Is The Price Of Bitcoin Going To Bounce Back?

This question originally appeared on Quora: Is the price of Bitcoin going to bounce back?
Answer by Henry Berg, Engineer, on Quora
All of us who are interested in bitcoin follow the price in one way or another. It is, after all, a very clean and simple indicator of how bitcoin is doing. But given that the price of bitcoin is determined solely by supply and demand, and that the supply of new bitcoins is predetermined, with new coins being issued steadily at a rate that drops sharply in the future, the only variable of interest is demand. And the demand for bitcoin is determined by how useful bitcoins are to people. So if you want to know whether the price of bitcoins will go up in the future, you have to ask yourself how useful you think bitcoins are going to be. Bitcoins are an almost pure example of an ideal online currency, with almost flawless fungibility, divisibility, portability, scarcity, durability and un-consumability. But to somebody who already has access to modern financial tools like bank accounts and credit cards, there are very few new things bitcoin has to offer. The compelling uses for bitcoin so far are to serve as a vehicle for speculation, i.e., a ticket for the roller-coaster ride of the last few years, and as a method of gambling and making purchases on the dark markets. For traditional purchases, the merchants pay all of the fees and bear all of the risks of credit cards, so a modern consumer has no incentive to use bitcoin for such purchases. That may change, but until merchants find some way of offering a discount for the use of bitcoin, bitcoin demand is dependent on the discovery of new uses.

This post was published at Forbes on 5 28/2015 @.