It’s a bubble that experts have for months now warned will burst. It hasn’t yet, though, and its growth even in the past week has been unprecedented.
Bitcoin, Gold and…Tulips?
As of Sunday, a single share of Bitcoin had shot past $17,000 per share. At the start of the week, its value was at $13k. So it’s gone up nearly a third in value in seven days – and this new figure is up 15 times what is was back in April when the currency turned financial heads, as the value of one Bitcoin exceeded that of an ounce of gold ($1,268 then) for the very first time.
Then, while, the New Year was still in its infancy, financiers and other industry experts cautioned temperance; some even likened the emergent interest in cryptocurrency to Europe’s tulip craze in the 1600’s. At that time, bulbs of the plant were considered so valuable that an entire estate could trade for one of the flowers. A later crash reduced the value back down to that of an onion.
The thing is, the experts warning about Bitcoin are largely levying the same criticisms as they did back in April: There’s no security, and what about legal protections? They denounce it as an unsustainable fad, one with spindly legs, on the cusp of breaking. Perhaps that’s so, but in the meantime a bevy of people from varied backgrounds – from hedge fund managers to Uber drivers to rapper Ghostface Killah – have taken the plunge, and gotten very rich in a short amount of time. Fortune recently estimated that if you’d bought $5 in Bitcoin during its inception in 2009, you’d be a cool $4.4 million richer today. An investment even last year would net a 10x multiplier here late in 2017.
IoT expert Jason Hope Offers Tech-Centered Outlook
Jason Hope’s take is from an IoT perspective, but he remains cautiously optimistic about cryptocurrencies current role in our economy, “What is apparent at this point is the stark interest new-market investors have taken in […IoT and bitcoin…], ones that respectively comprise multi-billion dollar industries and continue to exhibit rapid growth.”
The old tried and true rules of economics do apply. There are only 16.7 million coins in circulation, so they’re not making new ones. In the interest of saving you time, the math comes out to a net value of $265 billion as of mid-last week. So limited supply is a factor. Popularity has never been higher, and some have even speculated that the value will grow indefinitely, which has never before happened.
Is that even the point, though, with respect to mainstream appeal? “Financial purists won’t be big on this”, says Jason Hope. But let’s assume we’re not all purists here.
Why the Cryptocurrency Craze?
The value of Bitcoin isn’t in the ambiguous transactions it represents. It has nothing to do (outside the tech world) with Blockchain, or underlying securities. Who, save the theorists, cares about the endorsement of longstanding financial institutions, or even Warren Buffet?
“I think the ubiquity of Crypto’s appeal is more about the people involved”, postures Hope. “Bitcoin is cool right now, and in today’s culture that’s something that indeed outstrips solid gold.”
How much better is an IPhone or Samsung than a Droid Moto Z? As a tech guy, Jason tells tells us – not much. The operating system is virtually the same and the Moto Z actually takes better pictures. Yet it sells for $150 – $200 less than the latest model of either IPhone or Samsung S series. Why? Because those are the brands people recognize and identify with. I had a friend once who was stationed at a military base in Germany. He got a free upgrade on base to a newer model IPhone, before the device was being sold in Europe. He went right off base and sold it for double its worth – around 1200 euro – to a man who wanted to be the first German in that area to own the new model. Because, hell, it was cool to have one. And this is the same premise driving the Bitcoin craze.
Who are the Bitcoin Believers?
A large proportion of Bitcoin owners are millennials. Yes, those very same youngun’s who Snapchat all day, seek out campus safe spaces and complain if breakfast spots run out of avocado toast. This younger generation has come under fire for a number of reasons (many of them unjustifiably), so it makes sense that their recently anointed favorite currency would as well.
The loudest critics are older. They represent long-entrenched banks like Wells Fargo and JP Morgan Chase. Their main criticisms are of the nature of Bitcoin and its impending failure as a viable, conventional currency. Again, history would concede that they’re probably not wrong, nor would you need me to rehash the doomsday projections of men more qualified (and suddenly, they are legion) to predict market shifts. Bitcoin, like “.com” and other economic bubbles, will at its very best face some eventual downturns. Gauging how much anyone cares right now outside of the old heads is another matter. There’s money to be made in the present, and the present is the only world where “cool” consistently exists.
About Jason Hope
Jason Hope is an Arizona-based tech, entrepreneur, futurist, author, and philanthropist. A finance graduate of Arizona State University and MBA-holder from the school’s W.P. Carey School of Business, his work at the intersection of Tech and Finance has been published extensively. He lives in Scottsdale.
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