The future suddenly seems to have shifted from the hard currency that was once the norm to the age of cryptocurrency. It seems quite exciting, intriguing but also unpredictable to take financial standings and let go of cash to the rising army of cryptocurrencies.
Cryptocurrency is a digital asset used as an alternate medium of transaction that makes use of cryptography. A unique feature of cryptocurrencies is that they make use of decentralized system of control unlike the banking system or electronic banking systems. With the passage of time, a number of cryptocurrencies have been in the limelight with the first and most popular being bitcoin.
Bitcoin, a cryptocurrency which first came to view in 2009, has since taken the first spot among cryptocurrencies, and in the market. It is used for making transactions and primarily as a means of exchange with many industries and merchants now accepting bitcoin as a means of payment with its value soaring higher, being at its peak mid-December 2017, when it traded for over $ 18,000.
However, 2018 has seen a turn in its fortunes with the crash of bitcoin, and the digital currency getting as low as $8000. This has been worsened also by the rampant fear among investors with many in a hurry to sell their currencies and close their losses. This is coupled with the call for regulations of the activities of the cryptocurrency and harsh measures such as British banks’ ban of purchase of cryptocurrency with credit cards. With the uncertainty and high volatility of bitcoin, it is difficult to say what its future will be.
Given that the Asians are major players in the rise of bitcoin with Japan having legalized it earlier and Chinese investors at a time making up at least 80% of bitcoin ownership, some analysts argue that the crash was due to fears and anxiety mounted upon the Asian cryptocurrency market due to speculations that the South Korean regulators were about to ban trading in bitcoin and other crypto-currencies, a quite formidable threat. This arguably had a tremendous effect on the market and with its ripple effect, caused rapid sell-off of bitcoin and the resultant crash.
A major difficulty and cause for uncertainty in bitcoin is the fact that it has no intrinsic value. A large number of investors are people who bought bitcoin not because they see a future in it, but rather because of the belief that it will rise in value and at a very fast pace. Bitcoin was seen as a way to cash in quick money, and make tremendous gains in as short a time as possible. In the course of this, it lost a highly important feature of a currency‒ its use as a means of exchange. Investors wouldn’t spend the bitcoin they own, and reasonably so‒ why would you spend when by tomorrow it will be much more valuable?
In fairness, the appeal of bitcoin and cryptocurrency has been heightened by general geopolitical unease and the growing distrust of people for institutionalized banking system especially in the wake of the almost worldwide economic recession which successfully added sauce to the festering apathy for banks, protection from hyperinflation of everyday currencies, and significantly, Ransomeware attacks with their demand for payment in bitcoin have drawn the attention of the public to bitcoin like never before. Just as people turn to gold, bitcoin is the closest to being termed “digital gold” as it has a finite number based on its program, eternally fixed at 21 million coins meaning just like gold, it is scarce.
With the shadows on the future of bitcoin due to its present downturn, statistics show that the trajectory of bitcoin might soon be a tale in its journey as bitcoin has now stabilized at the $13000 region and is steadily rising again. If anything, these might be a template for a comeback as the low value of the currency could entice investors since the entry point is much lower.
Rather than making informed decision, those who joined the trend due to bandwagon are quick to jump ship with news such as Facebook banning ads on cryptocurrency since it seem the party is about to end. These investors successfully bleed the market rapidly.
Despite its sudden fall, statistically, bitcoin is of a much greater value now at it lowest point in recent months than it was in January 2017 when it peaked just above $1000. Even at its lowest point in recent time where it trades below $8000, it still is about 800% more valuable than it was a year ago. This shows that overall it still is a great bargain.
In the early weeks of 2017, the value of bitcoin fell by about 30% after which it broke even, followed by a sustained rise in its market value with a recoup of initial losses. We just might be looking at a repeat in the early parts of 2018 but on a wider scale, because the value of bitcoin is now high up, with greater effect due to mainstream popularity. Speculations are still in favor of bitcoin in the long run with cryptocurrency prediction survey putting bitcoin at a worth of $33000 by the end of 2018.
It is still incredibly difficult to say what the future of bitcoin will be, but one thing that has become normal along its history is large price swings‒ volatility. This shows that the market as much as it can race downhill rapidly can also bounce back in a short time. Bitcoin, more than any other innovation at the moment is closest to being a universal currency in the long run and a store of value readily available for cash recoup in the short term because by its statistical indications, though bitcoin and crypto-currencies may be having tough times at the moment, they are the future and with focus on their management and a control of volatility overtime, they may as well have come to stay.