Given the huge increase in value that Bitcoin witnessed in the year of 2017, numerous economic analysts, but also heads of major financial corporations and companies have given their thoughts on the popularity of the digital currency. So far, it seems like people are divided into two separate sides: those who believe that Bitcoin is a bubble, and those who think that it has a bright future up ahead.
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On Friday, the 17th of November 2017, Bitcoin managed to hit a new all-time high, thus reaching the threshold of $8,000 for the first time. At the time of writing, the cryptocurrency has not yet managed to settle its value, and is still slightly volatile, hence fluctuating at the $7,800 mark. This increase is quite interesting to analyse, considering the fact that not long ago, the coin suffered a major decrease in value, and traders could buy it for as low as $5,500.
Analysts currently believe that the recent increase in value is due to the possibility of the SegWit2x hard fork happening anyway, regardless of news stating that the plan had been cancelled.
These major changes in price have also fuelled the idea that Bitcoin may be a bubble, so in this article, we will attempt to explain why this isn’t the case, and why the digital currency is just getting started.
The main argument of anyone who believes in the ‘Bubble Theory’ would be that there is no actual, touchable value in the price of Bitcoin, but is rather an increase fuelled by speculation and trading volume. This argument is often backed by history lessons, pointing back to the Tulip Bubble, the dotcom bubble of 1990, or the housing bubble of 2008, when prices skyrocketed.
The main counter argument is that Bitcoin is unlike anything we have ever seen before. It is a digital currency, backed by blockchain technology that has attracted the interests of millions of investors and people throughout the world. Its value is based on supply and demand laws, so the more people want to use the digital currency, the more its price will grow. The economic principles that applied to other bubbles in the past are not applicable to the coin.
Additionally, given the large investments, huge trading volume, and the fact that numerous companies and governments are seeing big potential in Bitcoin, a bubble is not what is happening to Bitcoin right now. Last but not least, if the CME Group, which is the world’s largest derivatives operator has announced that it is preparing Bitcoin securities for a more institutionalized form of investment, it is unlikely that we will see the coin’s value drop massively anytime soon.
Since 2009, Bitcoin has done nothing but grow in value. While volatility may still be associated with the currency, this is understandable, as it is entering a market that remained unchanged over the years, and providing the world with a better way of making payments.
About the author:
Anupam is co-founder of Bitcoinprice.com and sends out dialy price analysis of major cryptocurrencies to a growing number of followers. Subscribe to his newsletter today.