Bitcoin entered the arena claiming to be the next big thing in
electronic cash. It took a while, but it gained traction with more and
more enthusiasts convinced that it would be just that.
Through an unpredictable market, it’s increase in price seemed to
reflect that it was indeed on its way to becoming the Next Big Thing,
but this same market volatility detracted from its initial aim of being a
currency, albeit a virtual one.
Yes, fiat currencies do fluctuate, but definitely not to the degree
that Bitcoin does. Take last week. In the span of one day, the price
of a single Bitcoin grew from $14k to $18k. Looking at the market
today, it’s trading at just under $14k. This volatility may make for
excitement and mystery, but it doesn’t do well when Bitcoin is trying to
establish itself as a viable alternative currency. In addition,
converting Bitcoin to dollars is a tedious, and sometimes expensive,
process, which doesn’t help its cause either.
Perhaps Bitcoin can be defined as store of value, as in keeps its
value without depreciating. Fiat currency used in economically advanced
and stable countries could be referred to as stores of value, if
hyperinflation doesn’t occur.
Inflation, in the context of an increase the actual supply of
available money, is a moot point for Bitcoin has it has a finite amount,
which is 21 million, of coins available. Bitcoin has the potential to
be a powerful cash alternative, especially in countries with a high
level of government and institutional corruption. However, because it
does not currently have all of the usual suspects required for it to be a
currency, it has not yet been adopted as a preferred medium of
exchange. So, it’s a no for store of value then.
Because its almost a viable cash alternative, perhaps Bitcoin and
other cryptos should be referred to as potential currencies. Even
though it appears to have no intrinsic value, it does offer investment
potential. You could purchase Bitcoin and hold onto it in the hopes
that you can sell it when it reaches those high prices. You could also
hold onto it until the time that it becomes a possible and widely used
fiat alternative. Until then, it’s a bit tricky to determine what its
actual value is.
The ‘bubble’ chants have been flying thick and fast as its price
continued to soar. The more expensive it became, the more alluring its
perceived value became. More investors started to buy, which resulted
in higher and higher prices.
However, analysts are of the opinion that whatever goes up, must come
down. The price will reach its peak, investors will start to sell and
the price will steadily drop.
The thing is, nobody knows when that possible peak will come.
Industry professionals such as Michael Novogratz has predicted that
Bitcoin will be trading at $50k by the end of next year.
Finding Bitcoin’s value may be tricky, but determining its popularity
is easy. Just take a look at any of its growth charts. Over 1000%
growth in less than a year is definitely worth mentioning. The big guns
at CME, CBOE and Nasdaq think so too, with Bitcoin futures becoming the
new kid on the blockchain at these financial firms.
: jack dean
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