Who determines bitcoin’s worth?

00:02 Who determines Bitcoin's worth? Turns 00:05 out you do, just like everything else in 00:07 the entire world. This is a concept 00:09 people have hard a hard time with 00:11 because most people have never thought 00:12 and just don't understand how markets 00:15 work. A market is anything where people 00:17 buy and sell anything. The grocery 00:20 store, insurance, uh a used car lot, all 00:24 of those are markets. Anything where 00:26 anything is bought and sold is a market. 00:29 And on markets, the value and worth and 00:34 price of anything is reflected by supply 00:37 and demand. In the case of Bitcoin, the 00:40 uh total supply is limited to 21 00:43 million. Uh so there's no new supply, 00:46 you know, beyond 21 million. It's a set 00:48 supply which means uh the price is 00:50 determined by the buyers and sellers of 00:52 who wants Bitcoin right now as compared 00:54 to who wants to sell Bitcoin right now 00:57 to buy a car or improve their lifestyle 00:60 in some way or go on a nice vacation or 01:02 whatever it is they might be spending 01:03 their Bitcoin on. So, uh for a lot of 01:07 people markets once they understand how 01:08 markets are work, it's sort of scary for 01:11 them because they're like, "But wait, 01:13 that means I thought a dozen eggs was 01:15 worth $4. I thought it was worth $4. 01:18 It's like, no. The the fact that you go 01:21 to Kroger or Costco or whatever and it 01:24 says a dozen eggs is worth is $4, that 01:27 does not mean they're worth $4. That 01:29 does not mean someone gave them that 01:32 value. Someone stuck the price on it 01:35 with their little little, you know, 01:36 price stamper machines, whatever. They 01:38 stamped that price because in their best 01:41 estimation that was the clearing price 01:44 where supply and demand balanced. If 01:48 there was suddenly a massive shortage of 01:50 eggs, uh they would raise the prices and 01:53 they would raise the prices because the 01:54 eggs would be flying off the shelves as 01:57 everyone realized that eggs were in 01:58 short uh supply and they couldn't get uh 02:02 additional eggs to restock the shelves. 02:04 So the price would rise $5, $6, $7, $8 02:09 for a dozen eggs. But that is not 02:11 because there's they're inherently worth 02:13 that. That is because people want them 02:16 and they're in short supply. And so the 02:18 price rises and the price rises because 02:20 the people who are selling them 02:21 understand that the price that they're 02:24 sticking on it is a function of supply 02:26 and demand. Now with liquid markets, 02:29 liquid meaning they're in in a constant 02:31 state of flux like the stock market and 02:35 you know stocks and bonds and 02:37 commodities like gold, silver, rice, 02:39 beans, wheat, 02:42 old, bitcoin. With those sort of 02:45 markets, nobody's even assigning a 02:47 price. Uh the price is entirely 02:50 dependent on supply and demand. So 02:52 nobody's even trying to use a little 02:54 sticker machine to, you know, stick a 02:56 price on it because the price is in 02:58 constant flux. Now behind the scenes, 03:01 that's true for everything, including 03:03 eggs. If you go to an, you know, egg 03:06 futures and wheat futures and comm, you 03:08 know, soybean futures, those prices are 03:11 constantly changing. There's not a set 03:13 price. Now, the grocery store does not 03:15 want they don't want to have little TV 03:18 screens with the price of eggs popping 03:20 up and down every couple seconds. And 03:22 so, they just pick a price near the 03:24 midpoint and slap it on there and just 03:26 leave it for a few hours or a few days 03:28 or a few weeks. Uh, that's sort of close 03:30 enough. Now, sometimes you get 03:32 shortages. Sometimes you go to the 03:33 grocery store and they don't have what 03:34 you want. 03:35 And that means the they chose a price 03:39 that was a little too low and people 03:41 bought more than the supply. Sometimes 03:43 you go to the grocery store and the 03:45 stuff on it is expired. It's because 03:47 they chose a price that was a little too 03:50 high. It was just high enough that not 03:53 quite all of it got bought in time 03:55 before it expired. So, they're guessing. 03:57 The the grocery store is guessing. But 03:59 what give gives Bitcoin its worth? Who 04:01 determines the price? Who determines the 04:03 value? It's all based on supply and 04:05 demand. Now, you may be thinking, "But 04:07 wait, if everybody stopped valuing 04:10 Bitcoin, the price would drop 04:12 precipitously." That is true for 04:14 literally 100% of things on the earth. 