So, which one should you be betting your money on: bitcoin or blockchain? These disruptive ideas are creating some real storm in the tech world. With bitcoin recently being an upsurge of over $17,000, it is pretty clear that it has caught more eyeballs and people in the FOMO (Fear Of Missing Out) phase want to invest in it. It is actually more like investing in the speculation rather than in bitcoin itself. Is it wise to do so?
I recently had a conversation about investing into bitcoins with quite a few people who have been following the ups and downs of this cryptocurrency, quite closely. About 95% of them asked me to invest only that money that I do not expect to get back, let alone double. This surged my curiosity. Of course, I did not want to invest any money at all in this global buzzword till I was absolutely sure of what is going on in this bitcoin space. So I did some reading and I would be happy to share my insights with you.
Bitcoin’s mind-blowing rise
What caused this extreme swell in the value of bitcoin? Will this bubble keep expanding or it is to burst anytime now? These questions swarmed in my mind continuously as I kept wondering if bitcoin is indeed a good investment opportunity, or not.
It is mostly believed that bitcoins sudden increase in value is mostly due to market speculation. A speculation whose foundation lies in the future value of the cryptocurrency, rather than the value it actually provides currently. This makes bitcoin a rather volatile investment.
What could make bitcoin a more stable investment?
Any digital cryptocurrency can be accepted as a long term value asset as long as the currency is accepted as a store of value and also as a medium of transaction or exchange. The more it is in circulation and the more it is accepted worldwide, the higher will be its value and worth. However, it seems difficult for bitcoin to achieve the status of real money. It is therefore, its lack of widespread acceptance in the current market which has led to its volatility.
Bitcoin is not really a viable store of value, which makes it ineligible to be treated as real money. A currency characterized by its extreme swings in value cannot be released in the market and expected to serve well in circulation. Bitcoins can move by over 20% in a day’s time. The cause of this volatility lies in the way bitcoin has been created. Although the supply is comparatively fixed, demand is variable (to large degrees).
Although some stores are now accepting bitcoins as a mode of payment, yet, it is nowhere close to being an established medium of exchange. Even though cryptocurrency is gathering momentum, yet it seems rather unlikely that governments will allow something so volatile to become a standard medium of exchange. Governments and financial institutions try to keep a tab on the monetary and fiscal policies of any country to prevent widespread problems.
Bitcoin is almost 70% over its value of $10,000 which was marked during the last weeks of November. The more speculative it becomes, the more indecisive investors become on whether to bet their money on this public cryptocurrency. The last time when bitcoin saw such an accelerated rise in price was in the year 2013. It was in the same year that it saw a fall in price by about 70% over the subsequent months.
This might not be a strong indicator that something like this might happen, once again. However, if its scalability and tradability comes into question then it might cause an hurdle in bitcoin’s increasing value and popularity, similar to the 2013 incident.
Regulators policies, too, play a major role here. If the regulators deem that bitcoins because of their “permission-less” model might become a tool in criminal activities, then they might go ahead and ban them, just like, China did by banning residents from trading in bitcoin exchanges.
Blockchain or Bitcoin?
However, the technology that lies underneath the bitcoin revolution, blockchain, surely holds a great deal of promise. Blockchain, unlike bitcoin, is a real disruptive technology that holds promise of fueling more projects, uses, apps and more using its unique concept. Blockchain is scalable and can be moulded into a number of uses and applications. Although you cannot bet your money on blockchain as such, like you can do bitcoin, but it is safe to say that blockchain is here to revolutionize the world and it is going to do a mighty good job at doing that.