While a lot of light has been shed on how Cryptocurrency works, it is still not obvious how it will continue into the future without any sort of regulation. It is not so easy to define like publicly traded companies where you are certain of the number of shares are outstanding and so can make a practical assumption as to the worth of the asset you are trying to value.
Plus, there are the unpredictable price movements. Of course, all financial instruments experience volatility, but Bitcoin and other crypto currencies seem to be excessively volatile and without having a value system set in place, how is one to gauge whether it is expensive or cheap at the moment? Just take a look at the latest rise and fall of Bitcoin, the largest and most traded cryptocurrency.
Bitcoin Weekly Review
Bitcoin has recently rebounded (https://www.cnbc.com/2017/09/06/bitcoin-price-on-the-rise-again-after-falling-1000.html) in the past few days after a significant downward spiral on news that China is going to ban initial coin offerings (ICO).
At the time of this article, Bitcoin has bounced back to $4,519.98 after its recent fall to $4,307 on Tuesday. The price fall was mainly due to one country’s decision not to accept anymore ICO’s. If the asset was regulated, this may not have even been a concern. Since the shares of Bitcoin can not be counted and any country is free to decide whether they will allow for further offerings makes Bitcoin, and all crypto currencies for that matter, more volatile than other financial assets and commodities.
The Future of Crypto
While banks and other financial intermediaries have done their damage in the past, it still takes a long time to do so because of regulation. Although blockchain technology has come along way, Bitcoin and other cryptocurrencies are still not transparent enough and stable enough to make any sensible prediction about their future price.
That being said, it is great to have another alternative that is not regulated by anyone. This gives the “little guy” a chance to get in while the getting is good.
How to know if it is currently good though?
Maybe so, maybe no. Bitcoin, for example, has recently brokenly $5,000, which is a 700% increase as of last week. Is that high or not?
All investors can do is trust the market, as well as encryption software, to gauge the price. That is not based on knowledge and education though, that is irrational behavior at its finest. It is the difference between investing and speculating.
Still, no one can deny the popularity of bitcoin and other cryptocurrencies. More online and offline merchants are accepting them as a means of exchange every day. This acceptance may eventually predict the long-term legitimacy of this financial commodity and prove that the continuous rise in price is not a bubble after all, but a legitimate crypto bull market.