Another day, and another price breakthrough for Bitcoin. Recently, the new price per token of this cryptocurrency surpassed $15,000. But is this seemingly endless growth of a cryptocurrency too good to be true?
Due to its novelty, Bitcoin is arguably one of the most volatile technologies around. Currently, Bitcoin alone is pushing the cryptocurrency market past the $160 billion mark, and many are starting to believe that Bitcoin is simply another bubble. Bitcoin has grown to a point where investors are buying it solely for the purpose of making money, and not to use it as a medium for exchange, or a store of value, as a currency should be. This is dangerous, losing the purpose of being a currency. From a technical point of view, Bitcoin’s value has grown exponentially at an alarming rate–possibly past its actual value.
There are a finite number of bitcoins in circulation (about 21 million or so), and unlike standard currency or even things like gold or silver at the moment, the price of Bitcoin depends solely on the demand as opposed to supply, given that it is limited. A country can print more currency, mine more gold and silver, but the amount of bitcoins in circulation is and will always be the same. To have only one factor of price fluctuation is a significant disadvantage.
Few countries allow Bitcoin, with even fewer are in support of it, especially countries with a relatively large economy. Governments around the world fear a currency that they have no power over and no means of controlling its value. Other more countries such as China see Bitcoin as a direct way of leaking money out of their economy and into the international market, giving Bitcoin and the ideology of blockchain a very concerning future.
Another issue is the over-reliance on the Blockchain algorithm. There are many other cryptocurrencies, all with similar functions, yet some have perks or traits that stand out, being improved versions of Bitcoin. Ether, for example, has a “smart contract” which is essentially an agreement between a couple of parties online that can be automatically executed on a transparent Blockchain. In other words, one can program their money to work for them, by investing, saving, and spending. Yet, these cryptocurrencies such as Ether don't experience a big of a hype as Bitcoin, solely because Bitcoin was the first to be decentralized, and thus more commonly known. Bitcoin’s growth slowly is no longer being dependant on its functionalities, but rather just hype. Unfortunately, hype will not last forever.
Frankly, it could basically just be a matter of time. Those daring enough to invest in this cryptocurrency can enjoy the gains, but one can only hope that they opt out before the inevitable burst.