Heaven Connected to Hell: Can Bitcoin Rise to $500,000 Per Coin?

To be honest, everyone wants to get rich quickly.

But Rongping believes that, looking at the above string of "wealth guides", most of us probably only lament "bad luck" and complain that the rich "TA" is blind...

In this life, is it true that I can only accept my fate?

Rong Ping was not quite sure what everyone was thinking.

However, in the past two days, a group of friends suddenly emerged in the back-end comments of our articles and asked questions enthusiastically. From their words, they seemed to be able to seize the tail of the times and rewrite the "wealth guide" for making a fortune in the short term!

There is only one question: Can Bitcoin rise to $500,000 per coin?

On the domestic knowledge question-and-answer platform "Mouhu", there is such a slightly sad story

--On December 21, 2011, an anonymous user who claimed to be a "junior college student" had 6,000 yuan of "spare money" on hand but didn't know what to do with it. In the spirit of seeking truth and being pragmatic, he went to a certain website to ask for advice from a big shot on how to "make money from money."

I have to say that the users of a certain website do have a passion that is inherited from their ancestors.

Some suggested that he buy financial books to enrich himself, some suggested that he go all in on stocks, and some suggested that he eat and drink a lot first, and then buy scratch tickets...

I will not mention the long and detailed tables and data for now. In the answers given that day, there was a brief suggestion that destined this ordinary question to be full of extraordinary tracks:

Buy Bitcoin, save the wallet file, and forget you ever had $6,000. Come back in five years.

Let’s assume that what would happen if the “anonymous college student” followed this investment advice?

In December 2011, Bitcoin, which had been officially launched for less than three years, had just experienced a bubble burst on July 8. Amid market panic, the price of Bitcoin plummeted from $29.6 per coin at the beginning of July to $2.05 per coin.

Calculated based on the exchange rate of 1 US dollar to 6.35 RMB at that time.

The 6,000 yuan of the "anonymous college student" can be exchanged for 944.9 US dollars. If all of it is used to buy Bitcoins, roughly 461 Bitcoins can be purchased.

The Bitcoin is purchased, and then it’s “Forget that you ever had 6,000 yuan. Check again in five years.”

On December 21, 2016, the transaction price of a single Bitcoin was US$834.28. The 461 Bitcoins purchased by the "anonymous college student" were worth approximately US$384,603 in total, which was equivalent to RMB 2,672,991 based on the exchange rate of 6.95 at the time.

In five years, the original capital of 6,000 yuan has skyrocketed to 2,672,991 yuan, and the return rate of the "anonymous college student" has reached 445.5 times!

What does it mean to have a 445.5 times return on investment in five years?

Rong Ping thought that under the existing financial system, such an investment return ratio would probably be a "miracle" legend in any field!

However, no matter how sad it is, the facts are quite cruel:

The "anonymous college student" did not adopt a small suggestion on December 21, 2011.

He finally chose to buy financial products from the bank.

However, it is worth mentioning that this college student who missed out on "millions of dollars" is also quite honest.

As the price of Bitcoin continues to rise, facing the "regret warnings" from countless netizens, he bravely stood up and frankly stated that he would not invest in a field he did not understand.

Of course, there are also people who continue to encourage such answers:

It’s not too late to buy now.

On November 16, 2013, the value of Bitcoin was 450.26 US dollars per coin. If Zhang Xiaolou, the Internet user on Hulu who instigated the "anonymous college student", had taken the same action at that time, then as of 19:00 on March 11, 2021 when Rong Ping wrote this article, based on the real-time unit price of Bitcoin of 55,664 US dollars, Zhang Xiaolou would have made a net profit of 55,214 US dollars with just one Bitcoin, and the return on investment for a single Bitcoin would have reached 123.6 times.

Undoubtedly, under the current financial system, this return on investment can still be called a "miracle."

Although Rong Ping does not know whether the netizen "Zhang Xiaolou" had "boarded the train" in 2013, it is certain that most of the tens of thousands of people who kept expressing their regret for the "anonymous college student" who missed the opportunity under this answer were just watching the fun...

The reason for waiting is simple: few people will invest in a field they don’t understand. In other words, few people are willing to truly understand what Bitcoin is.

Rong Ping believes that as Bitcoin has become popular, the question of “what is Bitcoin” is no longer a problem...

However, for the sake of most readers, I still need to briefly talk about:

What is Bitcoin?

According to the "popular" explanation:

However, the "double-edged sword theory" tells us that nothing is perfect.

Indeed, under centralized monetary rules, currency issuing institutions can gain great support in necessary actions such as regulating the total amount of currency issuance and combating economic crimes by relying on their control over the trends of financial activities.

However, regulation always leads to mistakes and supervision often means losing some freedom.

Issues such as excessive money issuance, exchange limits, and personal privacy records are considered offensive by a considerable number of people who advocate "extreme freedom" or have "special needs"...

Among these people, there is a person, or a team, named "Satoshi Nakamoto".

To this day, no one knows who "Satoshi Nakamoto" is.

