of the hype target. This issue has sparked widespread discussion. This article will delve into Bitcoin's price formation mechanism, hype phenomenon and its potential impact.

Before discussing the value of Bitcoin, we must understand its basic characteristics. Bitcoin is a decentralized digital currency that relies on blockchain technology for transactions and records. Due to its limited total amount (21 million pieces), many people believe that Bitcoin is a scarce resource and therefore has a high investment value. However, it is this scarcity that makes the price of Bitcoin vulnerable to market sentiment, which in turn causes sharp price fluctuations.

For example, in 2017, the price of Bitcoin soared from about $1,000 at the beginning of the year to nearly $20,000, and then quickly fell back. In this process, many investors made huge profits in the short term, but many people also suffered heavy losses due to chasing ups and downs. Behind this phenomenon, there are both good expectations for the future value of Bitcoin and the influx of a large amount of speculative funds, which makes the gap between the price of Bitcoin and its actual value more obvious.

Hype behavior is common in the Bitcoin market. Many investors are not based on a deep understanding of Bitcoin, but are influenced by market hotspots and blindly follow the trend. For example, in early 2021, Tesla CEO Elon Musk frequently mentioned Bitcoin on social media, which directly drove its price soaring. Since then, as market sentiment changes, the price of Bitcoin has quickly adjusted back. Obviously, this price fluctuation caused by the celebrity effect reflects the nature of market speculation more than the intrinsic value of Bitcoin itself.

Further analysis shows that the value of Bitcoin is not only affected by market sentiment, but also closely related to various external factors. For example, government regulatory policies, market liquidity, technological progress, etc. may have an important impact on the price of Bitcoin. In 2021, the Chinese government tightened its regulatory policies on cryptocurrencies, resulting in a sharp drop in the price of Bitcoin. This incident fully demonstrates that changes in the external environment can quickly trigger market reactions, further exacerbating the volatility of Bitcoin prices.

Bitcoin price fluctuations not only affect investors' psychological expectations, but also have a profound impact on the entire financial market. On the one hand, more and more institutional investors have begun to pay attention to Bitcoin, believing that it has a certain ability to hedge inflation risks. For example, Paul Tudor Jones, a well-known hedge fund manager, once said that Bitcoin is "digital gold" and has the potential to maintain value in the current economic environment. On the other hand, Bitcoin's price fluctuations have also attracted the attention of regulators, and some countries have begun to consider stricter regulation of cryptocurrencies to protect investor interests and maintain market stability.

In this context, investors need to remain rational when participating in Bitcoin investment and avoid blindly following the trend. The market is full of a lot of hype information about Bitcoin, and many investors often invest money at will without fully understanding Bitcoin. This behavior may not only lead to investment losses, but also have a negative impact on the healthy development of the market.

We should also pay attention to the future development trend of Bitcoin. With the continuous advancement of technology, Bitcoin's transaction efficiency and security are expected to be improved, which will attract more investors to participate. At the same time, the regulatory policies of various governments on cryptocurrencies are also constantly evolving, and there may be more legalization processes in the future. This will have a profound impact on the formation of Bitcoin's value.

However, although Bitcoin has certain investment value, its market volatility is still a risk that cannot be ignored. When investing in Bitcoin, in addition to paying attention to price trends, investors must also be sensitive to market changes and adjust investment strategies in a timely manner. For those investors who hope to get rich returns through Bitcoin, rational analysis of the market and in-depth research on the fundamentals of Bitcoin will be the key to achieving investment success.

When summarizing the value and hype of Bitcoin, we can find that multiple factors such as market sentiment, hype behavior and external environment work together to cause the sharp fluctuations in Bitcoin prices. Although Bitcoin is regarded as an emerging asset, the complexity and risks behind it cannot be underestimated. While chasing high returns, investors should keep a clear mind and look at the value of Bitcoin rationally.

