Bitcoin is soaring, with every week that passes another grand is bolted onto the price of a single bitcoin. Many financial and business figures are warning this is a huge bubble which will blow at any moment. But on the other side you have those that are saying this is the future for our currency and that it still has a long way to go.
We cannot predict with 100% accuracy just how this will turn out, only time will give us the answers we are looking for. However we do have our own ideas about where this is going. For our own prediction we are going to be arguing how bitcoin is to digital currency what gold is to physical currencies.
For thousands of years gold has been the anchor currency of the world, highly valuable and sort after worldwide, it was arguably the first globally accepted currency until regulation and anti-fraud/anti-counterfeit etc… came in as a major factor. Gold although still extremely valuable has too many practical issues with being a usable currency. Most of us would not be able to tell the difference between gold and gold coloured alloy, meaning it just cannot be used. On top of that it is so valuable that to buy small items we would literally need to trade dust particles if we were to use it in a practical sense.
Bitcoin draws almost identical parallels with gold, firstly it is way to valuable, meaning to make small transactions users have to trade in really small fractions. Although with a digital asset this can easily be done, it does not make for pleasant user experience. Secondly Bitcoin is merely the first of the crypto-currencies and the hardest to get hold of for both investors and miners. When bitcoin was created it was not fully optimized (it was a garage project, meant as a concept), as such things like transaction speeds are slow. When we say slow we mean if your making a transaction it could take maybe 20 minutes to a few hours depending on the size of the transactions. If you were in a shop trying to purchase then this would not be pleasant.
Eventually a better more optimised digital currency will become the standard use for day to day purchases, for example both Ripple and Ethereum are tackling these issues. However we do not fill this will make Bitcoin worthless, instead we predict that Bitcoin will become the gold standard for digital currencies. For large purchases and storing large quantities of wealth Bitcoin will be the coin of choice. It already has the strongest market-cap and the sheer popularity to help it achieve this.
So will the bubble pop
Initially it may dip once hedge funds stop ploughing through, however once we see a rise in other crypto-currencies being used as legit currency then we will see Bitcoin become a stable growing asset. An asset that will grow at the same rate of both the use of digital currency in the real world whilst keeping up with inflation. We strongly feel it will become as solid as gold. However Bitcoin will move separately to precious metals meaning two great assets that can be hedged against each other or against stocks and bonds.
Currently the price of almost all crypto-currencies depends on the price of Bitcoin, however in the near future it is more feasible for Bitcoins price to be measured against a more practical digital currency such as Ripple. Bitcoin may never be seen as a legit currency due many technical floors which by law prevent it becoming so. This however is not an issue, just like gold we cannot use it as a currency, however it is an asset which we can invest in. We now have Bitcoin IRAs regulated by the IRS, just as we do with gold and silver IRAs.