Bitcoins to Become Super Valuable?
Bitcoins to become Super Valuable?
Posted on August 18, 2012
A few clever people have known about Bitcoins since their genesis in January 2009. For those that don't know, the Bitcoin is quite simply an online digital currency - an electronic and independent alternative to €normal€ money. To be honest, up until now it's all been a bit geeky, with the main focus of interest being on the technical black arts needed to make the darn thing work. But things could be about to change - very quickly, and very dramatically. And there is just a chance that this change might make a few people very rich indeed!
There is plenty written online about the way in which Bitcoins work, so I won't repeat it here. Essentially, Bitcoins can be bought or earned, they can be used to pay for goods and services, and they can be traded on exchanges. In other words, they are pretty much like any other type of money. The big difference lies in the fact that Bitcoin transactions are anonymous and take place exclusively between two parties. Bitcoins can be used globally and do not rely on any third party such as a Bank or other financial institution. This makes Bitcoins very attractive to anarchists and criminals! It also makes them very unpopular with Governments as they cannot be taxed or regulated. The forces on both sides of this equation are gathering€¦.
So how much is a Bitcoin worth? The fact of the matter is no-one has the faintest idea. There is no means of achieving a consensus on the long term relative value of this currency as its worth depends purely on supply and demand - and not many people are using it. On top of this, the small volumes traded on Bitcoin exchanges result in prices that are extremely volatile. Bitcoins have traded for as little as a few cents and for as much as nearly $30 per coin within just a few months.
The number of Bitcoins in circulation is strictly limited. The release of new coins on to the market occurs at a steady rate and there is a pre-determined finite maximum number of coins that will be generated. As I said earlier, their value relies solely on supply and demand, which in turn depends on how many people use the currency to make purchases or receive payments. Oh dear, at the moment that is€¦errr€¦not many!€¦maybe just a few niche retailers and online digital services. Whatever the stats, Bitcoin is a very long way from being even heard of by the man in the street, let alone used! So does this make Bitcoins worthless in the short term? Far from it.
I mentioned earlier that Bitcoins are of particular interest to two opposing groups - in one corner we have the anonymous, the anarchists, the criminals, the libertarians, and maybe even the anti-capitalists. In the other corner, we have Governments (of all complexions), the regulators, the Banks, and the tax man. Make no mistake about it, these opposing forces understand the massive implications of a decentralised digital currency such as Bitcoin becoming a success - and because of this, there will be a fight to the death. There are already signs that this battle has begun. Since May 2012, the number of daily Bitcon transactions has risen from less than 10,000 to nearer 40,000. At the same time, the value of the Bitcom has more than doubled. How can this be? There is little evidence that there has been any great increase in the number of retailers accepting Bitcoins, or that so many more people are now using the currency. So who is buying all the Bitcoins? We will never know (it is anonymous remember) but the motivation exists for institutions to buy up the currency to limit or cease its growth - the current market capitalisation of Bitcoin is small enough to make it vulnerable to this type of attack. Conversely, there may well be significant investors in all types of market that the view the tensions surrounding Bitcoin as an opportunity to extract value.
The pressure of demand on Bitcoins could become extreme in a very short period of time as opposing forces battle for control of the currency and its future. For a few visionary and fearless investors, this could represent a unique opportunity to secure meaningful wealth. There is no technical reason why Bitcoins should not at some point achieve a €super peak€ in their value as they become progressively bought up by panicky institutions and short term speculators. Indeed, any such peak could be ridiculously high given the small number of coins available and the investment intentions of the big players. Of course, this is purely conjecture, and there can be no certainty that Bitcoins will achieve €super value€. In the meantime, holding Bitcoins remains a risk. That said, the birth of a global digital currency is a sesimic event with the highest of stakes - in such a situation, someone will get rich quick!
Dan Ryman
Copyright gingerymelon 2012
Posted on August 18, 2012
A few clever people have known about Bitcoins since their genesis in January 2009. For those that don't know, the Bitcoin is quite simply an online digital currency - an electronic and independent alternative to €normal€ money. To be honest, up until now it's all been a bit geeky, with the main focus of interest being on the technical black arts needed to make the darn thing work. But things could be about to change - very quickly, and very dramatically. And there is just a chance that this change might make a few people very rich indeed!
There is plenty written online about the way in which Bitcoins work, so I won't repeat it here. Essentially, Bitcoins can be bought or earned, they can be used to pay for goods and services, and they can be traded on exchanges. In other words, they are pretty much like any other type of money. The big difference lies in the fact that Bitcoin transactions are anonymous and take place exclusively between two parties. Bitcoins can be used globally and do not rely on any third party such as a Bank or other financial institution. This makes Bitcoins very attractive to anarchists and criminals! It also makes them very unpopular with Governments as they cannot be taxed or regulated. The forces on both sides of this equation are gathering€¦.
So how much is a Bitcoin worth? The fact of the matter is no-one has the faintest idea. There is no means of achieving a consensus on the long term relative value of this currency as its worth depends purely on supply and demand - and not many people are using it. On top of this, the small volumes traded on Bitcoin exchanges result in prices that are extremely volatile. Bitcoins have traded for as little as a few cents and for as much as nearly $30 per coin within just a few months.
The number of Bitcoins in circulation is strictly limited. The release of new coins on to the market occurs at a steady rate and there is a pre-determined finite maximum number of coins that will be generated. As I said earlier, their value relies solely on supply and demand, which in turn depends on how many people use the currency to make purchases or receive payments. Oh dear, at the moment that is€¦errr€¦not many!€¦maybe just a few niche retailers and online digital services. Whatever the stats, Bitcoin is a very long way from being even heard of by the man in the street, let alone used! So does this make Bitcoins worthless in the short term? Far from it.
I mentioned earlier that Bitcoins are of particular interest to two opposing groups - in one corner we have the anonymous, the anarchists, the criminals, the libertarians, and maybe even the anti-capitalists. In the other corner, we have Governments (of all complexions), the regulators, the Banks, and the tax man. Make no mistake about it, these opposing forces understand the massive implications of a decentralised digital currency such as Bitcoin becoming a success - and because of this, there will be a fight to the death. There are already signs that this battle has begun. Since May 2012, the number of daily Bitcon transactions has risen from less than 10,000 to nearer 40,000. At the same time, the value of the Bitcom has more than doubled. How can this be? There is little evidence that there has been any great increase in the number of retailers accepting Bitcoins, or that so many more people are now using the currency. So who is buying all the Bitcoins? We will never know (it is anonymous remember) but the motivation exists for institutions to buy up the currency to limit or cease its growth - the current market capitalisation of Bitcoin is small enough to make it vulnerable to this type of attack. Conversely, there may well be significant investors in all types of market that the view the tensions surrounding Bitcoin as an opportunity to extract value.
The pressure of demand on Bitcoins could become extreme in a very short period of time as opposing forces battle for control of the currency and its future. For a few visionary and fearless investors, this could represent a unique opportunity to secure meaningful wealth. There is no technical reason why Bitcoins should not at some point achieve a €super peak€ in their value as they become progressively bought up by panicky institutions and short term speculators. Indeed, any such peak could be ridiculously high given the small number of coins available and the investment intentions of the big players. Of course, this is purely conjecture, and there can be no certainty that Bitcoins will achieve €super value€. In the meantime, holding Bitcoins remains a risk. That said, the birth of a global digital currency is a sesimic event with the highest of stakes - in such a situation, someone will get rich quick!
Dan Ryman
Copyright gingerymelon 2012