Instead of panicking because of the steep bitcoin price decline, I decided to hold on to my coins and wait for the price to recover.
These are the reasons and facts why I believe bitcoin will recover in a few months:
1. Millions of dollars are being invested bitcoin as an industry. Not in coins, but in the bitcoin industry and infrastructure; exchanges, wallet services, payment processors, and payment systems for large corporations. And yes; in mining. All of that is in the process of being built and it will take a few months to be completed. But once the industry is built, the investment will probably go towards promoting the use and purchase of bitcoin.
2. Large investors in the US will invest in actual coins once bitcoin gets regulated. Ask any serious investor and he will tell you the same thing: he will not invest in actual coins unless there are regulations for bitcoin. Regulations are necessary for investors because they give ivestors a degree of certainty. New York will regulate bitcoin, but the regulations will be implemented in January of 2015. When that happens the bitcoin economy will see a major change in behavior, from a mainly speculative instrumento to a mainstream payment system.
3. People still use bitcoin and many more will use it because it is a cheaper way to move money. But this will only happen once the industry and infrastructure for bitcoin consumer use is in place. And again; this will happen in a few months.
Clearly a lot of people bought bitcoin hoping to become rich quick, not really thinking about the economic factors surrounding bitcoin and not really thinking about using it for its intended purpose: as a currency.
Now those same folks are panicking because the price is falling. What they don't realize is the price of bitcoin has fallen to zero in the past and then it went up again.
But now there's an important difference. In the past there was no industry nor infrastructure for bitcoin, which meant the price depended only on speculation. Now there is an industry and an infrastructure. And that gives bitcoin an important safety net. No matter how low it falls within the next few weeks, at the beginning of 2015 the price will be driven not speculation, but by its use as a currency.
That is the reason why I'm holding on my bitcoins and waiting for the price to recover. Not because or faith, but because of the facts.
PS: Don't bother to mention Paul Krugman. Krugman's latest Op Ed piece in the New York Times because Krugman clearly doesn't understand bitcoin. Therefore, his opinion is not qualified as a valid comment on the economics of bitcoin. In his piece, Krugman thinks bitcoin is some sort of political scam by libertarians used to get money out of gullible people. What Krugman apparently doesn't know is that 72% of all bitcoin transactions are conducted in China in Yuan, not in America in US Dollars. It is, therefore, impossible for libertarians run the type of scam Krugman suggests. People should really start looking at bitcoin strictly in terms of economics, not in terms of ideology. And the economics of bitcoin point to the development of a new economy based on cryptocurrency. Not because of political affiliation, but because it is a cheaper, faster and more convenient way to move money.
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