no comments

IS BITCOIN A BUBBLE? A QUESTION THAT HAS DIVIDED THE EXPERTS

After peaking at just shy of $20,000 mark to crashing down to less than $15,000 in a span of just ten days, BitCoin has reinforced many experts’ and investors’ belief that it is possibly a bubble waiting to burst. And yet, many are still looking at the flip side of this coin, posing convincing arguments that it is not a bubble. Then there are some whose minds are split into halves whether to tread with caution or go all guns blazing.

I am not denying that some of the most celebrated financial minds have said that it is a bubble; they have every reason to. The dramatic way in which Bitcoin value has surged recently is a call-out of its volatility. The share prices of this virtual currency have soared without a substantial business base.

But, there are counter-arguments we could not look away from. Some established investment institutes hail cryptocurrency as the dawn of revolutionary economic system comparing it to the emergence of stock markets back in its days. They consider Bitcoin as a viable digital cash that will make the financial transactions in the digital world more convenient. According to them, in spite of the advancements in e-commerce technologies, online payments are yet far from being completely hassle-free. You cannot use the traditional cash and card payments often follow a tedious process where the cardholder usually has to re-enter the card details for every purchase. Card transaction charges are also high. Furthermore, not everyone in the world owns a credit or debit card.

 

These are some of the challenges with the existing options that bitcoin is looking to take care of. It is set to make the cash-like, peer-to-peer payments in the online world possible. If you are using a physical, cash currency to make the payments in-person, you can easily avoid many uncertainties. However, when it comes to online transactions, the doubts and confusions always prevail.

Many economists even say that bitcoin can go on to serve a bigger purpose. It can completely replace the existing currency system. More reformed, viable and revolutionary systems have replaced the defunct, crippled systems in the past. For instance, before paper money came into existence in the 1830s, people had relied on tally sticks.

Bitcoin isn’t necessarily good only for those who feel the sense of rebellion against the current economic structure; it can be advantageous to the governments as well as central banks. Bitcoin can make it possible for them to incorporate more stringent policies, like negative interest. With this cryptocurrency in circulation, it will be hard for people to stash and hide their money away and evade the eyes of the income tax department.

However, many experts also see it as a great tool for money laundering. The high value of bitcoin can work in the favor of those who have hoarded large sums of money obtained illegitimately. The higher the value of bitcoin, the easier it will be for them to wash out the money. It is like laundering the money through expensive artworks. An instance, it is way easier to launder the money using a $20mn painting than with an artwork costing, say, $1,000.

What’s worth noting is that the price of bitcoin is more likely to keep increasing for two reasons. There is a limit to the number of bitcoins that can be extracted. The number is capped at 21 million. Out of this, nearly over 16 million coins have already been mined. The remaining will take more than a hundred years to be mined. The limited availability of bitcoins will keep the price high. Thus, it will continue to be an incredible tool for money laundering.

Well, that’s pretty much it! All things considered, bitcoin still looks like a bubble. But, it is also revolutionary. Whether or not the bubble will burst, only time will tell. One thing is sure though; it is set to bring reforms to the financial system of the world. And, it is not just the bitcoin we are looking at now; many more cryptocurrencies are now out there and look just as promising as bitcoin. If you are thinking about investing, learn more about it first. Do not take a dive because you fear missing out.

Reply