You probably lived in a cave for the past one decade if you haven’t heard of Bitcoin. If you are unaware, Bitcoin is a decentralized, peer-to-peer cryptocurrency that allows online users to pay for transactions in a fraction of a second. You see, it does not really matter what part of the world you are based, as you can receive Bitcoin payment in split second. Interestingly, it is snagging the headlines recently because its market value keeps increasing at a breakneck speed. Proposed in 2009 by Satoshi Nakamoto, a mysterious name or group, Bitcoin is increasingly going ubiquitous, disrupting today’s global financial services industry. These effects are somewhat possible because the crypto has distinctive features.
Bitcoin is unstoppable
As a digital coin, Bitcoin serves as a medium of exchange. Just like fiat currency (like US dollar, Euro, etc.) traded online, crypto traders can exchange bitcoin against other digital currencies or fiat currencies. These traders often sign up on crypto exchanges to trade BTC against altcoins or government-approved currency. To get started, you will need to fund your BTC account on the exchange using your credit card, wire transfers, etc. At this juncture, the platform serves as a liquidity provider that facilitates transactional bid-ask spreads. eToro and Robinhood, for instance, serve as brokerages, while Binance and Coinbase are the leading crypto exchanges. According to CoinMarketCap, cryptocurrency traders exchange over $6 billion worth of BTC every day.
Similarly, a number of institutional investors are ditching traditional stocks for Bitcoin. With the crypto market currently experiencing its bull run, more and more high-profile investors are racing to jump on the Bitcoin bandwagon. Well, the latest being Tesla CEO Elon Musk who announced that his ecofriendly, electric car company had acquired $1.5 billion worth of cryptocurrency. The automaker added that prospective customers could purchase the company’s brand of cutting-edge electric cars with Bitcoin. Indeed, this news rocketed the Bitcoin market value to $50,000 and improved investor confidence. A quick check of its market value shows that it is goes for over $63,000. For a digital asset that exchanged for $3,200 in the last quarter of 2018; that represents over 1,800% increase. Now, that is unbelievable!
Bitcoin Critics Still Maintain Their Positions
Despite its unprecedented growth rate, Bitcoin confounded critics still stick to their guns. Some of its fiercest critics are US billionaire Warren Buffet, American economists Nouriel Roubini and Ben Bernanke, Chinese eCommerce billionaire Jack Ma, and a host of several others.
Warren Buffet does not mince when it comes to his description of Bitcoin. The Chairman and CEO of Berkshire Hathaway has severally blasted the digital coin, calling it “a worthless delusion” and “rat poison squared”.
Looking at his position, Nouriel Roubini, who is a financial and credit bubble czar, criticized Bitcoin in his book, Crisis Economics, stating that Bitcoin lacks the qualities of money. However, the attacker would later make a U-turn to admit that the crypto could serve as a store of value – which is one of the functions of money.
In a similar vein, Jack Ma stated that he is concerned that Bitcoin may just be another bubble. Although the Alibaba founder appears bullish on the blockchain, he is skeptical about Bitcoin because, according to him, the digital money is only “a small part of the blockchain”.
As the US Federal Reserve chairman, Ben Bernanke wrote the Congress in 2013, distancing himself from the rapidly evolving digital money. In 2015, the American economist warned that ignoring blockchain transactions could have dire consequences. In his interview with Quartz, the economics professor maintained that Bitcoin has “serious problems,” noting that it was an unstable source of value addition.
Bitcoin and Risks
Despite these growing apprehensions, it is noteworthy that Bitcoin is growing meteorically. Admittedly, lots of prospective merchants, investors, and users are getting jittery due to these fiery tirades. For those who argue that Bitcoin cannot serve as a store of value because of volatility, they seem to be missing a point. Its volatility is a tradeoff for a perfect supply of elasticity and a market free from intervention. More importantly, the digital money will become stable as more derivatives emerge and high-profile investors step in. No currency is ever perfect and Bitcoin is no different.
Looking on the bright side, tens of thousands of online users and merchants are adopting Bitcoin. As for the investors and traders, they are laughing all the way to the bank every now and then. That’s simply because they get immense value from the new asset class – thanks to its unprecedented growth. As a prospective investor, you are probably worried sick that you would experience pump and dump (P&D) when you join the fray. Even if the digital currency collapses again, it will only take a while before it bounces back because history tells us so. Therefore, why not take that plunge? You don’t really know what you are losing for not having a second thought about investing in Bitcoin. Obviously, life itself is risky, but life without Bitcoin is even riskier than you thought.
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