04:17 If people stopped valuing insurance, the 04:20 price would go to zero. If people 04:21 stopped eating eggs, the price would go 04:23 to zero. If people stopped driving cars, 04:26 the price would go to zero. The price of 04:29 everything would go to zero if people 04:32 stopped valuing it. So, you might be 04:34 thinking, okay, but what keeps people 04:36 from stopping to value Bitcoin? Why 04:39 don't what's going to keep everyone from 04:41 waking up tomorrow and deciding 04:43 Bitcoin's not valuable? They don't want 04:44 it anymore. And the answer for that is 04:47 people need money because barter where 04:51 you like trade eggs for a pair of shoes 04:53 and things like that. Barter is 04:55 incredibly inefficient and impossible to 04:58 be workable in a modern economy where 05:01 there is so many goods and services you 05:03 could possibly want. It's impossible in 05:05 a modern economy for you to show up at a 05:07 restaurant and talk to the owner and 05:09 say, "Hey, what thing of value could I 05:12 do today to earn a meal?" Well, the very 05:16 first person who shows up might be able 05:17 to like mow the lawn, do the weed eating 05:19 and, you know, uh, edging, but what 05:22 about the very second person that shows 05:24 up? Like within two or three or four 05:26 people, the restaurant's going to run 05:28 out of random stuff that random people 05:30 can do, which means you need a way of 05:33 storing your time and energy, which is 05:35 what money does. Money stores your time 05:37 and energy so you can use it later. If 05:40 everybody wanted your skill set all the 05:43 time, you could actually live life 05:45 without money. You could show up to a 05:47 restaurant, do seven minutes of work, 05:48 eat lunch. You could show up to buy a 05:50 car, do two weeks of work, buy the car, 05:53 or, you know, whatever a year of work, 05:54 however long it works. But you would not 05:57 need to store up. I guess in the case of 05:59 a car, you would because you can't buy 06:01 like a little piece of the car with each 06:03 hour of work. So even there, you've got 06:06 to do enough work to accumulate enough 06:08 money to buy bigger purchases. So money 06:11 is what stores your time and energy. 06:13 You've probably never thought about it 06:14 that way, but that's actually what's 06:16 happening. What's actually happening 06:18 behind the scenes is that money is 06:21 storing your time and energy so that you 06:24 can use it later to go buy a car or eat 06:27 at a restaurant or buy insurance or buy 06:29 a dozen eggs. So because humans need 06:32 money, Bitcoin is valuable because 06:34 Bitcoin is a better money than any other 06:36 money that exists. Gold, for example, 06:39 does not work well as money because it's 06:41 not divisible. It's not portable in 06:43 large amounts. It's too hard to verify 06:46 that it actually is gold and it's not 06:48 just like tungsten with gold, you know, 06:51 gold wrapped around it. It's just 06:53 there's no good way to use precious 06:55 metals in a modern economy to buy stuff. 06:57 it's too hard to tell what they are, you 06:59 know, if it's legit, all that sort of 07:01 stuff. And so, most people use the US 07:04 dollar because it's easier to divide 07:06 into 100 pennies and it's verifiable and 07:09 stuff like that generally because, you 07:11 know, it's hard to it's hard to uh 07:13 counterfeit it. But the problem with the 07:14 US dollar is the government, the central 07:16 bank, the Federal Reserve we call it in 07:18 the United States, the central bank 07:20 never stops printing more of them, which 07:22 means they're cheating you constantly. 07:25 your time and energy is being stored up 07:27 by hard work. And then they print money 07:29 out of thin air that didn't cost them 07:31 anything. And so they're constantly 07:33 devaluing your hard work. You try to 07:35 save up a year of of your hard 07:38 hardearned time and energy. And in that 07:41 same amount of time, they print 3% 4% 7% 07:44 on average is about 7% more US dollars 07:47 per year. They print on average 7% out 07:50 of thin air every year. So no matter how 07:53 hard you try to save up your time and 07:55 energy in US dollars, the government is 07:59 debasing, meaning taking away, meaning 08:02 diluting your time and energy by 7% 08:05 every year. And that shows up in 08:07 inflation. It also shows up in the price 08:10 uh the fact that you don't get price 08:11 decreases on most of the things you buy, 08:13 which you normally would. Humans get 08:15 better at making stuff. So normally 08:16 stuff should be getting cheaper. Eggs 08:18 should be getting cheaper every year. 08:20 Meat should be getting cheaper. 08:21 Insurance should be getting cheaper. 