“The stock market is filled with individuals who know the price of everything, but the value of nothing.”
Phillip Fisher
Bitcoin could care less about its vertical positioning on a chart. But, as emotional monkeys with too much brain for our own good, we get attached to the movements of price. Up and down, back and forth, oscillating like many naturally occurring phenomena, price is supposed to be an equilibrium.
As we have gotten used to utilizing equities, real estate and other assets for storage of value, we have begun to necessitate that they must go up in price. Indeed, if we begin to use stocks to store value, therein lies an attachment to maintaining the price of a stock. Imagine that an investor owns a large amount of stock. That amount is acquired at a certain price, and they now have a vested interest in keeping the price of that security above the purchasing price, regardless of their belief in the company itself.
True Price Discovery Is Scary
Stocks haven’t been allowed to legitimately discover price. Many factors make this true. In this article, I focus on the underlying psychological mechanisms which influence people to hang on to securities they know they don’t believe in. This is a roundabout way of stating price discovery is hampered.
A true store of value is necessary for an economy. Without it, capital begins to be allocated in unnecessary pools — real estate, the stock market, failing businesses. These pools then have self-interested investors protecting their nominal value. Again, the price discovery of hard money, unleashed, will be scary. The reason investors protect the price of these assets is for wealth storage — but Bitcoin makes these forms of wealth storage dated, and highlights their flaws.
Although hedge fund
