You’ve heard of Bitcoin, most people have. Bitcoin, the global cryptocurrency and digital payment system. Bitcoin, the first decentralised digital currency, released in 2009. Perhaps you heard of it in passing, something about a ‘Silk Road’, and the ‘Darknet’. Perhaps you’re more informed, and you’re aware Bitcoin is a multi-billion-dollar digital asset, an asset that exceeded the value of an ounce of gold for the first time this year. You may be thinking of jumping on the cryptocurrency gravy train, but is cryptocurrency really worth its weight in gold?
Cryptocurrencies are flexible, independent of corporations, governments, and those long demonised central banks. They’re also anonymous, unregulated, and unstable. In September, the outspoken and often brusque CEO of JPMorgan, Jamie Dimon said.
“Bitcoin is a fraud that will eventually blow up. It’s worse than tulip bulbs, it won’t end well. Someone is going to get killed”
However, on Sunday November 5th, Bitcoin broke the £5724 ($7,500) barrier, topping out at a remarkable £5787.38 ($7,583.04), as reported by CoinDesk.
Cryptocurrencies are once again a subject of debate. While the bank of China was busy placing bans on digital currencies, and shutting down Bitcoin exchanges, all part of a plan to reduce the country’s financial risks, investors were throwing money at newly created virtual currencies; such as Ethereum, and Zcash. The burning question is one of value, what is Bitcoins true monetary worth? And is banking on Bitcoin a speculative gamble, or a solid investment? The answer, simply put, is no one knows!
The issue is, Bitcoin as an asset can’t quite be categorised. It isn’t precious metal, real-world currency, bond, or company stock; and it sidesteps the everyday confines of economic theory. Cryptocurrencies can’t be considered a value-producing asset, which makes sense, as Bitcoin doesn’t pay dividends, or generate earnings in the way real-world commodities and paper currencies do. Séverin Cabannes, the deputy CEO of Société Générale, when asked for his opinion on Bitcoin’s market valuation stated.
“Bitcoin today, is in my view, clearly in a bubble…very clearly. But we don’t know for sure what the market drivers behind this price valuation are”, Bloomberg.
Economists, analysts, and respected business magnates alike, are prophesising an imminent (.com) style decimation of Bitcoin.
Flying in the face of the naysayers, Bitcoin continues to trade at unprecedented levels, this year alone Bitcoins value has increased by 650%. The globally recognized futures and options exchange (CME) ‘Chicago Mercantile Exchange Group’, has revealed plans to list Bitcoin futures, causing the cryptocurrency’s price to sky rocket. (CME’s) Chairman and CEO, Terry Duffy explained,
“Given increasing client interest in evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract. As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle, that will provide investors with transparency, price discovery and risk transfer capabilities”.
In the early days, Bitcoin made many an overnight millionaire, and it seems it’s about to make a few more. In light of (CME’s) announcement, Bitcoin will surely become a far more appealing prospect on Wall Street. Investment in Bitcoin, can be seen as an investment in blockchain, which is the tech that underpins the cryptocurrency, though blockchain tech has many other applications. Recently, several major energy giants (Statoil, Shell, and BP), signed up for a new blockchain-based trading platform. Reality Shares Advisors, a subsidiary of Reality Shares ETFs, plans to work with Nasdaq Inc., to offer securities for different blockchain companies. Bear that in mind, and Bitcoins trajectory looks good. The craze for Bitcoin and other cryptocurrencies will ebb and flow. Bitcoins market will remain volatile, as its value, while subjective, lies in its potential. Bitcoin has its backers, and detractors, it may well be the next big thing, it could crash and burn; the one thing we do know is, no one knows for sure.