One of the most common objections people have when discovering bitcoin and considering their first bitcoin purchase is the perception that "it's so expensive." At the time of writing, bitcoin is currently around $99,000 Australian Dollars per coin. This perception is what we call "unit bias," which leads many people to either resist starting their bitcoin investment journey because they feel like they "have missed it." Quite often, these individuals get lured into the "crypto space" with the hope of finding the next coin that goes from 1 cent to $1,000 or higher. This thinking is flawed in several ways.
Firstly, the price of anything is merely a reflection of what the last item was bought and sold for. If a large buyer appears and there is no matching seller at that price, the price will increase until a seller is willing to part with their coins. It's important to understand that the price is not an inherent characteristic of bitcoin but rather a reflection of market activity and sentiment at a given time. Price going up indicates buyers are needing to pay more to get current bitcoin holders to part with their coins.
When you are buying bitcoin, you are provably investing in a piece of the scarcest asset ever created. There is a fixed supply of 21 million bitcoins, with probably 3-4 million "lost," leaving closer to 17-18 million coins actually available. Of these coins, 60-70% (conservatively) are held by long-term HODLers who are unlikely to part with their bitcoin at just about any price. This leaves us with about 5-7 million coins actually available for purchase.
Now, take a look at the total supply of that 10 cents per coin crypto you are considering buying. How many are available – 1 billion, 10 billion? Is there any cap on how many can be created? (I'll save you the time, the answer is generally NO - this is one reason we call them $hitcoins). If you held a significant volume of these coins and then decided to sell them, could you actually get the price currently shown in the market (will the buyers exist)?
Another point people often miss is that the higher the price of bitcoin, the more attractive it becomes to institutional investors (big money). Bitcoin’s total market cap is currently around $1.8 trillion AUD, compared to gold, which is about $18 trillion, and bonds, stocks, real estate – which are in the hundreds of trillions. When large investors (let's say an endowment or pension fund) look to deploy capital, they need to find assets with enough liquidity to soak up multiple billions at a time. To them, bitcoin needs to be bigger in size for them to really move money into the market. If bitcoin were $1 million per coin, its market cap would be nearly $20 trillion – much easier and more attractive for a pension fund to allocate to this asset class alongside their commercial real estate, stocks, bonds, gold, etc. So to them, bitcoin is far more attractive at higher prices (NOT lower prices).
Last but not least, the real unit of bitcoin, as expressed on the bitcoin network, is a satoshi. Transactions and activity really happen in satoshis, not bitcoin. What's a satoshi? This is the smallest unit of a bitcoin (like cents to the dollar), and there are 100,000,000 (100 million) satoshis for every bitcoin. So when buying bitcoin, you really need to think in terms of satoshis. If you are buying $1,000 AUD in bitcoin, you are actually buying roughly 1 million satoshis. Even investing a hundred dollars on a regular basis – let’s say weekly or monthly – you are accumulating 100,000 satoshis at a time. Starting at this level and gradually building up your 'stash' over time, you will be well on your way to becoming a 'whole coiner' – a great goal that will create generational wealth for you and your family, free from the constant debasement and theft of money printing and inflation.
Final thoughts:
There are about 100 million millionaires in the world. What if they all wanted to buy 1 bitcoin? Where do you think the price would go?
Countries and large corporations are beginning to put bitcoin on their balance sheets. What if this trend continues? Where do you think the price of bitcoin will go?
Stay humble, stack sats.