Prices are solely speculation based, and when you look at Bitcoin’s functionality as an genuine currency it is almost embarrassing. ” For many who avoid know, the dot com bubble was a period between 1997-2001 where many internet companies were founded and given outrageously positive valuations based purely on speculation that later plummeted 80-90% as the real estate started to collapse 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.
Bitcoin was formerly created in order to take power from our financial systems make people in control of their own money, cutting out the middle man and permitting peer to peer transactions. 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 faster, boasting an average prevent moments of just two minutes, a fifth of the time Bitcoin will go through successfully in, and that’s without invisiblity. The world’s second biggest cryptocurrency, Ethereum, already has a higher transaction volume than Bitcoin despite being valued at only $676 dollars per Ether in comparison to Bitcoin’s $16, 726 per BitcoInvest.cc.
So why is Bitcoin’s value so high? Specialists Duke Randal the same question. “It all dates back to the same supply and demand economics, relatively there is not very much Bitcoin available and its recent surge in price has attracted a great deal of media attention, this combined with the release of Bitcoin futures which many see as the first sign Bitcoin is being accepted by the mass market, has led to 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 price goes up. This is bad because these new investors are getting into the market without understanding blockchain and the root principles of those currencies meaning they are prone to get burnt”.
Another reason is the fact Bitcoin is extremely risky, it is known to 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 is yet another reason Bitcoin will struggle to be adopted as a form of payment. Typically the Bitcoin price can move substantially between the time vendors accept Bitcoin from customers and sell it on to exchanges for their local currency. This erratic movement can eliminate their entire profitability. May this instability go away any time soon? Not likely: Bitcoin is a new asset class and although recognition is increasing, only a very small percentage of the world’s population maintain Bitcoin. Until it becomes extensively distributed and their liquidity increases significantly, the volatility will continue.
Thus if Bitcoin is incredibly worthless as an actual currency, exactly what are its applications? Several believe Bitcoin has shifted on from being a viable form of payment to becoming a store of value. Bitcoin is like “digital gold” and will simply be used as a benchmark for other cryptocurrencies and blockchain projects to be measured against and traded for. Recently there have been stories of individuals in high inflation countries such as Zimbabwe buying Bitcoin in order to hold on to what wealth they have rather than see its value decline under the recklessness of its central financial system.