08:23 Everything should be getting cheaper by 08:25 between 3% and 5% per year because we 08:28 keep getting better at doing stuff. But 08:30 the government stole that from you by 08:32 printing money out of thin air. You 08:33 don't even know that everything ought to 08:35 be getting cheaper. Um, in addition to 08:37 that, they added the inflation on top of 08:40 that for an extra 3% 4% up to 9% per 08:44 year. So, not only is your stuff not 08:45 getting cheaper, it's actually getting 08:47 more expensive, which is where that 7% 08:49 is disappearing. Typically, uh you're 08:51 losing 3 or 4% of that because you're 08:53 not getting the price decreases and then 08:55 you're getting hit with a 3 or 4% 08:58 inflation, uh and often a lot higher 09:00 than that. So, uh humans need money. 09:03 They're going to continue to use money. 09:05 Money is going to continue to out 09:07 compete less good money. And Bitcoin is 09:10 a better money. So the reason people are 09:12 not going to stop using Bitcoin is 09:14 because it forces them to use something 09:16 else. Gold is not good as money and the 09:20 US dollar is not good as money. So 09:22 there's nothing that works as well at 09:25 storing your time and energy for the 09:27 long term as Bitcoin. Now because the 09:30 adoption of Bitcoin is so low worldwide, 09:33 only about 5% of the world owns any 09:35 Bitcoin. And most of that 5% it's a very 09:38 small percentage of their net worth. 09:41 Someone like me, I've got 100% of my net 09:43 worth in Bitcoin, but that's rare. In 09:46 the future, a much higher percentage of 09:48 the world will own Bitcoin, and a much 09:50 higher percent of their net worth of the 09:53 people that own Bitcoin will be in 09:55 Bitcoin. As a result, in the future, the 09:57 price will be much, much, much higher, 09:60 somewhere north of $1 million per 10:02 Bitcoin. And it will be that way because 10:05 Bitcoin is a better money because humans 10:07 need money. And because Bitcoin is 10:09 backed by math, it's backed by cryp 10:11 cryptography. It's backed by energy. 10:13 It's backed by its anonymous creation. 10:15 It's backed by open source software. 10:18 It's backed by all of the things that 10:20 make a money good, that make a money 10:23 divisible, durable, portable, uh 10:25 verifiable, authenticatable, 10:28 recognizable. Uh, and most important, 10:31 the most important attribute of any 10:33 money is scarcity. There will only ever 10:35 be 21 million Bitcoin. There's already 10:38 22 trillion US slloshing around. And 10:42 that number is unlimited. It just keeps 10:43 going up. You know, tomorrow it'll be 10:45 higher than today. The next day it'll be 10:47 higher than that. No matter how hard you 10:49 work, if you're saving in US dollars, 10:53 they're losing value. And as a result of 10:55 that, more and more people are figuring 10:57 out that Bitcoin works as better money 10:60 than the US dollar. And as those people 11:02 convert their US dollars to Bitcoin, the 11:05 price, even though it'll be volatile in 11:07 the short term, it will go up in the 11:09 long term because it's valuable. So what 11:11 gives Bitcoin worth? Demand. What gives 11:14 money demand? Barter sucks. And nobody 11:17 wants to barter for everything we need. 11:19 So we're going to use money. and better 11:21 monies out compete uh lesser monies. 11:24 Bitcoin is the best money that humans 11:27 have ever discovered or invented. And as 11:29 a result, the price goes up as people 11:32 adopt it and realize it's better money. 11:34 And it works just like anything else 11:35 with supply and demand where the price 11:38 is determined and you can just see it in 11:40 real time. Uh, if the grocery store 11:42 showed you the price of everything in 11:43 real time that was ch constantly 11:45 changing by the second, I think people 11:46 would have an easier time understanding 11:48 Bitcoin because they would understand 11:49 that all markets work that way. But a 11:51 lot of people are confused because they 11:53 think the prices they see are what the 11:55 thing is worth without realizing, no, 11:57 that's just an arbitrary price the 11:59 grocery store chose based on their best 12:01 guess, supply and demand. So you 12:04 determine Bitcoin's worth. 8 billion 12:06 people determined Bitcoin's worth. And 12:08 the reason Bitcoin is not going anywhere 12:10 and will continue to keep going up in 12:12 the long term. It goes up and down down 12:15 on its way up. The reason that happens 12:17 is because people value money because 12:19 they need to store their time and their 12:21 energy. And Bitcoin is by far the best 12:23 way to do that. Have a great great day 12:25 everyone. Thanks.