At the beginning of 2017, Bitcoin has hit $1000 US dollars and its continuous surge in value has left cryptocurrency analysts debating whether or not this tendency will continue.
If we compare Bitcoin’s value from the start to the final months of 2017, Bitcoin has seen a whopping 860% increase, and most financial experts were skeptical that Bitcoin will reach the $ 10.000 US dollar threshold by the end of the year.
How did Bitcoin get here?
As a response to the 2008 global economic crisis, investors have been drawn in increasing numbers by the advantages Bitcoin has to offer, thus justifying the coin’s incredible growth. The financial world is moving into cryptocurrencies at a fast pace, boosting even more the number of investors coming in this sector and consequently the value of Bitcoin.
In retrospective, saying that the Bitcoin price will reach $ 10.000 USD would have been considered just wishful thinking or absurd, but now more and more voices are predicting that the once-improbable price value will be reached by the end of the year.
Billionaire Mike Novogratz predicted the $10.000 USD price in October and still believes that Bitcoin will hit the much anticipated value by the end of the year. He also declared that he has invested in initial coin offerings, and that he plans to start a $500 million fund for cryptocurrency related startups, called Galaxy Digital Asset, suggesting he is prepared to secure his crypto possessions.
Bitcoin is still seeing high demands, with a majority of people showing more interest in buying than selling, making it a matter of time before the 5-digit sum is reached. Regarding trading volume, Bitfinex continues to be in the lead by far compared to the other rivaling exchanges.
With a value of approximately seven times that of gold, one must start wondering whether it’s better to invest in a physical precious metal or a digital coin. Not only that, but on the stock market it has found itself competing with the likes of IBM, McDonald’s and Disney, companies known for producing large capital.
To quote from Novogratz’s Bloomberg Television interview: “gold has value solely because people say it has value; Bitcoin is built on an amazing technology, there’s a limited supply of it”.
The Economic Bubble
Many critics think the Bitcoin bubble will burst and that a massive market collapse is bound to happen should there be no corrective measures implemented. It is speculated that once the price hits the predicted sum, many investors will opt to sell their digital assets and these en masse sales will produce a drop from which it will be hard to recover.
Some like Sara Feenan of Clearmatics (a block-chain startup) think that will not be the case as investors would be more likely to be motivated to keep their cryptocurrency holdings until a form a legalization will be instated. She continues to say that the possibility of cryptocurrency regulations is more probable to produce a price drop, although there have been no signs that there will be any actions taken in that direction. The president of the European Central Bank has stated that cryptocurrencies do not require regulation for the time being, as it is a currency still in developing stages.
International stance on Bitcoin
So far, Bitcoin has broken record after record in the month of November, and economically-influent countries like England and Japan adopting its use in routine transactions will most likely contribute to the current trend.
Bitcoin has been met with wariness by many governments, China and South Korea going as far as to ban initial coin offerings and close exchanges.
Japan on the other hand has legalized and regulated the digital coin, with stores being encouraged to accept Bitcoin transactions. Since Japan, the world’s 3rd economic power, has granted operating licenses for exchanges in October, it can be safe to assume that it aided to the cryptocurrency’s impressive rise in value.
Bitcoin is of great interest for being decentralized, with a limited monetary supply, 21 million Bitcoins in total, making it deflationary prone.
Because of this, Bitcoin is a safer alternative for countries that have problems in the banking sector like Venezuela and Zimbabwe. Although it has been declared illegal in the latter, it still continues to be used in growing numbers.
Venezuelan authorities have arrested citizens for mining, fearing that the large number of people choosing to mine as an alternative to salaries will further decrease the bolivar (Venezuelan currency). Cryptocurrencies made online goods affordable for people in a country which has an inflation hit of 4000%.
Favorable predictions or not, no one really knows for sure if this massive growth will be continuous and sustainable. Although things look really promising for now, we can only speculate how things will play out for the future of Bitcoin.