“In the long-term Bitcoin moves above $500,000 within three years. Bets?” – John McAfee (Founder of the software and anti-virus company McAfee Associates).
In 2009 when Satoshi Nakamoto invented the bitcoin nobody thought it could transform the world of digital payments. Bitcoins are a form of digital currency that can be used to make payments without any barriers of bank charges and government intervention. They run on Blockchains. Blockchains are decentralized ledgers that are run by “Miners” who are able to crunch transactions. These miners are rewarded by Bitcoins. Bitcoins can be used by anyone who is looking for digitally secured anonymous transactions. From a mere $0.08 in 2010, the value of bitcoins increased to $4000 in 2017. Experts and wall street strategists believe that it will rise to another $20,000 to $55,000 by 2022. We all have several unanswered questions about this emerging giant in the field of digitization. Here we will try to answer two of the most important questions that all our readers have in mind, namely
What caused the value of Bitcoins to increase by 600 % by 2017?
What does the future hold for bitcoins?
The cryptocurrency that went up by only 40 % by 2015 is definitely very volatile but there are a number of reasons why bitcoins are the “digital gold” and why more than 16.5 million bitcoins are in circulation as of today. We will have a look at some of these reasons: –
1) Safe against the currency risks- Bitcoins can be a blessing for people living in countries with high inflation or countries with risk of currency devaluation. Digital currency is a safe bet and this is one of the main reasons why bitcoins have managed to gain popularity in a country like China where 90% of the Bitcoin trading occurs because it was recently facing devaluation and hence people resorted to Bitcoins.
2) Free from Bank rules – In many authoritarian countries, people are using digital currencies like Bitcoins to escape from government rules of capital control. Also in countries like Greece, it is now proven that keeping money in the bank is not a good idea as banks can come up with new restriction and rules every time the economy of the country suffers. So, the investors started to look for something out of the reach of banks and here Bitcoins came to rescue.
3) Multipurpose – From settling insurance claims to crowdfunding, bitcoins, and blockchains can do it all. They have a wide range of applications. Each application will require only a transaction fee which will add on to the value of bitcoins. Some of the areas where bitcoins are being used are digital trading of securities, for buying properties, settlement and even in auditing and document stamping.
4) Scarce Resource – It is a scarce resource as there is a maximum limit on the number of coins that can ever be created and circulated. The market will soon realize that there will be a shortage of Bitcoins and just like gold bitcoins will gain its value from its dearth.
5) Quick Accessibility and Open for all- Investing in bitcoins does not require any long-term plan and you can use it whenever you need it. You can use it to buy pizza or invest in a property of your choice. Also, it is an open source cryptocurrency with no restrictions on the user.
6) Recent Events – Japan’s legislation accepting bitcoins as a commodity, New financial products like “interest-bearing bitcoin account”, development of new bitcoin products and investor’s confidence in blockchain and bitcoins are all adding to the ever-increasing values of Bitcoins.
7) Lack of real competition – Even though there are other options available for cryptocurrency but none of them are as popular or as secure as Bitcoins. Initial Coin offerings might seem like a novel idea but they are still in development phase and the remaining directly trading cryptocurrencies available need centralized exchange and so they are not as popular.
8) Arbitrage – The unpredictable nature of Bitcoins that could have been a problem in its adoption is also taken care of now. With the rise of currencies future market like ICBIT.com the stability of bitcoins is bolstered because these man-made tools and purchasing power parity techniques will help them achieve arbitrage. They will strengthen the beliefs of customers in the bright future of bitcoins.
9) Ethical – There have been rumors like bitcoins and digital currencies are used by criminals to get away with their crimes but that is not the case. Investing in bitcoins is a way to support fairer monetary system which is free from the control of the global banking organizations. These digital currencies seem like a solution to all the economic crisis usually created by the banking sector. Bitcoins seem like the only possible answer of “One World One Currency” dream that the entire world has seen.
For several reasons Bitcoins have enjoyed its superiority and popularity in the world of digital currency. From the excitement it brings among the investors to the media coverage it gets, all have contributed a lot in making Bitcoins what it is today. 2017 was the year when digital gold officially surpassed the value of real gold. The rate at which Bitcoin’s value is increasing can be understood from the fact that a £2,000 investment on Bitcoins 5 years ago would have made you a millionaire today. Humans despise change but this is one technological change that can cause a paradigm shift in the science of currency and monetary policies, and humans are loving this change. Almost every corporate leader has appreciated and recognized the power of Bitcoins. Eric Schmidt, Executive Chairman of Google is of the view that “[Bitcoin] is a remarkable cryptographic achievement… The ability to create something which is not duplicable in the digital world has enormous value…Lots of people will build businesses on top of that.”
With the increasing adoption of technology and the loss of faith in the conventional currency, we can only hope to see Bitcoin transform from gold to diamond of the digital world.