Bitcoin, which was invented by Satoshi Nakamoto in 2008 is a premier digital cryptocurrency. It has steadily gained popularity with a bunch of websites, services, and retailers now accepting bitcoins.
There is no doubt bitcoin is gaining popularity and more mainstream acceptance. Bitcoin prices have also seen unprecedented growth. The prices have been going through the roof. Every morning you get up and Bitcoin prices have increased.
Bitcoin has already grown almost three times this year. In general, there is has been super hype around cryptocurrencies and Initial Coin Offerings (ICOs). But Bitcoin and ethereum have seen the longest bull run with valuations going up astronomically.
You can even track bitcoin prices in INR
So what does one make of this price rise is it for real or is it a bubble?
First of all, let us look at what some of the experts are saying on the bitcoin price frenzy
“Nobody can stop Bitcoin. Bitcoin is better than currency”
“Bitcoin is a technological tour de force”
“Well, I think it is working. There may be other currencies like it that may be even better. But in the meantime, there’s a big industry around Bitcoin. — People have made fortunes off Bitcoin, some have lost money. It is volatile, but people make money off of volatility too”
“A Real Bubble”
So we have experts on both sides of the table. There are a few who think Bitcoin is a real bubble while for others, Bitcoin signals a fundamental change and hence is here to stay.
Why Bitcoin May Be Overhyped
- Bitcoin is a currency. Its value is not how its value changes with reference to Fiat currency but should depend on how much acceptability the currency has.
- In spite of the fact that Bitcoin is accepted at multiple places, the amount of penetration which is required to make it a mainstream currency is still not there. Moreover, there is little buyer protection.
- Bitcoin finds a lot of regulatory headwinds which can be a game changer and a significant risk on how bitcoin prices moves in future. There might be challenges at individual country levels.
- A good fork can undermine bitcoin and take it to a different trajectory.
- Problems in scaling as transactions increase.
- A big security hack can impact bitcoin in unpredictable ways.
Why Bitcoin Can Keep The Momentum Going
- Bitcoin solves big payments and enables micropayments for a service.
- As of now, Bitcoin is a big winner in the payments space and in markets where winner takes it all it can go all the way.
- A limited supply of Bitcoin ensures a deflationary currency whose price can keep going up.
- Can help create an alternate more secure payment ecosystem resulting in fundamental changes.
While there is no doubt that Bitcoin represent a new wave in technology poised to bring about a revolutionary change in payments, the current hype around price seems to be unwarranted and might get corrected. There is little to doubt that Bitcoin or cryptocurrencies are the future of payments, and will fundamentally alter the internet ecosystem as we see it today.