Will the Bitcoin Boom Bust?
The question of Bitcoin’s rapid rise in value and whether it’s sustainable comes up frequently.
As I see it, one cannot link an asset’s potential price increases (indefinitely to the north) solely to the fact that its supply is limited. Price increases only happen when the demand for that asset rises.
For example, if we all one day decided that “Gold” is not a good store of value, the demand for “Gold” would decrease (probably to zero) and its perceived price in our eyes would decrease substantially — however, this has not happened for centuries.
Thus, for an asset’s price to increase, it needs a stable and increasing demand. If people and institutions decide not to use Bitcoin as an investment or the means to transfer value, there will not be enough demand to support the increase in price, even though the supply is limited.
However, as many Central Banks are now printing more and more money (especially during the pandemic) it should most likely have a positive effect on the BTC price, as BTC is naturally resistant to inflation and quantitative easing (QE).
So, in my opinion, the BTC price will continue to increase in the long term and once mass adoption is achieved — we are seeing institutional money already flowing into BTC — it will conquer new all-time-highs. But, I also believe that there will be a point where supply and demand balance themselves and the well-known “invisible hand” will stop pushing the price up higher and higher.