Bitcoin plummets, where does the money go?

If archaeologists study Bitcoin in the future, they will definitely give a name to the cryptocurrency market changes from March 12 to 13, 2020, or call it the "313 halving." On that day, the market value of cryptocurrency evaporated by more than half in an instant.

Half of the money in the cryptocurrency world (actually the market value) disappeared inexplicably. Where did it go?

There are a lot of discussions about this question online, and as long as you exchange coins for stocks, you can find a lot of answers. This also shows its importance. We need to think about it repeatedly, and it will directly affect whether we make money or lose money.

On March 11, you had one Bitcoin, and the price of Bitcoin was $8,000. Financially, you had $8,000. On March 13, the price of Bitcoin dropped to $4,000. Financially, you only had $4,000. In these three days, you did nothing, and your account was down by $4,000. Although you still had 1 BTC.

Where did the $4,000 go? Did anyone take it?

(Bitcoin halving on 313)

Money has four major functions: medium of exchange; unit of account; store of value; and delayed payment.

During this change from $8,000 to $4,000, the US dollar played two different functions for Bitcoin.

The first is to use the "accounting unit" function of the US dollar to quantify the value of Bitcoin. In order to form a book price. In this process, there is no need for real US dollars to appear, only an imagination.

The second is to use the "medium of exchange" function of the US dollar to complete the exchange of Bitcoin between different people. This is a market transaction process, a process of handing over money and handing over goods. In this process, real US dollars need to appear, and real money and coins must be involved in the delivery.

We can simply say that the former is "how much Bitcoin is worth" and the latter is "how much money was used in the Bitcoin transaction" (hereinafter abbreviated as "how much money was used"). Both are numbers, but they are completely different numbers.

How much is Bitcoin worth? This number can evaporate or be blown into bubbles. The process of evaporation and blowing bubbles will not result in real money flowing from one person's pocket to another, but the valuation on the books of all coin holders will decrease or increase, changing at the same time.

How much money Bitcoin has spent will not evaporate, nor will there be any bubbles. This number is just transferred from one person's pocket to another's pocket. Real dollars will not disappear, nor will they be created. This process is the process of harvesting and being harvested.

So to answer the question in the title of this article: Bitcoin plummeted, where did the money (US dollars) go?

The answer is: Bitcoin plummeted, but the money (US dollars) did not evaporate. What really evaporated was the number of "how much Bitcoin is worth".

As Bitcoin was falling, a large number of people participated in the transactions. No matter how much money was used in the transaction, it would not disappear. It was just transferred from the pockets of some people to the pockets of others.

If you want to exchange your currency's "value" for real money (US dollars), you need to participate in transactions. If you participate in transactions, the "value" will collapse into real losses or profits.

If you want to make money from Bitcoin, the key is to combine the "value" and "use" of Bitcoin. You need to buy it with US dollars before the former appreciates, and sell it before it evaporates. This is buying low and selling high. In this way, you can increase the US dollars in your pocket, and the increase comes from the decrease in the number of counterparties participating in the transaction.

The key to making money is: buy before appreciation, sell before evaporation. The key is time. Those who make money are those who judge the timing correctly and participate in the transaction process, while those who lose money are those who make the wrong judgment and still participate in the transaction process.

For those who judge right or wrong but do not participate in the transaction, the numbers on the accounts evaporate or inflate, but there is no real loss or profit.

Those who hoard coins believe that if the time dimension is extended, the value of Bitcoin will increase, so they hold it for a long time.

Those who speculate in cryptocurrency believe that they need to predict the changes in the value of Bitcoin in a short period of time and participate in transactions.