Introduction: Understanding Bitcoin’s Price

For some, the Bitcoin’s price can be a confusing metric. It rises and falls, sometimes dramatically, but understanding what Bitcoin’s price truly represents is the key to making sound investment decisions. In this guide, we’ll explore the concept of price discovery, why Bitcoin’s price is inherently volatile, and why savvy investors should focus on acquiring Bitcoin itself rather than focusing on short-term price fluctuations.

What Is Price Discovery?

Price discovery is an economic concept where buyers and sellers determine the value of an asset in a free market. In the case of Bitcoin, this process is still in its early stages. Bitcoin is an emerging global money—a digital asset with the potential to become the world’s neutral reserve currency. But as a new form of money, its value is still being debated and determined by the market. When the price rises and falls, it is akin to a global voting system, where each market participant is voting towards their opinion on whether or not Bitcoin will become the global monetary network. Every time bitcoin’s price goes up, that is one more vote saying “yes, it will”.

Bitcoin’s Price vs. Bitcoin’s Value

One of the most critical insights for investors is understanding the difference between Bitcoin’s price and its value:

• Price is the current exchange rate in fiat currency (like USD).
  
• Value is Bitcoin’s inherent quality as a secure, decentralized, and finite form of digital money.
  

While the price may fluctuate wildly, Bitcoin’s value as a neutral, scarce, and secure form of money steadily increases as the system becomes more secure and decentralized.

Why Bitcoin Price is Volatile

Bitcoin’s price is volatile because it is a new form of money undergoing a global price discovery process. It is not yet universally understood or adopted, leading to periods of high demand and selling pressure. Even as major institutions, states, and even countries begin adopting Bitcoin, the price may remain stagnant or even decline because of competing sellers. For this reason, short-term price action is not the only signal to pay attention to. 

Real-World Examples

• The United States federal government and the states of New Hampshire and Arizona have established Bitcoin reserves.
  
• Companies like Tesla and MicroStrategy continue to accumulate bitcoin.
  
• Foreign nations are conducting international trade in bitcoin.

These types of events signify a major shift in Bitcoin’s adoption. Where once Bitcoin was viewed with broad skepticism and ridicule, it now holds respect in some of the highest seats of power in our society. This type of signal is at least equally as significant as bitcoin’s short-term price action.

Ignorance Arbitrage: Profiting from Price Discovery

The volatility of Bitcoin is not a problem—it is an opportunity. High-net-worth investors can take advantage of what we call ignorance arbitrage. This is the idea that there is an incredible arbitrage play available to anyone interested in bitcoin: if you understand bitcoin more than the average person, you can profit greatly. The ability to accumulate Bitcoin at a lower price before the broader market realizes its true value, is perhaps one of the greatest arbitrage opportunities of our modern era. There is money to be made when you understand something that others have yet to grasp.

Shifting Your Mindset

Rather than fixating on the dollar price of bitcoin, sophisticated investors should focus on acquiring more bitcoin itself. Over the long term, as price discovery continues, the value of Bitcoin becomes clearer, and those who accumulated early will benefit most.

Bitcoin Mining: The Best Way to Accumulate Bitcoin

What if you could acquire Bitcoin at even less than the current spot price, and do so in a way that greatly capitalizes on this ignorance arbitrage opportunity? That’s where Bitcoin mining comes in. Bitcoin mining is a process where you earn bitcoin by providing computational power to the network.

Why Bitcoin Mining is Like a Call Option

When you invest in Bitcoin mining, you are essentially buying the right to acquire bitcoin at a production cost for several years. Unlike buying bitcoin directly, which involves paying a premium that is additional to the production cost, you are able to acquire bitcoin at a much cheaper rate. 

Key Advantages of Mining:

• Lock in Production Costs: You acquire Bitcoin at the cost of electricity and maintenance.
  
• Tax Benefits: Mining equipment can be depreciated, and expenses can be deducted.
  
• Constant Accumulation: Regardless of price volatility, you steadily stack bitcoin at a more fixed production cost.
  

The Dollar Illusion: Shifting to a Bitcoin Standard

The final mental shift is to stop measuring your wealth in dollars and begin measuring it in Bitcoin. 

• Fiat Currencies Lose Value Over Time: The U.S. dollar and other fiat currencies are consistently inflated. Therefore, when measuring goods and services in fiat terms, things will get more expensive over time.
  
• Bitcoin is Finite: Only 21 million will ever exist, making it a deflationary asset and a better measuring tool for value.
  
• Accumulating Bitcoin Should Be the Goal: Not just watching the dollar price.
  

Conclusion: Front-Run Price Discovery with Bitcoin Mining

Bitcoin’s price is simply the world’s attempt to determine its value. This process is volatile because we are in the early stages of understanding a new form of money. But for high-net-worth individuals, this is an opportunity. By acquiring Bitcoin now—especially through mining—you can front-run the broader market’s realization of Bitcoin’s value.

Abundant Mines offers turnkey Bitcoin mining solutions for investors, allowing you to accumulate Bitcoin at production cost with none of the technical hassles.

Book a call with our team today and start accumulating Bitcoin through mining—before the world fully realizes its value.

Disclaimer: The information provided in this blog is for informational and educational purposes only and should not be construed as financial advice. Please consult with a financial advisor or conduct your own research before making any financial decisions.