Supply always comes on the heels of the demand – Robert Collier

Bitcoin has remained a mystery for many because of its steep price curves. There have been many speculations about bitcoins and whether they will remain an underdog or become a hundred-grand currency in the next few years.

Experts and futurists are divided on cryptocurrencies. Experts are in favor of treating it as a low-return future investment, while futurists consider cryptocurrency as a form of currency that will spread across markets in the coming years.

Let’s discuss this in more detail and see what possibilities exist for us shortly.

Futurists on Cryptocurrency Use

Veteran bitcoin investor Tim Draper has predicted that bitcoin will become a global currency in the next few years. However, he says that it will take a few short years before bitcoin will become a currency of the world. But when that happens, it will soar to $250,000. And, he predicts that this can very well happen in 2022.

Bitcoin currency has seen a bearish trend in the past few years. It soared to $20,000 by the end of 2017, and then the currency crashed to $4000 in the mid of 2018. This has made it an ‘unpredictable’ currency in the eyes of many cryptocurrency experts.

Economists on Cryptocurrency Use

Harvard University Professor of Economics and Public Policy Kenneth Rogoff has suggested that the sentiments around cryptocurrencies are exaggerated, and the currency is not worth what it is calculated at.

He says the “market capitalization of cryptocurrencies could explode over the next five years, rising to $5-10 [trillion]

.” But he speculates that the currency will be more likely to be around $100 rather than $100,000 what most futurists have already predicted, as we have discussed.

Moreover, he says that bitcoin’s use is limited to transactions rather than a tangible material like gold that can be used as an investment. This makes the currency vulnerable to a ‘bubble-like’ collapse. Furthermore, the cryptocurrency process is less efficient since it doesn’t rely on a trusted central authority.

KEY POINTS TO REMEMBER ABOUT BITCOIN

• What makes a product more valuable? If it has more demand. Or, if it is scarce. Let’s say 250 GTO is priced around $70 million. This is because the previous owner bought it for $69 million. Also, it is available in limited numbers as only 35 cars exist in the market.
• The blockchain technology that created Bitcoin makes it limited to mint more bitcoins. Developers and miners can mine as many as 21 million bitcoins only. This is one factor that makes bitcoin a scarce item in the world. But since it is scarce it cannot be minted more. As it can’t be minted more in numbers, one can’t consider it a global currency because a global currency needs to be minted more to keep the population-demand ratio balanced.
• However, what makes Bitcoin unique is that as of now, around 18,008,250 Bitcoins are in circulation. In the next few years, almost 366,750 more will be available in the market, but by that time, the difficulty to mine more bitcoins will rise exponentially.

Investing In Bitcoin in 2019

Even in 2019, bitcoin is struggling to keep itself stable. This is mostly because of the mining of more bitcoins. At one end, more bitcoins are coming to the market. While, at the other end, the demand for bitcoins is increasing rapidly.

This is what the current graph of bitcoins looks like in one year. As you can see at the start of the year, the value of bitcoin had fluctuated to less than $5K. But since then, as the demand has mostly been stable, it has even touched $10K in mid-September before falling back to $8K.

In comparison, the graph of bitcoin in 2018 is completely different. It almost touched $20K before falling sharply to $4K during that period. Experts consider it the first ‘bubble-burst’ of bitcoins. It is very much similar to the dot-com bubble that led to high speculations about the prices of the domain and then fell sharply.

With such sharp fluctuations, what if you want to buy a product say a car using bitcoins. There are companies like Autocoincars that provide the facility. But the fear of bitcoin fluctuations still looms high over the general public.

Government’s Fear of Illegal Trade

One reason Bitcoin has not yet become a global currency and according to predictions of Rogoff is because governments of the world have not yet adopted it. Most of these governments fear illegal trade rising sharply if they adopt bitcoins since there are no proper measures to track its progress.

Bitcoins have previously been used for a host of illegal activities such as money laundering, drug peddling, smuggling, and weapons procurement. And, with its mass adoption and without a central bank will increase the financial crime rate further.

Many powerful regulatory authorities such as the Financial Crimes Enforcement Network (FinCEN), Federal Reserve, and even the Homeland Security (DHS) Department of the USA are concerned about the potential consequences. Even in May this year, Mt. Gox, one of the largest Bitcoin exchanges, was barred from transactions through banks because of allegations that it broke anti-money laundering laws.

What Does the Future Hold?

There are two schools of thought on bitcoin’s future as we have already discussed. Both have their logics and both promote a different message. However, data suggests that bitcoin will remain a strong currency even in the future. Some limitations cryptocurrency will continue to face is that it is a digital currency. And, it can easily get erased by a computer crash, or through a cyberattack.

Should You Invest in Cryptocurrencies?

Finally, the BIG question: Should you invest in a cryptocurrency? The answer is a mix of two. You have to consider the cryptocurrencies as a long-term investment. But even then, now may not be the right time to invest in cryptocurrencies. This is because they are still around $10K.

A better situation will be if you can treat the current “investment” as any other high-risk investment. You should note that since it is not governed by a recognized institution, it is only priced at what the buyer is ready to pay for it.

If you are not ready for such high-risk investments, it is better to look for other better opportunities.