Strange to say that Bitcoin has been in existence since 2009, though it became especially popular among many people in 2017. The following image is an extract from Google Trends on Bitcoin.
As seen in the image above, the interest in Bitcoin had a spike in mid-2017. Since Bitcoin price is purely determined by the demand and supply forces, it is clear why Bitcoin price has always been on the increase, and it is constantly surging in price as more people become aware of Bitcoin and how blockchain works.
Reasons why Bitcoin is becoming important now
Among the existing cryptocurrencies, Bitcoin is the most preferred digital currency that is used as a means of payment. According to Coinmarketcap, Bitcoin ranks number one in terms of market capitalization with a staggering value of $289 billion. This is not particularly surprising as Bitcoin price has shown a huge upswing in the last year, and its dollar value is now reaching $17,000 while the BTC to EUR rate has already crossed €14,000. This means Bitcoin has sufficient liquidity, so traders will hardly face any liquidity crunch when transacting with this currency. What’s more interesting is that sending and receiving Bitcoin attracts minimal fees.
Bitcoin transactions are anonymous. This is another factor that has seen Bitcoin gain in its importance. Conventional currencies provide no room for anonymity. For example, many gamblers would like to keep their gambling proceeds a secret or you may want to donate to WikiLeaks, but doing so with fiat currency is traceable. There are many other reasons why you may want to keep your financial information private, and Bitcoin makes it possible to securely transact with anonymity. This implies that Bitcoin will remain relevant and its value will be on the increase as more users become aware and more businesses accept it.
Government intervention for acceptance of Bitcoin in certain territories, such as Japan and Russia, is a factor that will make Bitcoin gain in its importance as well. This means that Bitcoin users will no longer operate in a lukewarm environment but rather a fully legalized environment. This builds confidence in the digital currency (Bitcoin). In Japan, there has been reported that 260,000 retail stores are accepting Bitcoin. This directly creates a demand for Bitcoin, and as a result, its value appreciates.
CME and CBOE are now offering traders an opportunity to trade Bitcoin futures. The positive news from these exchanges will likely to see a big attraction from Wall Street traders. Those interested in trading will be allowed to take both bullish and bearish positions; in addition, these world’s top exchanges will provide traders with margin. Well, there is likely to be a Bitcoin market shake once Wall Street gets distracted by this news. Bitcoin is certain to gain value if the traders take bullish positions/contracts.
Bitcoin is also appreciating in value because investors are considering it a safe haven. The implication is that investors will buy Bitcoin to store their wealth in it. This concept is similar to how investors hedge their wealth against loss by acquiring gold. This is useful, especially during economic turmoil. Consider the case of Venezuela where inflation is expected to be above 2300% in 2018. Any prudent investor in that country would buy Bitcoin to avoid loss of wealth due to inflation. Since Bitcoin has an anti-inflationary measure of limited supply with a cap at 21 million possible Bitcoins, it puts Bitcoin as a safe bet to hedge your funds against inflation. Terrorist attacks and other fundamental news that affect the price of fiat currencies are likely to see investors buy into cryptocurrencies to shield against loss. This makes Bitcoin have intrinsic value and importance.
What comes next?
Innovation from the Bitcoin community has seen Bitcoin undergo software enhancement by introducing forks. During a hard fork as it happened on August 1, 2017, Bitcoin was split into two independent cryptocurrencies - a move that aimed to improve the scalability of the Bitcoin network. Bitcoin Cash was the outcome of the fork. After the fork all Bitcoin holders were rewarded an equivalent amount of Bitcoin Cash as that of Bitcoin. For example, if John had 3 BTC, after the fork John will have the 3 BTC intact and additional 3 BCH. During the fork, Bitcoin Cash was trading at $215. It has had an eightfold gain as at the date of writing on December 14, 2017, when the Bitcoin Cash price is $1915. That is a whopping 800% gain in 5 months. As more forks are expected, investors are likely to pump in more cash to purchase Bitcoin because of such attractive and rewarding investments. Why would Bitcoin value be stagnant amid such good news? It is only rational to jump on the bandwagon before it is too late to buy.
Positive sentiments about Bitcoin from corporate leaders such as Ben Bernanke, Bill Gates and Richard Branson build confidence on investors and other people who might want to buy Bitcoin. These are world renowned reputable leaders who command a huge following and have global influence. These leaders appreciating Bitcoin as a digital currency means a lot for Bitcoin in terms of the investors’ trust in it.
Bitcoin is a digital currency that has set pace for other cryptocurrencies and its use of blockchain technology has seen the technology being adopted in many other sectors. Continuous effort to improve Bitcoin and the software behind it is in progress daily. Bitcoin has set a good name and exceeded the expectation of many people in terms of its functions and its importance. With its scarce nature, increasing demand and more utility, Bitcoin is certain to increase in value without doubt.
Mary Ann Callahan, Blockchain and Bitcoin Expert/Consultant, Freelance Journalist, Cex.io
Mary Ann Callahan was born in Madrid, Spain. She is an expert in Bitcoin and Blockchain-related topics. Her experience has spanned across the high technology and data worlds for more than a decade, as well as many other industries, from her current work as a Journalist and Blockchain authority/consultant at Cex.io, a cryptocurrency exchange, to work at Social Media Marketing Manager at Boston Globe Media, and within the Morrison & Foerster LLP. She holds a B.S in Economics from Yale University, and a M.S. in Journalism from Columbia University. She has written on many technical topics, especially related to Blockchain security, Bitcoin regulations for many different countries, and related purchase and help guides.