I imagine you’ve read a lot about Bitcoin recently, and I imagine that you’ve had one of two thoughts about it; ‘I wish I’d bought me some Bitcoin,’ or ‘I’m going to buy me some Bitcoin.’ Number one, of course, everyone wishes they had invested in anything that goes up in value, but number two, as you might expect, needs a little more consideration.
1 Bitcoin is now worth the rather princely sum of $865, roughly £533, so it’s fair to say you’d have to have a fair amount of capital to back any sort of investment in the virtual stuff to begin with. But aside from that, Bitcoin has fast become far more volatile than any of the common currencies. In recent months especially, that volatility has only been in one direction. Up. Obviously the question remains, will it continue on the same path?
A lot of it comes down to the media and the public understanding of Bitcoin. As potential traders of Bitcoin have become decreasingly skeptical of the cryptocurrency, the value has gone up, so it’s important to look at what drives or removes that skepticism. The first potential pitfalls of the currency is the law, the government, and a general public mistrust of anything radically new. There have been numerous reports in recent weeks alone revealing Bitcoin as an increasingly common currency among criminals, drug-dealers and Internet scammers. That’s sure to put a few people off, and such cases have led to discussion of Bitcoin in the US Senate. It’s important to consider that there is the potential for serious harm to be done to the value of Bitcoin by any sudden change of legislation in the US. On the other hand, any public endorsement of Bitcoin from US senators, for example, could have a potentially huge positive impact on the value, and personally this is something I’d deem far more likely than the former eventuality.
Secondly, a contributing factor to the recent boom in the value of Bitcoin is a rapidly increasing level of demand from China, a potentially massive market for Bitcoin to move into and become hugely popular in, and that can only send the value one way.
The major driving force behind any further growth in Bitcoin is certainly going to come through widespread adoption of it as a genuine currency. It’s unlikely until it proves a little more stable, as large businesses won’t want their assets sitting around in such a volatile currency for very long, but slowly it is becoming a currency that you can, you know, use. So far, it’s acted more like an investment in stock rather than currency. You buy it, you watch the value fluctuate for a while, you sell it.
Now though, all sorts of examples are emerging of new places experimenting with Bitcoin, for instance the University of Nicosia is now accepting Bitcoin as payment for tuition fees, you can even buy beer in London with Bitcoins. Mostly though, Bitcoin remains useful for buying niche online services such as web hosting, online security and VPNs.
In spite of all of this, there’s one thing clear. Bitcoin is one of the most unpredictable, potentially rewarding or disastrous investments you could possibly make at the moment, but if you have the capital, the admirable ignorance of risk, and maybe a genuine use for Bitcoin, then it might be an investment that’s very much still worth making.