If you had spent $ 27 on Bitcoin when it was created by Satoshi Nakamoto in 2009, your investment would now be over $ 37 million.
Widely known as the greatest investment vehicle of all time, Bitcoin has skyrocketed from $ 777 to $ 17,000 in 2017.
By creating millionaires from opportunistic investors and leaving financial institutions with their mouths open, Bitcoin has responded to its critics at every stage of the year, and some believe this is just the beginning.
The launch of bitcoin futures on December 10th, which will allow investors to enter the bitcoin market through a major US regulated exchange for the first time, means we are just getting started.
What makes Bitcoin so valuable is that there is a limited supply of it. There will only be 21 million bitcoins, and unlike regular fiat currencies, you can’t just print more of them whenever you want. This is because Bitcoin operates on a proof of work protocol: to create it, you have to mine it using the computing power of a computer to solve complex algorithms on the Bitcoin blockchain. Once this is achieved, you will be rewarded with bitcoins as payment for the “work” you have done. Unfortunately, the reward you receive for mining has dropped dramatically almost every year since Bitcoin was introduced, which means that for most people, the only viable way to get Bitcoin is by buying it on the exchange. Is it worth taking such a risk at current prices?
Many people think that Bitcoin is just a bubble. I spoke to cryptocurrency expert and long-term investor Duke Randall, who believes the asset is overvalued: “I would compare this to many supply and demand bubbles in history, such as the Dutch tulip mania and the dot-com bubble in the late 90s. Prices are pure speculation. based, and when you look at the functionality of Bitcoin as a real currency, it’s almost confusing. ” For those who don’t know, the dot-com bubble was between 1997-2001, when many internet companies were founded and outrageously optimistic estimates based solely on assumptions were made, which later plummeted 80-90% when the bubble began to collapse in the beginning. 2000s Some companies, like eBay and Amazon, have recovered and are now well above these estimates, but for others it was the end of the line.
Bitcoin was originally created to take power from our financial systems and empower people to control their own money by eliminating middlemen and allowing peer-to-peer transactions. However, now it is one of the slowest cryptocurrencies on the market, its transaction speed is four times lower than that of the fifth largest cryptocurrency and its closest competitor in payment solutions Litecoin. Monero’s non-traceable privacy coin makes transactions even faster with an average lock time of just two minutes, a fifth of the time Bitcoin can do it, and that’s without anonymity. The second largest cryptocurrency in the world, Ethereum, already has a higher transaction volume than Bitcoin, despite the fact that it costs only $ 676 per ether compared to $ 16,726 bitcoin 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 economy, there are relatively few bitcoins and the recent price hikes have attracted a lot of media attention, coupled with the launch of bitcoin futures, which many see as the first sign of Bitcoin being adopted by the mass market. which has led many people to jump on the bandwagon in search of financial gain. As with any asset, when the demand for buying is higher than for selling, the price rises. This is bad because they are new investors entering the market without understanding the blockchain and the underlying principles of these currencies, which means they can burn out. “
Another reason is that Bitcoin is extremely volatile, it is known to fluctuate up or down by thousands of dollars in less than a minute, which, if you are not used to it and don’t expect it, makes less experienced investors panic, resulting in losses. This is another reason why Bitcoin will struggle to be accepted as a form of payment. The price of bitcoin can vary significantly between times when sellers accept bitcoin from customers and sell it on exchanges for their local currency. This erratic movement can completely negate their profitability. Will this instability go away anytime soon? Unlikely: Bitcoin is a relatively new asset class and while awareness is growing, only a very small percentage of the world’s population owns Bitcoin. Until it becomes more widespread and its liquidity improves substantially, volatility will continue.
So if Bitcoin is worthless as a real currency, what are its applications? Many believe that Bitcoin has evolved from a viable form of payment to a store of value. Bitcoin is similar to “digital gold” and will simply be used as a benchmark for other cryptocurrencies and blockchain projects to be compared and used for exchange. Recently, there have been reports of people in high inflation countries like Zimbabwe buying bitcoins in order to preserve the wealth they have, instead of seeing its value fall due to the recklessness of the central banking system.
Is it too late to get involved with Bitcoin? If you believe in what these cryptocurrencies will do for the world, then it’s never too late to get involved, but with the high value of bitcoins, this is a boat for those who have already set sail. You might be better off looking at Litecoin, which is up 6908% over the year, or Ethereum, which is up an incredible 7,521% over the year. These new, faster currencies hope to achieve what Bitcoin first set out to do back in 2009, and will replace government fiat currencies.
Who knows what the price of these currencies will be in ten, fifteen or even twenty years? One thing’s for sure: we’d better buckle up as it’s going to be a wild ride.