What is the magic behind bitcoins insane growth?
What is the reason for bitcoins insane growth?
Well, people have always been divided in regards to the growing price as well as the legitimacy of the bitcoin. Supporters who bought the bitcoin back in the early days of its conception, typically, fall into a few categories: those who understood and believed in the potential of the technology, bought it by accident, the curious types, and would-be millionaires that lost access to their bitcoin wallets long ago. But what events affect the recent insane price volatility of the bitcoin, and where is it headed? First of all, let’s understand why this cryptocurrency is even needed.
To start off, bitcoin transactions are fast, as a matter of fact they are much faster than say, traditional checks, and international wire transfers. It’s сheaper to use too. The fees associated with sending or using bitcoins are much lower than when going the debit or credit card route. In certain cases, the fees are almost nonexistent. It’s immutable, no central authority controls the world’s supply of bitcoins. Meaning that they are completely decentralized and bitcoin holders are full-fledged owners of their bitcoin holdings and can do whatever they want with them.
Additionally, bitcoins can’t simply be printed or produced by anyone indefinitely. Therefore, they are safe from suffering from inflationary market movements. Bitcoins also provide users with a certain degree of anonymity. Sure, people can see how many bitcoins were sent from a specific wallet address and where, but unless the individuals involved in a bitcoin transaction disclose their identities, it is near impossible to uncover them. While one can obviously see the benefits of the bitcoin over traditional financial exchange tools, why is the price so volatile, and what impacts it?
The technology itself
Simply put, the technology underlying the Blockchain and the bitcoin has developed quite rapidly and proved that there are real world uses for it. For example, thanks to the bitcoin, cryptocurrencies have evolved to such a degree that startups and small business can launch their projects and gain financing through Initial Coin Offerings (ICO’s). Great projects like Obsidian, ChainLINK, and FLiK have been able to raise millions of dollars’ worth of funds in order to provide the world with great products. Whenever there is a successful ICO on the horizon, the bitcoin price rises.
The introduction of the bitcoin as cryptocurrency and the underlying tech behind it opened up the possibilities for a variety of new technological advancements. Such as the open-sourced Ethereum Blockchain, which allowed people to generate smart-contracts, or the digital equivalency of real world binding agreements. These contracts are impregnable, and can be tied to a lot of real life uses. Such as renting an apartment, crowd funding, and even paying out wages. Whenever something new and truly unique that relates to cryptocurrencies is introduced to the market, and hypes, the price of the Bitcoin spikes.
Ever since the bitcoin price became noticeable, and broke through the penny limits, media outlets all over the world started talking about the bitcoin. The media has the power to greatly sway the price of a bitcoin. Positive news can obviously lead to a price increase, while negative news can cause it to plummet dramatically.
For example, when news stories covering government involvement in the closing of Silk Road, an online drug market place, hit the mass media back in 2014, the price of a bitcoin fell by nearly a third. News such as this, as well as reports about hacks, scams, and other things can cause panic and disruption among the bitcoin community, causing the price to drop. While good news pertaining to big companies like Reddit, Microsoft, and WordPress getting behind the bitcoin will definitely lead to a price increase. Therefore, a line can clearly be drawn between the publics adoption of the bitcoin and media coverage. However, despite the power of mass media, the bitcoin does adhere to the economic principles of supply and demand to some degree. Though, the price of the bitcoin is probably affected more by hype than by boring theories taught in college.
Policies, governments, and regulation.
Whenever a country or government makes moves in the bitcoin industry, the price is definitely bound to change. For example, when China announced that it would be taking ICO’s under control in the middle of September, the price tanked nearly 20% and remained close to $4,000 per unit for quite some time.
A statement that was released by the Russian central bank and backed by president Vladimir Putin also caused a brief, yet definitely noticeable $600 drop in price before it rebounded back to the sub $5,000 range. The Russian CB came out with a statement implying that they would soon start blocking user access to bitcoin exchange websites. Putin stated that while he understands and acknowledges the underlying value of the bitcoin as well as it being a formidable payment method, Russia is not simply barring individuals from enjoying the benefits of the bitcoin. Rather it is attempting to protect its citizens from certain risks associated with the coin. Such as, wild market fluctuations, tax evasion, and illegal purchases through Darknet markets.
So why did the news from China cause such a heavy dip and made weak hands leave the market while Russia made but a temporary dent? The reason for this is rather simple. Russia’s trading volume in the bitcoin ecosystem is not extremely significant, therefore, recent developments did not produce a massive impact. However, if their slice of pie was bigger, the aftermath could have probably been cataclysmic. Following this news, the bitcoin price is hammering its way towards the $6,000 range. But, is Russia’s adopted stance in regards to the bitcoin justified? Expert opinions diverge in regards to whether or not the bitcoin is worthy of attention.
CEO of JP Morgan Chase & Co, Jamie Dimon, came out stating that he doesn’t think that people should be investing in bitcoins and that it will eventually succumb to government regulations, as well as other cryptocurrencies. While Forbes millionaire, Michael Novogratz, believes that the bitcoin will soon meteor past $10,000 per unit, and has actually started a fund directed towards exploring the financial possibilities behind the risk rewarding cryptocurrency!
What are we to do?
Will the bitcoin continue on its triumphant rise or will it plummet down cause jaws to drop wide open? Truly, only time will tell. However, cryptocurrencies have become a part of everyday life. Soda’s from vending machines can be bought with cryptocurrencies and bitcoin millionaires who got in early are popping up every day.
Sure, one can speculate on the market price and turn a great profit, but is the cryptocurrency market here to stay? Will you miss out if you don’t board the bitcoin express today? It’s quite hard to say, as there are many factors that influence its growth and sustainability. Despite everything, remember, never wager more than you are ready to lose.
Please share your opinion about the news in the comments.