Cryptocurrency sounds like a cloak and dagger term from some William Gibson-esque cyber punk novel. But it’s actually a real thing you can buy right now.
Have you heard of Bitcoin? If you have, you might have only heard it in conjunction with words like “deep web” or “Snowden” or “libertarian.” But despite its supposed associations, it’s a rising star in the currency world.
But is it a good investment? What would one do with a Bitcoin? And are they as good as gold?
In the next few paragraphs, we’re going to answer these questions and give you some insight into whether this premier cryptocurrency is stable or an about-to-burst bubble.
1. What Is Bitcoin?
Bitcoin is a cryptocurrency. And a cryptocurrency is a decentralized digital currency that relies on cryptography to keep it secure during transactions.
Traditionally, governments print money. For a long time, this money was backed by a physical thing like gold or silver to help retain its value.
Now, when governments print money, they rely on implied value. This kind of money is called fiat currency. And it can be manipulated easier than gold backed or silver backed currencies.
A decentralized currency cannot be manipulated by a government. It is beholden only to the free market.
On top of being decentralized, cryptocurrencies cannot be tracked like government backed currencies. Each transaction is completely private between buyer and seller.
A Criminal’s Currency?
You can probably see how a cryptocurrency might be vilified by any government. The assumption is that only criminals would want the anonymity provided by a cryptocurrency.
But normal law abiding citizens do enjoy their privacy. And people who see government as an invasion of that privacy do find cryptocurrencies alluring.
Legitimate businesses that deal in sensitive information also find cryptocurrencies attractive. The ability to keep client information secure is an increasingly difficult task.
Cyber security is a big thing in 2017. Businesses make up 40% of security breaches each year. And this number is going up every year.
Bitcoin Was the First
In 2009, a group or individual by the pseudonym Satoshi Nakamoto launched Bitcoin. And there are 16.4 million Bitcoins in circulation today.
But the number of possible Bitcoins is finite. Bitcoins are mined by people who sit behind computers instead of standing in a mine with a pickax.
They use a special software to solve particularly complex math problems. When their computer solves the problem, they receive bitcoins. This is how the cryptocurrency is “printed” and put in circulation.
Miners also verify transactions and help create the block-chain record that makes Bitcoin so secure. How all of this takes place is too complicated to go into in a blog. But it’s an incredible and complex method of keeping the currency secure.
2. Is Bitcoin in Trouble?
Bitcoin keeps getting declared dead. It seemed back in 2009 it would just be a quick traders fad that would die out.
Eight years later, anybody who said Bitcoin and cryptocurrency was a fad is eating their words. Bitcoin just soared to its highest market value ever. $3,451 US Dollars per coin.
That’s over $56 billion for all the Bitcoins in the world. And the Bitcoin miners haven’t even reached 80% of the 21 million Bitcoins possible.
Does this inflation sound familiar? It should. In 2007, home prices soared. Investors were trading in mortgages all over the place. And then in 2008, the market took a dive.
Bubbles are what keep stock traders up at night. They try to predict them, and those that can predict them survive while the rest wallow.
Could Bitcoin Be a Bubble About to Burst?
Those who are trading in Bitcoin aren’t worried. In fact, the Bitcoin world just went through a little “Civil War” and survived just fine.
Just like families in real life, the Bitcoin “miners” had a little feud. Not many people knew it was going on, but it was a significant fight.
They had a choice between two different software updates for their Bitcoin mining operation. And they couldn’t agree on which to adopt.
This did have traders worried. And the Bitcoin did drop $1,938.94 US Dollars on July 16, 2017. Almost half of what it is a month later.
The two factions came to an agreement and the civil war was over. Then business went back to normal and the Bitcoin gained favor with investors once more.
Except, it wasn’t over. A small group of miners was still unhappy with the agreement and they “forked” or split the currency. Bitcoin Cash emerged.
But the original Bitcoin remained profitable and only a few miners slipped off to mine Bitcoin Cash in protest.
The market is big enough for two Bitcoins, apparently, and the new Bitcoin Cash isn’t strong enough to pose any threat to the old Bitcoin currency.
3. Big Badda Boom
So, Bitcoin is booming. But why?
Bitcoin doubled in value in 2016. And it happened again this year. Most currencies don’t do this unless something drastic happens.
But Bitcoin plays by different rules. This makes Bitcoin a slightly uncertain investment. Yet investors are flocking to it like flies on meat.
The reason? Global political and economic unrest. Events like Brexit and the US Presidential election upset have investors worried traditional currencies are in trouble.
Bitcoin is a sort of life raft for investments. It’s a place to store wealth, and this is a popular trend among the wealthy.
But not only are investors betting on economic uncertainty, they’re betting on the technology behind Bitcoin itself.
Blockchain presents a new way to keep track of transactions and streamline money processing. It’s a novel way to ledger funds, essentially. And it’s ground breaking.
Because of this added interest, the US Securities and Exchange Commission is re-evaluating its stance on cryptocurrencies. And their stance hasn’t been very friendly in the past. This re-evaluation is bolstering investor confidence in Bitcoin and its rival Ethereum.
Conclusion: More People Use Bitcoin
While you still can’t buy a burger with Bitcoins, you can still use them for larger purchases. As the world becomes a more uncertain place, more people will look to more secure investments.
Bitcoin might be the answer for a lot of people’s financial worries. Check out Bitcoin right now and you might be surprised at the investments you could make.
