If you spent $ 27 on bitcoin when it was created by Satoshi Nakamoto in 2009, your investment would now be worth over $ 37,000,000.
Widely considered the largest investment instrument of all time, Bitcoin rose sharply in 2017 from $ 777 to $ 17,000.
By creating millionaires from opportunistic investors and leaving financial institutions open-mouthed, Bitcoin has met with critics at every turn this year, and some believe this is just the beginning.
The release of bitcoin futures on December 10, which for the first time will allow investors to enter the bitcoin market through a large regulated exchange in the United States, suggests that we are just beginning.
What makes bitcoin so valuable is that there is a limited amount. There will always be only a maximum of 21 million bitcoins, and unlike normal fiat currencies, you can’t just print more of them whenever you want. This is because bitcoin works on a proof of performance protocol: to create it, you have to dig it up, using the power of computer processing to solve complex algorithms in the bitcoin blockchain. Once this is achieved, you receive bitcoin as payment for the “work” you have done. Unfortunately, the reward you receive for digging has dropped dramatically almost every year since the creation of bitcoin, which means that for most people the only viable way to get bitcoin is to buy it on the stock market. At current price levels, is this risk worth taking?
Many believe that bitcoin is just a bubble. I spoke with Duke Randall, a cryptocurrency expert and long-term investor, who said the asset was overvalued: Prices are purely speculation-based, and when you look at the functionality of bitcoin as a real currency, it’s almost inconvenient. “For those who don’t know, the dotcom bubble was a period between 1997 and 2001, when many Internet companies were founded estimates based solely on speculation, which later fell by 80-90% when the bubble began to collapse in the early 2000s, with some companies such as eBay and Amazon recovering and now far above those estimates, but for others that was the end of the line.
Bitcoin was originally created to take power away from our financial systems and put people in control of their own money by cutting out intermediaries and allowing affiliate transactions. However, it is now one of the slowest cryptocurrencies on the market, with four times the speed of transactions than its fifth largest cryptocurrency and its closest competitor to payment solutions Litecoin. The untraceable Monero privacy coin makes transactions even faster, boasting an average blocking time of just two minutes, a fifth of the time Bitcoin can do so, and that’s without anonymity. The world’s second-largest cryptocurrency, Ethereum, already has more bitcoin transactions, although it is valued at only $ 676 per ether compared to $ 16,726 per bitcoin per bitcoin.
So why is the value of bitcoin so high? I asked Duke Randall the same question. “Everything returns to the same supply and demand economy, there is no very much available household and recent jump in the price attracted many media attention, this combined with the launch of bitcoine futures, which many see as the first sign the Bitcorn is accepted by the mass market, which has led many people to jump on board for financial gain. Like any asset, when there is a greater demand for purchase than for sale, the price rises. This is bad because these new investors are entering the market without understanding the blockchain and the basic principles of these currencies, which means they are likely to burn out. “
Another reason is that bitcoin is extremely volatile, known to rise or fall by thousands of dollars in less than a minute, which, if you’re not used to it and you don’t expect it, makes less experienced investors panic about selling. which leads to a loss. This is another reason why Bitcoin will struggle to be accepted as a form of payment. The price of bitcoin can fluctuate significantly between when providers accept bitcoin from customers and sell it on exchanges for their local currency. This chaotic movement can destroy all their profitability. Will this instability disappear soon? Unlikely: Bitcoin is a relatively new asset class, and although awareness is rising, only a very small percentage of the world’s population owns bitcoin. Until it becomes more widespread and its liquidity improves significantly, volatility will continue.
So, if bitcoin is quite useless as a real currency, what are its applications? Many believe that bitcoin has moved from a viable form of payment to becoming a means of storing value. Bitcoin is like “digital gold” and will simply be used as a benchmark for other cryptocurrencies and blockchain projects to measure and trade. Recently, there have been stories of people in high-inflation countries, such as Zimbabwe, buying bitcoin to keep the wealth they have instead of seeing its value decline due to the recklessness of the central banking system.
Is it too late to join bitcoin? If you believe in what these cryptocurrencies will do for the world, then it’s never too late to get involved, but because the price of bitcoin is so high, it’s a boat for some who have already sailed. Maybe it’s better to look at Litecoin, a growth of 6908% for the year, or Ethereum, which has grown by an incredible 7521% for the year. These newer, faster currencies hope to achieve what Bitcoin originally set out to do in early 2009 and replace government-run fiat currencies.
Who knows what the value of these currencies will be in ten, fifteen or even twenty years? One thing is for sure, however, it is better to fasten, because it will be a wild trip.