Any price is just the amount someone is willing to pay. This is why prices change even for things that do have intrinsic value like food commodities, oil, etc.
More specifically, price is a function of supply and demand. Bitcoin was created with a very specific bootstrapping plan baked into the design.
What people are missing is that the bootstrapping plan is well known and obvious to investors, and is meant to incentivize a speculative motivation for mining, which it has done successfully.
But think about it this way, the price of a currency is only loosely linked to supply and demand. Nobody really knows how many dollars exist, yet the currency has characteristics that make it trustworthy.
Bitcoin is the same phenomenon. The price is based on the success of the governance model and the appealing characteristics of the ecosystem.
Based on these appealing characteristics, there is the widespread expectation that Bitcoin will win market share from other currencies over the long term.
We know there will be a finite number of Bitcoin mined, what we don't know is how much market share Bitcoin will have in comparison to other currencies.
Market share is not a function of money supply as much as it is a function of the holders of the currency that rely on the currency because of its governance mechanism, fungibility, etc. Many countries hold USD in reserve because they find the governance characteristics of the USD appealing. Bitcoin is just a novel way of doing currency governance.
For all uses of currency other than holding inventory, the governance mechanism matters very little, since there is little risk exposure to price fluctuations or the risks associated with bad governance.
Critiques of Bitcoin get mired in an imprecise understanding of all of the above, but the most notable blind spot is that Bitcoin is a governance mechanism first and a currency second, and investors are pleased because the governance mechanism has been tested a few times and has (thus far) performed admirably.
More specifically, price is a function of supply and demand. Bitcoin was created with a very specific bootstrapping plan baked into the design.
What people are missing is that the bootstrapping plan is well known and obvious to investors, and is meant to incentivize a speculative motivation for mining, which it has done successfully.
But think about it this way, the price of a currency is only loosely linked to supply and demand. Nobody really knows how many dollars exist, yet the currency has characteristics that make it trustworthy.
Bitcoin is the same phenomenon. The price is based on the success of the governance model and the appealing characteristics of the ecosystem.
Based on these appealing characteristics, there is the widespread expectation that Bitcoin will win market share from other currencies over the long term.
We know there will be a finite number of Bitcoin mined, what we don't know is how much market share Bitcoin will have in comparison to other currencies.
Market share is not a function of money supply as much as it is a function of the holders of the currency that rely on the currency because of its governance mechanism, fungibility, etc. Many countries hold USD in reserve because they find the governance characteristics of the USD appealing. Bitcoin is just a novel way of doing currency governance.
For all uses of currency other than holding inventory, the governance mechanism matters very little, since there is little risk exposure to price fluctuations or the risks associated with bad governance.
Critiques of Bitcoin get mired in an imprecise understanding of all of the above, but the most notable blind spot is that Bitcoin is a governance mechanism first and a currency second, and investors are pleased because the governance mechanism has been tested a few times and has (thus far) performed admirably.