Had you spent $27 on Bitcoin when it absolutely was created by Satoshi Nakamoto in 2009 your investment would now be worth over $37,000,000?
Widely regarded as the greatest investment vehicle ever, Bitcoin has seen a meteoric rise during 2017 going from $777 all the way to $17,000.
Creating millionaires out of opportunistic investors and leaving financial institutions open-mouthed, Bitcoin has answered its critics at every milestone in 2010 and some believe this is just the beginning.
The launch of Bitcoin futures on December 10th, which for the first time will allow investors to enter the Bitcoin market by way of a major regulated US exchange, implies that people are only getting started.
What makes Bitcoin so valuable is that there is a finite amount in existence. There will only ever be a maximum of 21 million Bitcoins and unlike normal fiat currencies, you can’t just print more of these once you feel like. This is because Bitcoin runs on a evidence of work protocol: to be able to create it, you’ve to mine it using computer processing power to fix complex algorithms on the Bitcoin blockchain. Once this is achieved, you’re rewarded with Bitcoin as payment for the “work” you’ve done. Unfortunately, the reward you get for mining has decreased drastically almost annually since Bitcoin’s inception, meaning for most people the only real viable way to get Bitcoin is buying it on an exchange. At the present price levels is that the risk worth taking?
Many believe Bitcoin is merely a bubble. I spoke to cryptocurrency expert and long haul investor Duke Randal who thinks the asset is overvalued, “I’d compare this to numerous supply and demand bubbles over histories such as for example Dutch Tulip Mania and the dot com bubble of the late 90s. Costs are purely speculation based, and once you look at Bitcoin’s functionality as an actual currency it is nearly embarrassing.” For those who don’t know, the dot com bubble was a period of time between 1997-2001 where many internet companies were founded and given outrageously optimistic valuations based purely on speculation that later plummeted 80-90% whilst the bubble started to collapse in the first 2000s. Some companies such as for example eBay and Amazon recovered and now sit far above those valuations but also for others, it absolutely was the conclusion of the line.
Bitcoin was originally created to be able to take power far from our financial systems and put people in control of their own money, eliminating the middle man and enabling peer to peer transactions. However, it is now among the slowest cryptocurrencies available on the market, its transaction speed is four times slower compared to the fifth biggest cryptocurrency and its nearest competitor for payment solutions Litecoin bitcoin mixer. Untraceable privacy coin Monero makes transactions even quicker, boasting the average block time of just two minutes, a fifth of that time period Bitcoin can do it in, 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 Ether in comparison to Bitcoin’s $16,726 per Bitcoin.
So how come Bitcoin’s value so high? I asked Duke Randal the same question. “Everything goes back to the same supply and demand economics, relatively there’s not quite definitely Bitcoin available and its recent surge in price has attracted a lot of media attention, this combined with launch of Bitcoin futures which many see as the first sign Bitcoin will be accepted by the mass market, has triggered a lot of people jumping on the bandwagon for financial gain. Like any asset, if you find an increased demand to get than to sell, the cost goes up. This is bad since these new investors are entering the marketplace without understanding blockchain and the underlying principles of those currencies meaning they will likely get burnt “.
Another reason is that Bitcoin is extremely volatile, it has been proven to swing up or down tens of thousands of dollars in under a minute which if you should be not used to nor expecting it, causes less experienced investors to panic sell, resulting in a loss. This is another reason Bitcoin will battle to be adopted as a form of payment. The Bitcoin price can move substantially between enough time vendors accept Bitcoin from customers and sell it to exchanges because of their local currency. This erratic movement can wipe out their entire profitability. Will this instability go away anytime soon? Improbable: Bitcoin is really a relatively new asset class and although awareness is increasing, only a very small percentage of the world’s population hold Bitcoin. Until it becomes more widely distributed and its liquidity improves significantly, the volatility will continue.
So if Bitcoin is pretty useless as an actual currency, what’re its applications? Many believe Bitcoin has shifted from being a feasible form of payment to becoming a store of value. Bitcoin is much like “digital gold” and will just be utilized as a benchmark for other cryptocurrencies and blockchain projects to be measured against and traded for. Recently there has been stories of men and women in high inflation countries such as for example Zimbabwe buying Bitcoin to be able to retain what wealth they’ve rather than see its value decline under the recklessness of its central banking system.
Can it be too late to try Bitcoin? In the event that you rely on what these cryptocurrencies will do for the entire world then it is never too late to get involved, but with the expense of Bitcoin being so high could it be a ship for a few that has already sailed. You could be better off having a look at Litecoin, up 6908% for the year or Ethereum which will be up an incredible 7521% for the year. These newer, faster currencies hope to achieve what Bitcoin first set out to do in its inception in 2009 and replace government-run fiat currencies.
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