In the future, whether Bitcoin can gain a foothold in the market and become a widely accepted asset still needs further verification by the market. In any case, the story of Bitcoin continues, and the value and risks behind it are worthy of deep thought and discussion by every investor.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

As we all know, blockchain, as the underlying application technology of encrypted digital currency, has long been favored by various countries; however, encrypted digital currency has been slow to gain market approval. Bitcoin, a typical representative of encrypted digital currency, is at the forefront of the storm and is boycotted by many countries. There are three reasons why Bitcoin is boycotted by many countries:

1. Avoiding financial supervision

Since Bitcoin adopts the "decentralized" blockchain distributed accounting rules, both parties to the transaction can independently realize financial transactions such as fund clearing, storage, withdrawal, and cross-border payment under the encryption program.

The regulatory authorities lack effective supervision over key factors such as Bitcoin counterparties, transaction background, and capital flow. Bitcoin and other digital cryptocurrencies are likely to become the capital channels of underground banks, providing financial convenience for cross-border money laundering, black market transactions, and economic sanctions.

2. Challenging the authority of legal currency

From the characteristics of Bitcoin transactions, Bitcoin has initially possessed the basic attributes of legal currency such as value scale, medium of exchange, and general equivalent.

Bitcoin holders can settle funds and freely exchange currencies online; although the issuance volume is small, the impact of Bitcoin transactions cannot be underestimated. This has largely challenged the legal currency authority of central banks in various countries, and it is reasonable that it has been resisted by many governments.

3. Suspected of pyramid scheme fraud

The characteristics of virtual transactions on the Internet have made digital currencies such as Bitcoin popular in the field of illegal pyramid schemes and online fraud. Some institutions have built their own trading platforms, fabricated Bitcoin projects, and promised investors high interest returns to organize pyramid schemes and illegal fundraising.

Once the funds are raised, the trading platform will be closed and the investment funds will be taken away. The way to make money is exactly the same as the "runaway" of executives of domestic P2P platforms.

The existence of the above problems seriously disrupts the social and economic order of the country where they are located. This is the fundamental reason why regulatory authorities in many countries remain on the sidelines and even resist Bitcoin.

However, the fact that Bitcoin is not recognized by countries around the world does not mean that it has no value for speculation. We all know that capital will naturally pursue profits, especially in China. Due to the lack of investment channels, a large amount of hot money has been generated. Hot money continues to pursue various speculative targets, such as stocks, foreign exchange, precious metals, and even stamps and coins, garlic, Pu'er tea, yellow pear wood, and everything else that can be speculated.

Investors buy one ten-thousandth of the ownership of a certain artwork in the cultural exchange, which is obviously not for collection or appreciation. He just needs something to speculate.

Another example is the Chinese stock market. Stocks were originally a tool for optimizing resource allocation, but the Chinese stock market has nothing to do with the real economy and is a complete money-making market.

In terms of capital flow, the Chinese stock market is a black hole of funds where stockholders continue to invest money and state-owned enterprises continue to make money. Why are stockholders willing to play such a negative-sum game? Why hold stocks that can neither pay dividends nor exercise shareholder rights?

Because he just needs something to speculate.

Bitcoin has a huge imagination space and great controversy, so it shows a volatility far exceeding other investment products, which is naturally suitable for hot money speculation.

If mature investment products such as stocks and foreign exchange want to achieve the volatility of Bitcoin, they must use high leverage. However, once high leverage is used, there is a risk of liquidation. Without leverage, even if there is a loss due to mistakes, it is possible to get out of the trap by holding on to it, such as the stockholders who pretended to be dead after the big drop in 2008 and got out of the trap in 2015. Once the leverage is wrong and the position is liquidated, there will be no way to turn around, such as the stockholders who lost everything after the serial liquidation in 2015.

In the stock market, to achieve several times or even dozens of times of profit, you need to use leverage at the risk of liquidation, but in the Bitcoin market, there is no need to use leverage, and there is no need to risk liquidation. Relying on the volatility of Bitcoin itself, you can achieve several times or even dozens of times of profit.

As a standardized, globalized, highly volatile, 24-hour non-stop trading target, Bitcoin is more volatile than stocks, foreign exchange, precious metals and other electronic trading targets, and is better than stamps, coins, garlic, Pu'er tea, yellow pear wood and other physical speculation targets in terms of standardized trading, skyrocketing history and future prospects. Therefore, it has attracted a lot of hot money to participate in speculation.

At present, the funds attracted by Bitcoin as a speculation target far exceed the funds attracted as a payment system. At least half of the price of each yuan is the value of the speculation target.