Is Bitcoin a Bubble or Undervalued?

Is Bitcoin a Bubble or Undervalued?

Bitcoin has been the best-performing currency of the year thus far, totally eclipsing any other form of asset and out-performing every forecast that market gurus have made. The sudden increase in the value of this virtual asset has come as a complete surprise to many and fueled a buying mania that has driven the price skyward at a rapid rate. The question on everyone's mind is will it continue its exponential growth? Or will it crash into a worthless virtual asset that has no value? This article will explain the basics of Bitcoin, the mania of the current bubble and the potential of Bitcoin into the future.

 

Is Bitcoin Money?

The argument in the case of Bitcoin as sound money has many factors to consider. Sound money fulfills certain criteria. It must be fungible, divisible, a unit of account, and most importantly, a store of value. While Bitcoin enjoys the first three factors, it falls short of being a store of value. Bitcoin's volatile pricing and absence of an intrinsic value mean that it cannot be considered a store of value in the same way silver and gold coins are.  

However, Bitcoin does have an edge that sets it above these traditional precious metal assets. Bitcoin is readily traded for goods and services by retailers all across the globe. While some may take Bitcoin directly, others require a different strategy in order to purchase goods and services from them.

Cryptocurrencies are stored in virtual wallets; these wallets offer debit MasterCard's that are linked to the wallet and allow the user to spend their Bitcoin at any location that accepts MasterCard. The transaction is processed instantly and converted from Bitcoin into the country's fiat currency. This convenience of exchange makes Bitcoin a viable monetary instrument that can be used for trade at almost any retail location in the world.

 

The Genius of Bitcoin

While the debate is still ongoing for Bitcoin as a form of sound money, the key point that makes cryptocurrency so unique and highly demanded is its decentralized nature. Bitcoin is not controlled or manipulated by any monetary authority or government. Therefore, Bitcoin can be viewed as a true free-market currency whose price relies on the trading volume, or demand, for the asset.

This is the critical reason why Bitcoin is so attractive. At present, world debt levels are fast becoming unsustainable and central banks in leading G8 countries are undergoing massive money printing schemes, known as quantitative easing. This excessive money printing will eventually end in disaster with runaway hyperinflation similar to the disasters experienced in Zimbabwe and the ongoing crisis still developing in Venezuela. By purchasing and holding Bitcoin, you circumvent central banking authorities and avoid any risk that may be associated with ludacris monetary policy of central banks.

 

Where Can I Buy Bitcoin?

Buying your first Bitcoin is as easy as taking out small personal loans Knoxville TN. You simply log on to a Bitcoin exchange, such as Coinbase, create an account and arrange to buy a Bitcoin from a seller on the exchange. Your seller will issue you with bank account details to which you must deposit fiat currency for the Bitcoin. Once the payment has cleared, the seller will send you Bitcoin to your virtual wallet at the exchange where it can then be instantaneously transferred to your own personal, private, and encrypted wallet to be stored or spent.

 

Is Bitcoin a Bubble?

With one simple look at a Bitcoin pricing chart, it becomes apparent to anyone with financial knowledge that Bitcoin is experiencing a parabolic pricing move, with the price skyrocketing to $4000 on some exchanges on April 2017. The price has since stabilized at around the $2500 mark, however, a severe rise or drop in the price could come at any moment.

The reasons for Bitcoins sudden price moves earlier in the year come from interesting events that are worth noting. The first would be the announcement of Japan's government in recognizing Bitcoin as money, opening the way for it to be used as collateral in the or banking system. This sent the price soaring extremely quickly. The second event that changed the price was when the US Securities Exchange recognized Bitcoin as an asset and have cleared the way for the world's first Bitcoin ETF where investors can bet on price moves in the currency on an official exchange.

While no-one knows the future to come for Bitcoin, one thing is certain; it continues to be adopted by the populations of nations as a viable means of payment for trade and with this fact, it would be safe to assume that the price will continue to climb toward the skies over the long run.