Bitcoin continues to set records, passing US 34,000 a coin and then breaching the US $40k limit, with institutional investors helping the price to double in value in less than a month.
In fact, on January 6th a new milestone was achieved, with the total value of the cryptocurrency market exceeding the Us $1 trillion levels for the first time.
Bitcoin the best known and longest established altcoin accounts for the majority of that total, with a market capitalization close to Us 4725 billion.
There are now even some speculating that Bitcoin could become an alternative to gold, with some analysts even speculating that the price per coin could quadruple in the future.
Certainly, both share certain characteristics, namely that there is a finite quantity of both. Much as the supply of gold is limited to what can be extracted from the ground, so the quantity of Bitcoin has a stipulation in its original source code that means no more than 21 million can ever be mined. That means that both provide a hedge against inflation, unlike regular money where more can just be printed and put into circulation by central banks.
Increasingly Bitcoin is being offered as a payment method by many online retailers – a review of online casinos in Canada such as listed here provides one example of an industry that has begun to embrace the possibilities that crypto-currencies have to offer.
History suggests that Bitcoin may not continue to rise inexorably. In 2017 the cryptocurrency broke through the US $20,000 benchmark only for there to be a sharp, sudden correction and for it to fall below US $3,300.
Anybody though investing in it needs to recognize its volatility and that it may be subject to sharp fluctuations.
There are also serious issues that need to be resolved before it becomes a mainstream currency.
For example, there are major fraud and security concerns, with novice investors leaving themselves susceptible to hackers by their failure to understand that tokens need to be stored in a digital wallet.
It is also an unregulated asset. Whilst for some this is actually a plus point with any cryptocurrency because it provides anonymity, it means also when something goes wrong it is beyond the scope of any central or local government body to intervene.
Another major question is whether Bitcoin has any value at all. Certainly, major investors like Warren Buffet have been extremely negative on cryptocurrencies in general, arguing that they have no value except for the ability to sell it to somebody else.
Bitcoin has no tangible data to support its value, unlike the shares in a publicly-traded company, for example, where there are financial statements, analysts’ reports, presentations, and management commentary to help reach a consensus view as to what they are worth.
Instead, the value of any cryptocurrency is determined by those who use it, and is based on the sentiment which is ephemeral and transitory.
Currently, the mood surrounding Bitcoin is positive and helping to move it in an upward trajectory. However, that could all change tomorrow or next week.
It would be unwise to expect Bitcoin to continue moving upwards in 2021 without some form of lump at some stage.