As an #Bitcoin investor, you want to know the answer to the question, “Is the long stretch of new highs (of Bitcoin) sustainable in the long run?” with confidence before you put in your hard earned money into the investment.
Once upon a time, a bitcoin was trading at USD $0.10
Then without interruptions, it has been breaking new highs with each passing year.
Feb. 2011 at USD 1…
Aug. 2013 at USD 108…
Feb. 2017 at USD 1,017…
Fast forward to Today, November 3, 2017, it hits USD 7,199.99, an increase of +USD 160.01 (+2.27%) from the last 24 hours (at the time of this article reporting). The volatility is small change if you compare that to some days, like the Bitcoin forking period (where Bitcoin Gold was created), the volatility was around 12%.
The rise of new high in Bitcoin price is no doubt phenomenon. The surprising thing is, it happened in spite of creating other coins through scheduled forkings, 1 to 1 bonus, to existing Bitcoin holders, creating additional millions to their coffer.
In 2017, more people take notice of the above fact.
Let dive deeper into possible reasons for the new highs of Bitcoin with each passing week/weeks.
1. By “Satoshi Nakamoto” design, the number of Bitcoin that can be produced is fixed at 21 millions. Latest figure indicated that there are about 16.5 million in circulation right now.
Through the years, coins that could be created are becoming lesser due to more complexity and difficulty in mining. The limited supply creates a high demand for it and a higher Bitcoin price.
2. Bitcoin is always compared with Gold, as a safe haven asset. Let look into some of the characteristics, the pros and cons of each commodity.
a) Durability – There is a vulnerability of Bitcoin being stolen due to someone hacking onto its online wallets, users’ computers or smartphones. In comparison, there is a degree of higher difficulty of unsecured gold being stolen due to its size and weight.
Conclusion: Bitcoin is slightly losed out with Gold in term of durability.
b) Intrinsic Value – Both Gold and Bitcoin are limited in supply. Although forking will create other coins, it will not create two identical Bitcoin (e.g Bitcoin Cash is not Bitcoin. It is an Altcoin.)
Conclusion: Both are equal on this count.
c) Portability – Transferring bullion can be very expensive given, its weight and need for more high level of security in transportation, higher import taxes like India. It is much faster and cheaper to move Bitcoin around.
Conclusion: Bitcoin beats Gold hands down for portability.
d) Unit of Account – Bitcoin has better purchasing holding power than maturing gold from 2010 to 2016 years of comparison.
Gold – 2010 (+27.74%); 2013 (-27.74%); 2016 (9.12%)
Bitcoin – 2010 (9,900%); 2013 (5,587%); 2016 (128%)
In term of today’s market cap., Gold has about USD 8 trillion vs about Bitcoin of USD 100 Billion (about 1 is to 80 times).
Assuming 1/10 (10%) of Gold cap. goes to Bitcoin_Gold 2.0 market, that is about 800 Billion.
One Bitcoin is then worth USD 38,095 (800 Billion divides by 21 million)
At 1/20 (5% of Gold cap.), it is worth USD 19,048.
At 1/40 (2.5% of Gold cap.) it is worth USD 9,524.
Conclusion: We are only talking about one entity’s comparison only. The potential of Bitcoin price per se is huge and very huge indeed!
Overall Conclusion: One could say that if the dust is settled as highlighted above, the potential of Bitcoin rise to USD 10,000 or more is likely and not impossible as one seems to think so initially.
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Flash News (31-Oct-17): CME Group Inc. is planning to have Bitcoin Future Contracts listed in its exchange before end of this year – The implication is volatility of Bitcoin currency can be hedged! It addresses a major concern of Bitcoin’s usefulness as a stable stored currency.
CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is an American financial market company operating the world’s largest options and futures exchange.
If you would like to know whether you are ready for it, please read my recent post on “5 Tips To Trade Bitcoin Or Volatile Cryptocurrency”
For cryptocurrency starter, you may like to consider opening an account with Coinbase, a secure online platform for buying, selling, transferring, and storing digital currency.
Note:- If you buys or sells US$100 of digital currency or more through Coinbase using this link, you and your referral will both get US$10 worth of free bitcoin.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
If you’ve any comments, please drop me a line.
Reuben Ong
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