Had you spent $27 on Bitcoin when it absolutely was produced by Satoshi Nakamoto in 2009 your investment would now be worth over $37,000,000?
Widely regarded as the maximum 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 this year and some believe that is just the beginning.
The launch of Bitcoin futures on December 10th, which for initially enables investors to enter the Bitcoin market through a major regulated US exchange, implies that individuals are only getting started.
Why is 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 them when you feel like. The reason being Bitcoin runs on a evidence of work protocol: in order to create it, you have to mine it using computer processing power to solve complex algorithms on the Bitcoin blockchain. Once that is achieved, you are rewarded with Bitcoin as payment for the “work” you have done bitcoin mixer. Unfortunately, the reward you get for mining has decreased drastically almost each year since Bitcoin’s inception, meaning for many people the sole viable way to get Bitcoin is buying it on an exchange. At the present price levels is a risk worth taking?
Many believe Bitcoin is just a bubble. I spoke to cryptocurrency expert and longterm investor Duke Randal who thinks the asset is overvalued, “I’d compare this to numerous supply and demand bubbles over histories such as for instance 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 many who don’t know, the dot com bubble was an interval between 1997-2001 where many internet companies were founded and given outrageously optimistic valuations based purely on speculation that later plummeted 80-90% while the bubble started initially to collapse in early 2000s. Some companies such as for instance eBay and Amazon recovered and now sit far above those valuations but for others, it absolutely was the conclusion of the line.
Bitcoin was originally created in order to take power from our financial systems and put people in control of their own money, reducing the middle man and enabling peer to peer transactions. However, it is now one of the slowest cryptocurrencies in the marketplace, its transaction speed is four times slower than the fifth biggest cryptocurrency and its nearest competitor for payment solutions Litecoin. Untraceable privacy coin Monero makes transactions even quicker, boasting an average block time of just two minutes, a fifth of that time period Bitcoin can get it done in, and that’s without anonymity. The world’s second biggest cryptocurrency, Ethereum, already features a higher transaction volume than Bitcoin despite being valued of them costing only $676 dollars per Ether compared to Bitcoin’s $16,726 per Bitcoin.
So exactly why is Bitcoin’s value so high? I asked Duke Randal exactly the same question. “All of it goes back to exactly the same supply and demand economics, relatively there is not greatly Bitcoin available and its recent surge in price has attracted plenty of media attention, this with the launch of Bitcoin futures which many see as the very first sign Bitcoin is being accepted by the mass market, has triggered plenty of people jumping on the bandwagon for financial gain. Like any asset, if you find a higher demand to get than to offer, the cost goes up. This is bad since these new investors are entering industry without understanding blockchain and the underlying principles of these currencies meaning they are likely to get burnt “.
Another reason is that Bitcoin is very volatile, it has been known to swing up or down a large number of dollars within just a moment which if you are not used to nor expecting it, causes less experienced investors to panic sell, resulting in a loss. This is just one more reason Bitcoin will struggle to be adopted as an application of payment. The Bitcoin price can move substantially between the time vendors accept Bitcoin from customers and sell it onto exchanges for their local currency. This erratic movement can get rid of their entire profitability. Will this instability disappear any time soon? Not likely: Bitcoin is a relatively new asset class and although awareness is increasing, only a really 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 are its applications? Many believe Bitcoin has managed to move on from being a practical kind of payment to being a store of value. Bitcoin is 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 have been stories of people in high inflation countries such as for instance Zimbabwe buying Bitcoin in order to retain what wealth they have rather than see its value decline under the recklessness of its central banking system.
Is it too late to try Bitcoin? In the event that you believe in what these cryptocurrencies is going to do for the entire world then it is never too late to get involved, but with the expense of Bitcoin being so high is it a boat for a few which has already sailed. You may be better off having a glance at Litecoin, up 6908% for the entire year or Ethereum which is up an unbelievable 7521% for the year. These newer, faster currencies hope to accomplish what Bitcoin first attempted to do back in its inception in 2009 and replace government-run fiat currencies.
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