Bitcoin: What is all over-optimistic?

If you had spent $ 27 on Bitcoin when it was created by Satoshi Nakamoto in 2009, your investment would now be worth over $ 37,000,000.

Bitcoin is widely seen as the largest investment vehicle of all time, and it went up dramatically during 2017 from $ 777 all the way to $ 17,000.

Creating opportunistic investors and leaving financial institutions open, Bitcoin has answered its critics at every significant event this year and some believe this is just the beginning.

The launch of Bitcoin futures contracts on December 10, which will allow for the first time investors to enter the Bitcoin market through a major regulated US exchange, means that we are just getting started.

What makes Bitcoin so valuable is that it has a limited amount. There will only be a maximum of 21 million Bitcoins, and unlike regular currencies, you cannot print more of them whenever you want. This is because Bitcoin works to prove a working protocol: in order to create it, you have to mine it using computer processing power to solve complex algorithms on the Bitcoin blockchain. Once this is achieved, you will be rewarded with Bitcoin as payment for the “work” you did. Unfortunately, the bonus you get for mining has decreased drastically every year around since the inception of Bitcoin, which means that for most people the only viable way to get Bitcoin is to buy it on the exchange. At current price levels, is this a risk worth the risk?

Many people think Bitcoin is just a bubble. I spoke to cryptocurrency expert and long-term investor Duke Randal who believes the asset is overrated, “I will compare this to the many supply and demand bubbles throughout history like the Dutch Tulip Mania and the dot com bubble of the late 1990s. Prices are just speculations, and when you look at Bitcoin jobs as a real currency. It’s almost embarrassing. ” For those who don’t know, the dotcom bubble was a period between 1997-2001 when many internet companies were founded and provided outrageously optimistic ratings based solely on speculation that later fell 80-90% as the bubble began to collapse early on. 2000s. Some companies, like eBay and Amazon, have recovered and are now much higher than those ratings, but for others, that was the end.

Bitcoin was originally created in order to wrest power from our financial systems and get people to control their own money, dispense with a middleman and enable peer-to-peer transactions. However, it is now one of the slowest cryptocurrencies on the market, and its transaction speed is four times slower than the fifth largest cryptocurrency and its closest competitor in payment solutions Litecoin. Monero’s untraceable privacy coin makes transactions faster, as it has an average blocking time of just two minutes, five times Bitcoin, and that’s anonymously. The second largest cryptocurrency in the world, Ethereum, already has a higher transaction volume than Bitcoin even though it is only valued at $ 676 per Ether compared to Bitcoin’s $ 16,726 per Bitcoin.

So why is Bitcoin’s value so high? Duke asked Randall the same question. “ It all comes down to the same economics of supply and demand, relatively little bitcoin is available and the recent rise in prices has attracted a lot of media attention, along with the launch of Bitcoin futures contracts that many see as the first sign Bitcoin is accepted by the mass market. , Which led to a lot of people jumping in the bandwagon to make a financial gain. Like any asset, when there is a higher demand to buy than to sell, the price goes up. This is bad because they enter new investors into the market without understanding the blockchain and the basic principles of these currencies which means It is likely to be burned. “

Another reason is that Bitcoin is very volatile, and has been known to fluctuate up or down thousands of dollars in less than a minute, and if you are not used to or expecting it, it causes less experienced investors to panic from selling, leading to a loss. This is another reason Bitcoin will struggle to adopt it as a form of payment. The price of Bitcoin can fluctuate dramatically between the time when sellers accept Bitcoin from customers and sell them to exchanges in their local currency. This erratic movement can wipe off her profitability completely. Will this instability go away anytime soon? Unlikely: Bitcoin is a relatively new asset class and despite increased awareness, a very small percentage of the global population owns Bitcoin. Until it is distributed more widely and liquidity improves significantly, volatility will continue.

So if Bitcoin is useless as a physical currency, what are its applications? Many believe Bitcoin has gone from being a viable payment method to becoming a store of value. Bitcoin is similar to ‘digital gold’ and will simply be used as a benchmark for other cryptocurrencies and blockchain projects that can be measured and traded. Lately, there have been stories of people in high-inflation countries like Zimbabwe buying Bitcoin in order to keep the wealth they own rather than seeing its value plummet as its central banking system recklessly.

Is it too late to engage in Bitcoin? If you believe in what these cryptocurrencies will do to the world, it’s never too late to get involved, but with Bitcoin so expensive, it’s a boat for some who have already set sail. You might be better off looking at Litecoin, up 6908% for the year, or Ethereum that’s up an incredible 7521% for the year. These newer and faster currencies hope to achieve what Bitcoin first set out to do in its inception in 2009 and to replace fiat currencies run by the government.

Who knows how much the price of these currencies will be in ten, fifteen, or even twenty years from now? One thing is for sure though, we’d better connect ourselves to it because it would be a road trip.