But the whole world knows that it is precisely because of the existence of Satoshi Nakamoto that a decentralized currency, Bitcoin, was born that can be said to have gone to the completely opposite extreme compared to traditional centralized currencies. It does not rely on specific monetary institutions for issuance, does not require any central transactions, has no borders, no supervision, and can be traded globally 24 hours a day with just a click of the mouse!

The fact is: in the world of Bitcoin, no one is the master, or everyone is the master.

Under a common set of rules, the ultimate upper limit of Bitcoin has been permanently set at 21 million. Many problems that once existed in traditional centralized currencies, such as excessive money issuance, exchange limits, and retention of transfer records, seem to have been solved once and for all.

In the eyes of Bitcoin believers: Bitcoin is a perfect free currency.

However, just as the drawbacks of traditional centralized currencies are fully revealed under the "double-edged sword theory", is it just because Bitcoin is endowed with complete "freedom" and claims to be "decentralized" that it can create perfection so easily?

In August 2019, a professional information website called "BitInfo Charts", which focuses on tracking the distribution of Bitcoin in known addresses, released a surprising statistical conclusion:

The top 2.8% of wallet addresses own 95% of all existing Bitcoins.

Of course, BitInfo Charts is not the only one with a similar view.

In a report last August, Bloomberg also published similar statistics:

The top 2% of accounts control 95% of all Bitcoins.

Of course, thanks to Bitcoin's "distributed accounting principle", everyone who participates in Bitcoin transactions can see changes in the ledger in real time.

As can be seen from the above picture, the addresses in the red box account for a total of 2.39%, and the bitcoins held by these addresses account for 94.89% of all current bitcoins.

Obviously, whether it is "BitInfo Charts" or Bloomberg, their statistical results are not wrong...

So now the question is:

In a completely free trading environment, what happens when 2.39% of the accounts control as much as 94.89% of the liquid options?

Or let's put it another way:

In a place where there is neither an authoritative independent third party nor any equal negotiation conditions, what will happen when 2.39% of the people dominate the life and death of as many as 94.89% of the people?

Rong Ping only thought of four words: do whatever you want.

In fact, this is also the norm in the current "cryptocurrency circle" - in the Bitcoin market where there is no law to speak of, the dealers wash the market, pull the market, sell the market, fabricate liquidity, and frantically cut "leeks" like three meals a day.

However, for most "Bitcoin believers", such "norm in the cryptocurrency circle" cannot make them recognize their true nature as "leeks".

They will talk about the robustness of Bitcoin, which is completely different from all other "altcoins";

They will emphasize Bitcoin's "anti-inflation", "confidentiality" and "liquidity" compared to all traditional currencies.

....

But is Bitcoin really such a unique “show”?

Before answering this question, let’s review the most basic economic principles with Rong Ping.

First of all, Rongping needs everyone to tell me: What is the white object in the picture below?

This question is not difficult, everyone knows that this is just a blank piece of paper.

What is the use of white paper?

This is its value: it can draw, write, and fold a paper airplane...

So one day, in order to own a paper airplane, you took out a piece of paper called "money" and exchanged it for the stack of white paper on top.

However, they are both paper, so why can smaller and less "paper" be exchanged for much more "paper" just because there is an extra portrait of a great man?

The reason is simple: because he is "currency".

Although a five-yuan note is just paper like the white paper above, in addition to the "practical value" shared by ordinary white paper, this smaller five-yuan note also has the sovereign credit endorsement of the currency issuing institution and a certain amount of gold reserves as a backing...

But, the second problem arises.

The endorsement of national sovereignty is quite abstract, and we have no access to gold reserves at all. So why do we, who have nothing to touch, choose to assume that "money" can buy paper?

Rong Ping called this "default" a "consensus."

The reason is very simple, because everyone understands that behind this small piece of paper money stands a whole "state machine". Everyone knows that as the credit endorsement of currency issuance, a certain amount of reserve gold will become the value scale of the currency...

But what about Bitcoin?

Indeed, after clarifying the algorithmic rules of Bitcoin, a "consensus" based on rule recognition was generated, which represents the generation of Bitcoin's value.

--On May 22, 2010, Laszlo Hanyec, a programmer living in Florida, USA, successfully purchased two pizzas worth $41 from another user on the "Bitcoin Report" website for 10,000 bitcoins.

This was the first public transaction in the history of Bitcoin.

At this time, there are two people who recognize the value of Bitcoin payment.

Under the "consensus" of the two, the payment value of Bitcoin is about 0.041 cents per coin, which is about RMB 0.3 per coin.

Of course, the story is not over yet.

August 4, 2010.

Laszlo, a programmer who used 70,000 bitcoins to buy 14 pizzas over more than two months, finally chose to "terminate the transaction."

On this day, programmer Laszlo updated the message and said: I didn't expect this transaction to be so popular. I have used up all the bitcoins I have, and I can't mine thousands of bitcoins every day. So I have to terminate the transaction. Thank you very much to those brothers who have completed the transaction with me and bought me pizza.

