Bitcoin: All It’s Hyped Up to Be?

Had you paid twenty seven dolars on Bitcoin when it was created by Satoshi Nakamoto in 2009 the investment of yours would right now be truly worth over $37,000,000.

Widely viewed as the greatest investment car of all time, 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 the critics of its at each milestone this year and some feel this’s simply the start.

The launch of Bitcoin futures on December 10th, which often for the first time allows investors to enter the Bitcoin market through a significant regulated US exchange, implies we are only just getting started.

Exactly what makes Bitcoin so useful is that there’s a finite amount in existence. There will only ever be a maximum of 21 million Bitcoins in addition to unlike regular fiat currencies you can’t simply print more of them whenever you feel like. This is since Bitcoin works on a proof of work protocol: in order to generate it, you have to mine it using computer processing power to resolve challenging algorithms on the Bitcoin blockchain. Once this is achieved, you are rewarded with Bitcoin as payment for the “work” you have finished. Unfortunately the reward you receive for mining has decreased drastically nearly every season since Bitcoin’s start, which means that for most people the only practical method to get Bitcoin is shopping for it on an exchange. At today’s price levels is that a risk worth taking?

Many feel Bitcoin is basically a bubble. I spoke to cryptocurrency expert and long term investor Duke Randal who believes the asset is overvalued, “I would compare this to a lot of demand and supply bubbles over history including Dutch Tulip Mania together with the dot com bubble of the late 90s. Price is purely speculation based, and as soon as you look at Bitcoin’s performance as a genuine currency it is just about embarrassing.” For individuals who actually do not know, the dot com bubble was a time period between 1997-2001 where many web companies have been founded and given outrageously optimistic valuations based purely on speculation that later plummeted 80 90 % as the bubble started to collapse in the early 2000s. Several companies including Amazon and eBay, recovered and now sit far above those valuations but for others it was the conclusion of the model.

Bitcoin was originally developed in order to get power away from our monetary systems and put people in charge of their own money, cutting out the middle male as well as enabling peer to peer transactions. Nonetheless, it’s currently among probably the slowest cryptocurrencies on the market, its transaction speed is four times slower than the 5th biggest cryptocurrency and its nearest competitor for payment solutions Litecoin. Untraceable privacy coin Monero can make transactions even quicker, boasting an average block time of a mere 2 minutes, a fifth on the precious time Bitcoin can get it done in, and that’s without anonymity. The world’s next biggest cryptocurrency, Ethereum, currently has a greater transaction volume than Bitcoin despite being estimated at only $676 dollars per Ether compared to Bitcoin’s $16,726 per Bitcoin.

And so why is Bitcoin’s value so high? canaan avalon 1166 requested Duke Randal exactly the same question. “It all goes back to a similar supply and demand economics, relatively there is not very much Bitcoin out there and its recent huge increase in price has attracted a great deal of mass media notice, which mixed with the launch of Bitcoin futures of which most people see as the first indicator Bitcoin has been acknowledged by way of the mass market, has led to a lot of people jumping on the bandwagon for financial gain. Like every asset, when there is a greater interest to buy than to sell, the fee goes up. This’s terrible because these new investors are entering the industry without realizing blockchain and the underlying ideas of these currencies which means they are likely to get burnt”.

Another reason is Bitcoin is extremely volatile, it has been noted to swing up or down thousands of dollars in only a minute and this if you are not accustomed to nor expecting it, leads to less experienced investors to panic sell, causing a loss. This’s nonetheless one more reason Bitcoin is going to struggle to become adopted as a sort of payment. The Bitcoin price can move considerably between the time vendors accept Bitcoin from consumers and sell it onto exchanges for the local currency of theirs. This erratic movement can eradicate their whole profitability. Will this instability go away any time soon? Not likely: Bitcoin is a relatively new asset class and although awareness is increasing, only an extremely tiny portion of the world’s population hold Bitcoin. Until it becomes more widely distributed and its liquidity gets better significantly, the volatility will continue.

So if Bitcoin is fairly useless as a real currency, what are its applications? Many believe Bitcoin has moved on from learning to be a viable form of payment to transforming into a market of value. Bitcoin is like “digital gold” and can simply be utilized as a benchmark for other cryptocurrencies as well as blockchain tasks being assessed against and traded for. Lately there have been accounts of people in high inflation countries such as Zimbabwe purchasing Bitcoin in order to hold onto what wealth they’ve instead see the value decline of its under the recklessness of its central banking system.

Is it too late to become involved in Bitcoin? If you believe in what these cryptocurrencies will do for the world then it is never too late getting involved, but along with the price of Bitcoin being expensive can it be a boat for some which has sailed. You could be more well off getting a glimpse at Litecoin, up 6908 % for the season or Ethereum that is up an amazing 7521 % for the year. These newer, faster currencies hope to achieve what Bitcoin first set out to accomplish back in the beginning of its in 2009 as well as substitute government run fiat currencies.

Leave a Comment