Cryptocurrency is on the rise as talks of an alternative to physical currency permeates both the financial sector and mainstream conversation. Just this month, the valuation of bitcoin, perhaps the most famous cryptocurrency option currently on the market, fell to around $5,500. Within two days it had bounced back and was trading above $6,400.
The Bitcoin Boom
The uptick in bitcoin over the last few weeks is largely attributed to a changing tide in the mainstream. Billionaire hedge fund legend Mike Novogratz emphasized that ever large numbers of institutional investors are gradually preparing to engage head on with Bitcoin and use it to invest in the market. This would mark a sizable change in the tide, perhaps making 2017 the year in which bitcoin went from exclusively speculative entity to some kind of actual alternative. According to Cyrpto Coin News, the past 12 months alone have see the liquidity of bitcoin increasing substantially along with its market valuation, which has predictably attracted the interests of institutional investors, including those initially skeptical of bitcoin’s place in the current financial ecosystem.
This might sound like nonsense to some; cryptocurrency is still in the “insider baseball” stage for most. But the ebbing and flowing highlights the volatility of the cryptocurrency market as a whole, signaling for some that this new breed of economics is both something to monitor and be weary of. Since its development in 2009 the digital currency has grown in popularity, even if it has yet to be fully embraced by the powers that be. For those still trying to wrap their head around the new online economy, bitcoin is a digital currently created and held exclusively electronically. Its value hinges on its decentralization, meaning that no single institution (or government) can control or access the network.
A Worldly Denomination
That latter point goes a long way in explaining, according to the UBS, that governments are likely to limit proliferation of the currency by restricting their use for government-related finances such as tax payments. This might be a way of mediating what could only be called a “disruptor”; giving up the ability to control or monitor the flow, distribution or gains is a tough sell. China, for one, has recently banned any trading or offerings of cryptocurrencies, and chances are it won’t be the last government to act on those same concerns.
Still, even with governments largely putting their foot forward, the value of bitcoin has risen 700% this year alone. Its volatile nature is, to many, no different than the highly-prized stock market. Each year, more and more retailers are accepting bitcoin, including a surprising list of American conglomerates: Home Depot, Microsoft, Target, even sandwich chain Subway.
To Invest Or Not To Invest?
So what is the next step for cryptocurrency? Earlier this month, Goldman Sachs announced they were considering the development of a cryptocurrency exchange operation—this after JP Morgan CEP Jamie Dimon called bitcoin “a fraud” likely to stay on the periphery of the black market. Nevertheless, the bitcoin market hit $150 billion in August, making it difficult to get a grasp of just what this means for bitcoin and other cryptocurrency like it.
One of the regulating factors of bitcoin is that only 21 million can ever be created—though each “coin” can be split into smaller parts for distribution. This means that the supply can’t be increased or decreased based on the whims of a singular entity, making its inherently limited supply more similar to gold than money. The value of gold increased by approximately 11% in 2017, which helps explain why internet search for bitcoin has trumped that of gold bullion. This could be a hint that cryptocurrency might disrupt investment strategies before it does currency. But either way, 2017 is shaping up to be something of watershed moment for the little coin that could.
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