Widely regarded as the greatest purchase vehicle of all time, Bitcoin has seen a meteoric surge during 2017 going from $777 all the way to $17, 000.
Creating millionaires out of opportunistic investors and leaving finance institutions open-mouthed, Bitcoin has answered its critics at every motorola milestone this year and some believe this is just the beginning.
The launch regarding Bitcoin futures on December 10th, which for the first time allows investors to enter the Bitcoin market through a major controlled US exchange, implies that we are just getting started.
What makes Bitcoin so valuable is that there is a finite amount in existence. There will probably only ever be a maximum of 21 million Bitcoins and also unlike normal fiat currencies you can’t just print many them whenever you feel like. This is because Bitcoin runs on a proof work protocol: in order to create it, you have to mine that using computer processing power to solve complex algorithms on the Bitcoin blockchain. Once this is achieved, you are rewarded with Bitcoin as payment for the “work” you have done. Unfortunately the particular reward you get for mining has decreased drastically virtually every year since Bitcoin’s inception, which means that for most people the only feasible way to get Bitcoin is buying it on an trade. At the current price levels is that a risk worth getting?
Many believe Bitcoin is simply a bubble. I spoke to be able to cryptocurrency expert and long term investor Duke Randal who also thinks the asset is overvalued, “I would examine this to many supply and demand bubbles over background such as Dutch Tulip Mania and the dot com bubble of the late 90s. Prices are purely speculation centered, and when you look at Bitcoin’s functionality as an actual crypto currency it truly is almost embarrassing. ” For those who don’t know, the dot com bubble was a period between 1997-2001 where many net companies were founded and given outrageously optimistic values based purely on speculation that later plummeted 80-90% as the bubble began to collapse in the early 2000s. Several companies such as eBay and Amazon, recovered and now take a seat far above those valuations but for others it was the final of the line.
Bitcoin was originally created in order to consider power away from our financial systems and put people in command of their own money, cutting out the middle man and enabling expert to peer transactions. However , it is now one of the slowest cryptocurrencies in the marketplace, its transaction speed is four times slower compared to the fifth biggest cryptocurrency and its nearest competitor for repayment solutions Litecoin. Untraceable privacy coin Monero makes purchases even quicker, boasting an average block time of merely two minutes, a fifth of the time Bitcoin can do it inside, and that’s without anonymity. The world’s second biggest cryptocurrency, Ethereum, already has a higher transaction volume than Bitcoin despite being valued at only $676 dollars per Azure compared to Bitcoin’s $16, 726 per Bitcoin.
So why is Bitcoin’s value so high? I asked Duke Randal the same question. “It all goes back to the same supply and demand economics, relatively there is not very much Bitcoin available and its recent rise in price has attracted a lot of media attention, this with the launch of Bitcoin futures which many see because the first sign Bitcoin is being accepted by the mass industry, has resulted in a lot of people jumping on the bandwagon for financial gain. Like any fixed and current assets, when there is a higher demand to buy than to sell, the price increases. This is bad because these new investors are entering industry without understanding blockchain and the underlying principles of these stock markets meaning they are likely to get burnt”.