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A Defining Moment for Bitcoin?

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After Bitcoin’s value fell by a third last week, some analysts believe now is the defining moment for the world’s most popular cryptocurrency. With exchanges struggling to keep up with investor demand, Bitcoin faces a moment of truth as it has gone mostly unregulated during its historic rise. Could Bitcoin be setting itself up as one of the most remarkable asset bubbles in the history of U.S. financial markets?

Institutional involvement will surely increase as investors can now buy futures, and most importantly, short the cryptocurrency. The CME and CBOE now offer Bitcoin-specific investment products, and some analysts believe that many large tech companies will get behind the blockchain technology that shapes how investors buy and sell the cryptocurrency.

What is significant about Bitcoin is the limited amount of government’s who regulate the cryptocurrency, aside from China. With the cryptocurrency up a remarkable 1,400 percent this year, there has been little in the way of government intervention to protect consumers from fraudulent activity.

As of now, most large banks, hedge funds and other Wall Street institutions have remained on the sidelines when it comes to Bitcoin. However, reports indicate that Goldman Sachs is working on a trading desk specifically for Bitcoin, which is estimated to open in mid-2018. This could be the catalyst that Bitcoin needs to sustain such a remarkable runup.

Analysts are looking at the cryptocurrency closely to determine if last weeks price correction will lead to a healthier valuation. Will the correction lead to a balance removing the “irrational exuberance” that often plagues currencies? That remains to be seen.

There is no doubt that true believers in Bitcoin continue to prop up the value of the cryptocurrency. However, history shows that an investment of this type must encourage the development of the market and continue to widen its investor base to remain a viable, long-term investment. Look no further than the tech bubble of 1999 for proof that “irrational exuberance” can kill a market. Now is the moment of truth for Bitcoin.

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