Bitcoin is the universal epitome of ‘crypto currency’ success, even more so with the unabated pace of growth it has showcased in spite of the economic volatility plaguing the ‘real’ currencies. The first half of 2017 has been dotted by multiple milestones of peak value of Bitcoins. The iconic cyber currency has continued its surges, and bettered its all time highs multiple times already.
The Bitcoin Surge
At the time writing this post (4 May), Bitcoin is buzzing in the financial spheres, as it has now recorded a value of $1540.71 per unit, driven by amplified overnight trading. CoinDesk Bitcoin Price Index estimated that the market climbed to $1540.71 at the peak time of trading, and Bitcoin crossed the iconic $1500 mark at around 1:15 UTC, ending the day’s trading at a value of $1,534.80 per unit.
It’s noteworthy that since January 2017, the global Bitcoin market has witnessed exciting events, with a lot of dynamism, shifts in regulatory alignments towards crypto currencies, investor confidence, and global business events in general. The story that gathered maximum weight happened in January, when Chinese regulators issued warning to exchanges facilitating Bitcoin trading. The warnings later resulted in trading fees, and withdrawal delays. However, Bitcoin has surpassed all the negative sentiment, and made rapid leaps to set new records of valuation per unit in the first few months of the year. A Bitcoin was value at a record high of $1331 at April end, and the steep increase in value seems to be a trend that will continue, as we already see Bitcoin value surpass the $1,500 value mark.
What Are The Reasons for Bitcoin’s Current Growth
Several factors have combined to make Bitcoin the success that it has become today. These forces have been in play since the time of Bitcoin’s early days, and have amplified its value to record breaking lvels today. Let’s understand them.
Bitcoins Are Designed to Increase in Valuation
Bitcoin is a currency that’s been designed to appreciate in value consistently. Is that even possible, you ask? Well, here’s the logic. Fiat currencies (paper based currencies) are prone to the stress of inflation, which happens when there’s more currency in supply than the demand. On the other hand, Bitcoin crypto-currency, at its core, has the concept of slow but continued reduction in supply.
The rate of Bitcoin production every 10 minutes is being reduced, as a part of planned four-yearly ‘halvings’. This known pressure on supply will create a supply-demand offset in favor of the supply side, driving the valuation up, theoretically always! Compare it, for example, with US Dollar, which has no limit on the production, as the Government and central banking authority can pass decrees to warrant more production whenever they deem appropriate. These overproduction endeavors are fuelled by debts, huge war expenses, etc. Bitcoins don’t suffer from debts, so there’s no overproduction requirement.
Fatigue and Lack of Confidence Associated with Fiat Currencies
Take your mind back to events in Greece, Zimbabwe, Cyprus, and Venezuela, that caused serious damage to the valuation of national currencies. The world is looking for a better economic value and currency model that is not susceptible to such falls, and Bitcoin gets most boxes ticked.
Recently, Japan announced nationwide recognition of Bitcoin as national currency at par with Yen.
Ecuador and Mexico are working on the idea of their own national blockchains to emulate the Bitcoin model. China is in talks with the biggest consultancies of the world, to work out a blockchain currency model in the future.
Global access to World Wide Web, ever increasing list of economic events indicating the fragility of fiat currencies, and examples of governments and financial regulators adopting cryptocurrencies – all these factors have fused together to position Bitcoin as a potent force that can shape economic future.
The Transition from Cash To Digital Currency
We are living in times where the global body of financial regulators is increasingly aligning itself to the idea of cashless or low-cash economies. This idea is being realized via soft bans, of the kind witnessed in India in November 2016,, wherein the ruling government demonetized the two highest dimension currency notes (accounting for 86% of the GDP).
Measures such as these aim at funneling economic transactions to digital media, which in turn brings more transactions under tax regime. The ulterior government motives notwithstanding, it’s clear that digital currencies are the way to the future. Because Bitcoin has already showcased stable performance, process control, security, and inflation-immune nature for so many years already, it becomes a key player in the economic storylines that will unfurl in the near future.
The present certainly belongs to Bitcoin. But what about the future?
What Do Experts Predict About The Future Of Bitcoin?
Let’s understand what makes experts predict a great future for Bitcoin.
Waning Interest and Value in Global Reserve Currency – US Dollar
US Dollar is the Global Reserve Currency. Through QE Infinity, it continues to lose its value year on year, due to increase in supply, which triggers inflation. This has even caused the global interest in it to wane. It’s noteworthy how China has been pressing to replace USD as the Global Reserve Currency.
The right question to ask – how much value does the USD lose every year? Well, where the government says it’s 1-2% annually, the truth is that the dollar loses close to 8-10% every year because if inflation.
Because of this, every subsequent year, it takes more US dollars to buy one Bitcoin unit. The result – with the falling Dollar, the Bitcoin will continue to rise. The moment USD loses the Global Reserve Currency status, people will be flooding the Bitcoin market to get onboard.
All this while, Bitcoin will just have to continue what it is already doing, and accumulate immense value with every passing day. No world government or economic institution has any control over Bitcoin, which means the wheels of this machine will continue to roll pretty much the way they have been doing all these years.
Proven Track Record for Investors
In the past 6 out of 7 years, investors have made handsome returns on any Bitcoins they’ve purchased. This is not even comparable to the kind of paltry returns that investors associate with fiat currency trading.
Wall Street is Yet to Hop on the Bandwagon
The sentiment at Wall Street, believe it or not, is a major wind that shapes which ways the trees of global economy bend. Bitcoin analysts and experts contend that the crypto-currency will experience another shot in the arm when the Wall Street jumps on the Bitcoon bandwagon, which will soon enough create forces that will amplify the demand for Bitcoins manifolds. These projections and predictions imply that the value of a bitcoin could still grow many times, notwithstanding the fact that one Bitcoin already costs 1,500 USD!
Can anybody say for certain that Bitcoins will continue to rock and roll? No. However, never once has a currency concept gathered so much attention, never before has a digital concept showcased such immense potential and proven it, and never before has the sum total of all economic forces pushed so vigorously in favor of one financial product – the Bitcoin. The future is exciting. Are you onboard the Bitcoin bandwagon yet?