If people make money in stocks and crypto by buying low and selling high, who is buying the stocks from they are high, and why?

Question

Let’s just say for example, I bought a stock at $10. Then it goes up to $500

I can obviously make a profit, but why would someone buy it at such a high price?

Is it like the person who buys it at $500 is hoping that it will go up to $1000, then the person who buys it at $1000 hopes it will go up to $1500, and so on?

In: Economics

Answer 1

You’re really asking ‘what is a company really worth?’ This can be answered for simple companies using various methods, one of which is Discounted Cash Flow analysis. Companies are worth more if they generate more profit. Depending on the company, it may be entirely logical and justified to be at $10 and $1000 10 years later. While different people with different levels of optimism and knowledge might up with a different calculation using any valuation method, you can put a lower and upper bound on a reasonable price.