Why Bitcoin isn’t a Bubble – Why Bitcoin Price Increase
Why Bitcoin isn’t a Bubble – Why Bitcoin Price Increase
The cryptocurrency field is a volatile area where prices fluctuate unpredictably. This has led to some financial experts warning that bitcoin is just a bubble that is sure to burst sooner or later, but is bitcoin really a bubble? This article aims to disprove the notion that bitcoin is in fact a bubble.
Detractors of bitcoin usually point to the housing bubble of 2008 which saw prices skyrocket or even the dotcom bubble of 1990. However, this argument fails to consider that bitcoin is unlike anything ever seen before whose value is based on supply and demand laws, which means its price will grow the more people want to use it. Previous economic bubbles never had the same economic principles apply to them.
There are certain factors playing out now that will ensure that bitcoin is unlikely to proof the detractors right by having its bubble burst any time soon. The fact that a large number of companies and governments are waking up to the big potential in bitcoin, the fact that there are currently large investments and huge trading volumes in bitcoin or the fact that the world’s largest derivatives operator CME Group has recently announced that it is formulating bitcoin securities to ensure a more institutionalized system of investment means that rather than the bubble bursting bitcoin is actually unlikely to have its value tumble tremendously anytime soon.
The price of bitcoin has increased consistently since 2009 and any talk surrounding its volatility may be attributed to the fact that it is entering a market that had remained static and unchanged over a long period of time. The fact that bitcoin absolutely serves a purpose and fills a niche that had previously been unfilled is another reason that may be used to explain why its bubble is unlike to burst. The slog that is buying and transacting on the internet is a challenge that is well known. One can’t make use of cash payments with credit card online transactions accompanied with a myriad of problems including high transaction levies and the fact that not everyone is a credit card holder. Bitcoin can therefore be viewed as a remedy for these issues, a way for the world to make peer-to-peer payments online, an innovative economic institution just like in the arrival of private clubs, stock markets, nation-states and joint stock corporations.
Another factor to consider is that unlike hard cash, bitcoin has value that is autonomous from just your belief that it is valuable. The electric energy and computing power that is put into mining it gives the currency distinctive value. Additionally, the fact that there is a limited supply of bitcoin, with the maximum that can be mined being 21 million coins, and the also the fact that bitcoin is impossible to inflate means that the price of bitcoin could continue to increase. This is because of the principle of demand and supply, with its high demand and the fact that its dearth is sure to go high, it follows that its price will continue to soar continuing to disapprove the naysayers.
Another way, a more cynical way, of looking at bitcoin and why it’s no bubble is looking at it as a money laundering tool. Taking paintings as an example, masterpieces by Picasso and others have remained very valuable partly because of their art, beauty and rarity but also because of their potential as money laundering vehicles. The fact that you can have a painting valued at say $20 million makes it much easier to launder money. Therefore, it makes sense that the price of bitcoin remains as high as possible a sad fact but a real prospect all the same. Away from this cynical look at things, art whose constituent materials aren’t that expensive ends up being very valuable since there is an infrastructure that has been built up to push the notion of art as value and therefore push the price exponentially higher and we are yet to see the art bubble bursting, why then is it assumed that bitcoin is just a bubble that will burst when it more or less subscribes to the same principles?
The decentralized nature of bitcoin, the fact that it is not controlled by any country, bank, company, government or individual can also explain why its price keeps increasing. This is because it is impossible to manipulate by any of the above institutions or individuals and therefore it is corruption free. Its revolutionary nature like its use of blockchain technology also makes it increasingly very valuable. Economic and political factors like the high US debt levels, Brexit, oil uncertainty, rising inflation, issues between US and North Korea among others can only strengthen its hand and ensure it continues to soar.
As usual it’s hard to predict the future but it is looking increasingly likely that bitcoin may be here to stay, and it may be time for the detractors to begin coming to terms and embracing it. This article is just the cherry on a very big cake that is matters bitcoin, as always you can learn a lot more by visiting authoritative sites on the same such as bitgale.com
