Bitcoin Can Do Things the Dollar Can’t

When you pull up a chart for bitcoin, you probably just check the price and move on…

Most people look at bitcoin in terms of dollars. That’s for the same reason you’d price any asset in dollars – it makes it easy to track. People want to see when bitcoin is in a rally and when it’s in a sell-off.

Tracking its price makes that easy to do.

But don’t forget: Bitcoin – and the network it’s built on – doesn’t have anything to do with dollars.

Thinking about bitcoin and other cryptocurrencies in terms of price and nothing else can lead to misconceptions. And it can hold you back as a crypto investor.

Let me show you what I mean…

Bitcoin Can Do Things the Dollar Can’t
Dollars don’t get exchanged on the bitcoin network – only digital assets do.

Now, there may be a human at either end of a bitcoin transaction who does care about dollars and does care about price. Bitcoin is an investable asset, after all.

But bitcoin is great for other things – like international trade. You can send it to anyone, anywhere around the world, and they can convert it into anything they want. Or they can simply keep it.

This illustrates that bitcoin isn’t dependent on dollars. It’s a store of value in its own right.

When we talk about a cryptocurrency’s price, what we’re really talking about is the value that the market is putting on it…

We’re dealing with perception, risk tolerance, and expectations of profit. It’s about all the people who participate in the market and what they believe will happen.

So, if I say bitcoin is going to reach $1 million in our lifetimes, that means I have the expectation that when bitcoin costs $80,000, it’s undervalued on a long-term basis. But it might be overvalued on a short-term basis. It comes down to perception… and time.

Crypto Is More Like Gold Than You Think
All of this might sound obvious. But I want to help folks break away from limited thinking and misconceptions…

I’ve heard people talk about transferring dollars over the bitcoin network. That isn’t possible. You could build a network on top of bitcoin where someone holds dollars on one end… and someone else then feels confident that they could withdraw dollars from somebody else.

But it’s important to know that the transactions on the bitcoin network are independent of dollars… other than the “brackets” at either end of any transaction. Those are the humans who say, “I’m going to buy bitcoin with my dollars.”

You can’t just walk up to the bitcoin network, hand it some dollars, and have those dollars move across the network. It’s not the same as a bank wire.

Even more important, this understanding matters to your investments, too…

We’re all looking to build our net worth. But when you’re building a position in cryptocurrencies or related technologies, ask yourself… Does it change things if you take dollars out of the equation? Do you still look at your cryptos the same way?

Try putting the price appreciation of the token out of your mind once in a while. Instead, ask yourself, “Do I want to own this disruptive technology that has unique new monetization principles? Do I want to own it for the long term, regardless of the dollar change in value?”

Because that dollar change is just a human on the other side who’s willing to buy it for that price. And technology doesn’t always answer to price… That is, its potential isn’t always recognized in any given moment.

So, try holding your portfolio to this standard…

Look at it the same way you would an ounce of gold. We know that gold’s price in dollars is going to fluctuate. But a bar of gold doesn’t ask how much it’s worth when you pick it up and hold it in your hands, does it?

While gold’s price changes from day to day, it always has value.

The same is true for bitcoin.

Good investing,

Eric Wade

Source: Daily Wealth