What’s Bitcoin?

Bitcoin is digital money. An electronic online currency that can be used to make transfers around the globe without banks or middlemen.

But be warned: if your learn more about it you may become so interested in it that you want to know it all and will spend a significant amount of time to learn. However that’s a good thing. Learning and understanding is the only way to profit from Bitcoin. Because the more you know, the better you can deal with it.

To learn the basics, these three videos will help you get the general idea of what bitcoin is and how it works:

Why does Bitcoin have value?

Why do people value Bitcoin and why does the price go up and down? Learn the economics of bitcoin by listening to this podcast and truly understand why bitcoin has value:

Excerpt: “The Bullish Case For Bitcoin”

“The process of monetization is game-theoretic; every market participant attempts to anticipate the aggregate demand of other participants and thereby the future monetary premium. Because the monetary premium is unanchored to any inherent usefulness, market participants tend to default to past prices when determining whether a monetary good is cheap or expensive and whether to buy or sell it. The connection of current demand to past prices is known as “path dependence” and is perhaps the greatest source of confusion in understanding the price movements of monetary goods.

When the purchasing power of a monetary good increases with increasing adoption, market expectations of what constitutes “cheap” and “expensive” shift accordingly. Similarly, when the price of a monetary good crashes, expectations can switch to a general belief that prior prices were “irrational” or overly inflated. The path dependence of money is illustrated by the words of well-known Wall Street fund manager Josh Brown:

I bought [bitcoins] at like $2300 and had an immediate double on my hands. Then I started saying “I can’t buy more of it,” as it rose, even though that’s an anchored opinion based on nothing other than the price where I originally got it. Then, as it fell over the last week because of a Chinese crackdown on the exchanges, I started saying to myself, “Oh good, I hope it gets killed so I can buy more.”

The truth is that the notions of “cheap” and “expensive” are essentially meaningless in reference to monetary goods. The price of a monetary good is not a reflection of its cash flow or how useful it is but, rather, is a measure of how widely adopted it has become for the various roles of money.

Further complicating the path-dependent nature of money is the fact that market participants do not merely act as dispassionate observers, trying to buy or sell in anticipation of future movements of the monetary premium, but also act as active evangelizers. Since there is no objectively correct monetary premium, proselytizing the superior attributes of a monetary good is more effective than for regular goods, whose value is ultimately anchored to cash flow or use-demand. The religious fervor of participants in the Bitcoin market can be observed in various online forums where owners actively promote the benefits of Bitcoin and the wealth that can be made by investing in it. In observing the Bitcoin market, Leigh Drogen comments:

You recognize this as a religion — a story we all tell each other and agree upon. Religion is the adoption curve we ought to be thinking about. It’s almost perfect — as soon as someone gets in, they tell everyone and go out evangelizing. Then their friends get in and they start evangelizing.

While the comparison to religion may give Bitcoin an aura of irrational faith, it is entirely rational for the individual owner to evangelize for a superior monetary good and for society as a whole to standardize on it. Money acts as the foundation for all trade and savings, so the adoption of a superior form of money has tremendous multiplicative benefits to wealth creation for all members of a society.”

You can read the full article here.

 

More videos

If you prefer to watch more videos, we curated a great list of educational videos:

Interested in trying out Bitcoin? Read our how-to-get-started-guide.