Bitcoin: All It’s Hyped Up to Be?

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.

Widely regarded as the largest investment tool of all time, Bitcoin has seen a meteoric rise during 2017 ranging from $ 777 to $ 17,000.

Creating millionaires from opportunistic investors and leaving financial institutions open-mouthed, Bitcoin has responded to its critics at every milestone this year and some believe this is just the beginning.

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

What makes Bitcoin so valuable is that there is a limited amount. There will only be a maximum of 21 million Bitcoins and unlike normal fiat coins you can not print more of them whenever you want. This is because Bitcoin works with a working protocol test: to create it, you have to undermine it using the power of computer processing to solve complex algorithms in Bitcoin blocking. Once this is achieved, you are rewarded with Bitcoin as payment for the “work” you have done. Unfortunately the reward you get for mining has dropped drastically almost every year since the inception of Bitcoin, which means that for most people the only valid way to get Bitcoin is to buy it on a stock exchange. At current price levels, is it a risk worth taking?

Many believe that Bitcoin is just a bubble. I spoke to cryptocurrency expert and long-term investor Duke Randal who thinks the asset is overvalued, “I would compare this to many supply and demand bubbles throughout history such as the Dutch Tulip Mania and the bubbles of the last few years’ 90. Prices are just speculation based, and when you look at the functionality of Bitcoin as a current currency it is almost embarrassing. ” For those who do not know, the dot com bubble was a period between 1997-2001 where many internet companies were founded and gave extremely optimistic estimates based solely on speculation that later fell 80-90% as the bubble began to collapse in the early Years 2000 Some companies, such as eBay and Amazon, recovered and now stand well above those estimates, but for others it was the bottom line.

Bitcoin was originally created in order to take power from our financial systems and put people in control of their money, cutting the middle man and enabling peer transactions. However, it is now one of the slowest cryptocurrencies on the market, its transaction speed is four times slower than its fifth largest cryptocurrency and its closest competitor to Litecoin payment solutions. Monero’s fuzzy privacy currency makes transactions even faster, boasting an average blocking time of just two minutes, one-fifth of the time Bitcoin can do so, and that is without anonymity. The world’s second largest cryptocurrency, Ethereum, already has a higher transaction volume than Bitcoin despite being valued at just $ 676 per Ether compared to $ 16,726 Bitcoin per Bitcoin.

Then why is the value of Bitcoin so high? I asked Duke Randal the same question. “It all turns into the same economy of supply and demand, there is relatively little Bitcoin available and its recent rise in price has attracted a lot of media attention, combined with the start of the Bitcoin future that many see. as the first sign Bitcoin is being accepted by the mass market, has resulted in many people jumping into the gang for financial gain.Like any asset, when there is a higher demand to buy than to sell, the price goes up. “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, it has been known to fluctuate up or down thousands of dollars in less than a minute which if you are not used to it or even expect it, makes less experienced investors panic sale, resulting in a loss. This is another reason that Bitcoin will struggle to be adopted as a form of payment. The price of Bitcoin can fluctuate significantly between the time traders accept Bitcoin from customers and sell it on exchanges for their local currency. This messy move can wipe out all their benefit. Will this instability disappear soon? Unlikely: Bitcoin is a relatively new class of assets and although awareness is growing, only a very small percentage of the world’s population owns Bitcoin. Until it is more widely distributed and its liquidity is significantly improved, instability will continue.

So if Bitcoin is too useless as a current currency, what are its applications? Many believe that Bitcoin has moved from being a valuable form of payment, becoming a valuable repository. Bitcoin is like “digital gold” and will simply be used as a benchmark for other cryptocurrencies and blockchain projects to be measured and traded. Recently there have been stories of people in high inflation countries like Zimbabwe buying Bitcoin in order to keep the wealth they have instead of seeing its value decline under the recklessness of its central banking system.

Is it too late to get involved in Bitcoin? If you believe in what these cryptocurrencies will do for the world, then it is never too late to get involved, but with the cost of Bitcoin being so high, is it a boat for some that has already sailed. You may be better off having a look at Litecoin, up 6908% for the year or Ethereum which is an incredible 7521% increase for the year. These newer, faster currencies hope to achieve what Bitcoin first decided to launch at its inception in 2009 and replace government-run Fiat currencies.

Who knows what the price of these coins will be ten, fifteen or even twenty years from now? One thing is for sure though, we better connect as it will be a wild ride.