There are two key points here:

1. More and more people recognize the value of Bitcoin.

2. Under the prescribed algorithm, it becomes increasingly difficult to obtain new bitcoins.

There doesn't seem to be much direct connection between the two, or rather, there is an inevitable connection between the two.

In 2010, why did more and more people recognize the value of Bitcoin?

Programmer Laszlo used 10,000 bitcoins to buy two pizzas worth $41, giving Bitcoin "payment value" for the first time.

On top of that, the rule sets a permanent cap of 21 million units, which makes some people bullish on the future "unit price" of Bitcoin...

Speculation arises.

Let’s not even talk about whether there was anyone who had the foresight to predict the sky-high price of Bitcoin today. Anyway, the worst-case scenario is that if you turn on your computer and mine Bitcoin for two days, at least the pizza you get in return is more cost-effective than the electricity bill.

Then, more and more people began to contribute computing power to the blockchain industry, participate in bookkeeping, and obtain Bitcoin rewards under the "consensus".

Of course, this is not the best part.

As an initial design, dynamic parameters were set to ensure that new Bitcoin blocks are generated at an average rate of one every 10 minutes. The difficulty of Bitcoin mining will continue to increase or decrease with the increase or decrease of computing power.

It's like doing arithmetic.

When you find it easy to solve a problem, we will switch to a more difficult test paper. When you find it difficult to solve a problem, we will lower the difficulty level for you.

On the one hand, there is the “payment value” that already exists;

On the one hand, there is a final cap of 21 million;

On the one hand, with the continuous participation of miners, the mining difficulty has soared;

As prices continue to rise and fall, the Bitcoin pattern has taken shape:

The top 2.39% of Bitcoin accounts, represented by early loyal players and late-entry capital giants, control as much as 94.89% of the Bitcoin share.

As many as 97.61% of retail investors who entered the market later together control the remaining 5.11% of Bitcoin shares.

The next scene seems to be just the traditional scene of big investors pushing up the price, small investors following up, and big investors dumping the market to cash out...

Stop kidding!

The Bitcoin market is not as conscientious as the stock market...

The stock market is monitored by the China Securities Regulatory Commission and protected by national laws. Even if you want to "cut leeks", you have to consider the social impact and abide by the Basic Law!

What is the Bitcoin market?

Lawless!

If you want to play the stock market, you must have at least one lot, which is 100 shares. If a certain stock needs to be "diluted by additional issuance", the legal procedures will take at least three months, if not half a year!

What about Bitcoin?

You might as well take a look, now the trading unit has been divided into several decimal zeros!

This is the fact. The so-called Bitcoin is a game in which big investors manipulate the market to spread the myth of wealth. Small investors continue to enter the market, competing for that 5%, or even smaller and smaller shares. In a lawless place, it is a tragedy that the investors are repeatedly reaped by market crashes!

Of course, you don’t have to worry about the 5% share, which is not enough for the big customers to eat and drink.

Bitcoin is an internet currency. Although the 21 million coins on the upper side are blocked, they can be greatly divided on the lower side!

How many parts can 1 Bitcoin be split into?

100 million satoshis!

This means that even if only 5% of the current 18.62 million bitcoins in circulation, or about 930,000 bitcoins, are traded in units of "satoshi" one day in the future, their total amount will easily exceed the current total number of global stocks!

Of course, Bitcoin bosses are not fearless.

There is only one thing they fear most:

There are no new "leeks" entering the market...

In 2015, American cybersecurity expert John McAfee made a bet with someone on Twitter that if the price of Bitcoin was less than $500,000 per coin within three years, he would eat “Chicken” live in front of a national audience.

In addition, he firmly believes that by 2020, the price of Bitcoin will be at least $1 million per coin.

Unfortunately, as of 23:00 on the evening of March 12 when Rong Ping wrote this article, the price of a single Bitcoin still did not exceed $60,000.

Rong Ping doesn't care whether John McAfee fulfills his bet.

In my opinion, the reason why he dared to make such a vow is actually aimed at one point: human greed. As he said, "People dare not invest in cryptocurrencies because they don't understand how they work."

Today, Rong Ping has roughly explained its operating mechanism.

I believe that while today's "popular science" dissuades some people from doing something, it will inevitably lead to some people getting lucky...

Is it okay if I don’t add leverage?

Is it okay for me to hold it for a long time?

It is not convenient for Rong Ping to comment on this choice. I can only reiterate my own opinion:

The essence of Bitcoin is a piece of code. At best, it is just a virtual asset. It may be profitable, but in the final analysis, it does not have any of the three natural functions of currency: a measure of value, a store of value, and a medium of exchange!

Finally, let’s go back to the original question:

Can Bitcoin rise to $500,000 per coin?

Rong Ping thought, the answer is not up to you or me.

The ones who really have the final say are the top 2.39% of account owners who control 94.89% of the Bitcoin market.

As long as the big guys are happy and there are enough investors, what’s the harm if the price rises to 50 million US dollars per coin?

But ask yourself.

Are you a big boss or a leek?