Many believe Bitcoin is simply a bubble. I actually spoke to cryptocurrency expert and long-term investor Fight it out Randal who thinks the asset is overvalued, “I would compare this to many supply and demand bubbles over history such as Dutch Tulip Odio and the dot apresentando bubble of the past due 90s. Prices are solely speculation based, and when you look at Bitcoin’s functionality as an real currency it is almost embarrassing. ” For those who avoid know, the dot possuindo bubble was a period between 1997-2001 where many internet companies were created and given outrageously optimistic valuations based purely on speculation that later plummeted 80-90% as the bubble started out to break down in the early 2000s. Some companies such as eBay and Amazon, recovered and after this sit far above those value but for others it was the end of the line BitcoInvest.cc.
Bitcoin was actually created in order to take power away from our financial systems and set people in control of their a single cent, cutting out the middle man and permitting peer to peer purchases. However, it is now one of the slowest cryptocurrencies on the market, its transaction speed is four times slower than the fifth biggest cryptocurrency and its nearest rival for payment solutions Litecoin. Untraceable privacy coin Monero makes transactions even quicker, boasting an average block time of just two minutes, a fifth of the time Bitcoin can do it in, and that’s without anonymity. The world’s second biggest cryptocurrency, Ethereum, already has a higher transaction quantity than Bitcoin despite being valued at only $676 dollars per Ether compared to Bitcoin’s $16, 726 per Bitcoin.
So why is Bitcoin’s value so high? I asked Duke Randal the same question. “It all dates back to the same provide and demand economics, relatively there is not very much Bitcoin available and its recent surge in cost has attracted a lot of media attention, this combined with the launch of Bitcoin futures which many see as the first sign Bitcoin is being accepted by the mass market, has resulted in a lot of individuals joining the club for financial gain. Just like any asset, when there is a higher demand to buy than to sell, the purchase price goes upward. This is bad because new investors are coming into the market without understanding blockchain and the root principles of these currencies that means they are likely to get burnt”.
Another reason is the fact Bitcoin is extremely volatile, it is known to golf swing up or down hundreds of dollars in less than one minute which if you are not used to nor expecting it, causes less experienced investors to panic sell, producing in a loss. This particular is yet another reason Bitcoin will struggle to be adopted as a form of payment. The particular Bitcoin price can move substantially between the time vendors accept Bitcoin from customers and sell it on to exchanges for their local currency. This particular erratic movement can eliminate their entire profitability. Will this instability go away sooner? Not likely: Bitcoin is a comparatively new advantage class and although awareness is increasing, only a very small percentage of the world’s population maintain Bitcoin. Until it becomes extensively distributed and its liquidity boosts significantly, the volatility will continue.