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Cryptocurrency is the cool new kid on the block, and it’s currently showing no signs of slowing down. Instead of being a physical representation of value (like gold), cryptocurrency is an encryption key that’s entirely digital—and for the time being, at least, entirely valuable. Bitcoin, the most well-known cryptocurrency, has continued to break records this year with its soaring value. With digital assets quickly becoming legitimized, the question comes up time and time again: has bitcoin reached its peak? Is it worth investing in cryptocurrency?
How High Can It Go?
In the last year, the value of bitcoin has soared, at one point in June 2017 reaching $3025.47 each. This is in contrast to the beginning of 2017, when it was valued a8t $1900. Bitcoin has become attractive to investors in the last few years for several reasons. First, it’s a finite resource, despite being digital. New bitcoins are made at a certain rate using algorithms, and more can’t be created by the whims of any government, meaning its value can’t be diluted by increased volume. In fact, that’s another benefit of cryptocurrencies like bitcoin—they’re not tied to any government or bank. Some have predicted truly insane valuations of bitcoin in the future—up to $100,000 each, but others are wondering if bitcoin has peaked, at least for now. Factors influencing bitcoin’s rise currently include its legitimization as a currency by some countries, as well as geopolitical unrest that has people diversifying and looking for non-government assets to hold onto.
The Lure of the Blockchain
One of the most compelling aspects of cryptocurrency is the technology the assets rest on. Many banks are now exploring the possibilities of incorporating the technology of the blockchain (distributed ledger system) to increase security. While blockchain technology is considerably more secure than other digital networks, it’s not infallible. In addition, the idea that bitcoins can’t be traced to their owners has been shown to be untrue, a fact that hasn’t dampened bitcoin’s value overall.
Though bitcoin is the most well-known cryptocurrency available, it’s not the only one making waves. Ethereum, an alternative to bitcoin, also uses blockchain technology, and has grown even faster in 2017 than its competitor. In January, the cryptocurrency was being traded at $7.98, but reached $401.10 in June, an increase of more than 5000%. The rise of Ethereum and bitcoin shows that the world is very interested in digital assets—at least for now. The success of these currencies has ushered in more options for potential investors (a whopping 831 different currencies)—but that doesn’t mean that cryptocurrency is always going to be a safe bet for investors.
Skeptics of Bitcoin & Cryptocurrency
The incredible rise of bitcoin may be impressive, but some experts are convinced it can’t last—at least for now. By nature, bitcoin is inherently volatile—it has been known to drop by hundreds of dollars in a single hour at times. Though it’s not tied to any bank or government, geopolitical factors have an enormous impact on bitcoin fluctuations, and there’s the ever-present issue of actual value. One prominent investor has sold off many of his cryptocurrencies for the time being, waiting until the price drops to buy more. He also predicts that one day, the cryptocurrency bubble will pop entirely, leaving investors essentially empty-handed. Others point to inefficiencies in the bitcoin system, and the fact that even if valuations are high, that doesn’t mean the coins can necessarily represent that amount of legal tender—it’s an odd marketplace with no guarantees.
Should You Invest?
With recent failures to set up a bitcoin ETF, the use of the currency is still limited, though its price remains impressive. Many people are still optimistic about the long-term future of bitcoin, but investing in it during times of growth can be dangerous. Some advocate buying one bitcoin and leaving it to grow, drop, and change. Others think it’s best to wait and buy when it drops, in anticipation of future growth. As with any investment, buying bitcoin is risky—but the rewards could be massive. With the finite supply and rock-solid blockchain technology, it’s unlikely that bitcoin is going away—and that alone is the reason for the investing world to keep an eye on it.
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