There is a lot of hoopla about Bitcoin and other Cryptocurrencies these days, as their value soar and new investors pour in money in hopes of getting similar lucrative returns, others have seen in the past few years.
However, in order to understand the recent rise and future of Bitcoin, you have to learn about its past. Since I am not a Cryptocurrency or Bitcoin expert, you would be better served by reading this article by Arstechnica on the history of Bitcoin and its soaring value, which went from US$ 12 to 10,000 in around 5 years.
I first heard of Bitcoin a few years ago, when it was still being championed as a form of anonymous currency, which could be transacted online for a plethora of services and would eventually be used offline for day to day usage. It was supposed to be a democratic digital currency, free from the tracking and control of governments. This hasn’t happened, and will likely never happen unless the development community changes the trajectory of Bitcoin for good.
However, from the beginning, due to the anonymous nature of Bitcoin, it was mainly used to transact for services which fell in grey or completely dark area. It was and still is used (now other cryptocurrencies have taken over low value ransoms) for ransom by cybercriminals, which is on the rise thanks to more and more outbreaks of ransomware.
As an actual currency, which many dubbed Bitcoin to be, it has limited value or utility, especially considering recent spike in its value. After all, who would pay for services with a currency, which is limited in nature (only slowly expanding) and has the potential of rising in value very rapidly?
For all practical purpose, Bitcoin today have become a speculative instrument, which can be further used to purchase other speculative instruments (Initial Currency Offering of newer Cryptocurrencies).
It has no real-world value or demand, and its value can only rise until there is speculation that it will go higher in future and so will other cryptocurrencies, which are coming out.
If large investors start cashing in their Bitcoin (which any smart investor will at some point in time), it will likely have a severe effect on the value of the Bitcoin and that could be disastrous for late investors, while the early investors will still be able to reap in good return. That is, of course, assuming, someone would still pay in actual currency for the Bitcoin.
There are many that will disagree with me, and it might be the case, Bitcoin continues to rise in value for the next few years, setting new records and eventually rising in value so much, that it becomes a speculative instrument that can only be transacted by the super-rich and it will produce a new class of billionaire, which mined or bought Bitcoin at fairly low value.
However, conventional wisdom tells us, each bubble (yes it is a bubble) can only be sustained for a limited amount of time, before it bursts and burns the small and late investors. Majority of the early, large and smart investors will likely getaway with a slap on the wrist, only to pursue another such new avenue for high returns…