Bitcoin is one of the most divisive topics in the investment world. Some believe that it is a speculative bubble, while others think that it is the future of currency. Whatever the case may be, Bitcoin’s price has continually defied the expectations of pessimists.
The bull case for Bitcoin
Positive sentiment has seen Bitcoin’s price fluctuate between $5,800 in March 2020 to around $60,000 today. This level of major gains has been seen numerous times in the past with Bitcoin.
The number one cryptocurrency now has a market cap of more than $1 trillion, and this will grow as on March 31, PayPal started allowing its U.S. customers to make payments with certain cryptocurrencies. The advantages associated with blockchain-based transactions are obvious — more privacy, strong security, and efficiency.
Many Bitcoin proponents see it as a version of digital gold, acting as a hedge against inflation. With the huge amounts of government spending all across the world, many commentators believe that significant inflation could be on the way, which could see a large influx of money going towards Bitcoin.
While major institutions largely ridiculed Bitcoin for many years, a lot of them are now getting in on the action. JPMorgan CEO Jamie Dimon once said that Bitcoin was “a fraud” — now, the investment bank believes that the long-term price might rise to $146,000 and could become a competitor to gold. JPMorgan now even offers a Cryptocurrency Exposure Basket to its investors.
Numerous companies have also been building up stores of Bitcoin recently, including Tesla and Square.
The bear case for Bitcoin
Bitcoin bears largely believe that the gigantic price rises are due to an asset bubble akin to tulip mania. Even people who don’t even know what Bitcoin is or how it works have been looking at investing due to the hype and large price gains — a sign of an overinflated asset.
While some Bitcoin fans believe that it is digital gold, it does not have any intrinsic value as it is not backed up by an underlying asset and it is way more volatile than gold. Gold can be physically traded, melted down for different uses, and has true value across the world.
Another big issue for Bitcoin is its lack of usability. While this has improved over the years, it is still not commonly used for buying and selling goods and services.
Governments have tight control over fiat currencies and currency manipulation can be a useful economic tool. It doesn’t seem plausible that major governments will tolerate the widespread adoption of cryptocurrencies and give up this control. Bitcoin’s security measures could backfire, as the authorities won’t want widespread use of a currency that is not trackable.
So, should I buy Bitcoin?
Both sides make strong arguments. It is clear that some form of digital currency will likely play a major role in the future. There is also no denying the many great uses of blockchain technology.
However, the significant volatility of Bitcoin is a cause of concern for many investors. While there is potential upside, there is also the fear of buying at the peak. With Bitcoin, people need to be aware of the risks before committing to direct investment.
As an alternative to direct investment, many investors are looking at other ways to get exposure to cryptocurrencies. One particular company in this space that will garner a lot of attention when it goes public in the near future is the popular fiat-to-crypto exchange Coinbase.
Who is the founder of Bitcoin?
The true identity of Bitcoin’s creator is still unknown. Satoshi Nakamoto is the pseudonym associated with the creation of this cryptocurrency.
When was Bitcoin started?
Bitcoin was launched in 2009.
How many Bitcoins are there?
The total possible supply of Bitcoin is fixed at 21 million. Currently, over 18.6 million Bitcoins are in existence, with more getting added each day as they get mined.
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Contributing Writer at MyWallSt
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.