A great weekend for bitcoin and what the future portends

Janica San Juan 9 January 2018 NEWS

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Despite price corrections, there are signs of growth to come.

Bitcoin enjoyed yet another high-performance weekend, hitting a US$17,150 high point. Even though the market has since experienced a major correction, there is reason to expect a bright future for bitcoin and cryptocurrencies in general.

The weekend recuperation came in at an opportune time after the currency closed the year on a relatively low note of approximately US$14,000. This came as a surprise for many investors as less than two weeks prior, on 17 December, bitcoin had hit an all-time high value of US$19,666, fuelled by CME Group's much-anticipated bitcoin futures trading.

The previous weekend’s rally could have been attributed to the effect of reports that Peter Thiel, a billionaire investor and co-founder of Paypal, had invested more than US$15,000 in the currency in 2017.

Such moves are to be expected in the volatile and speculation-driven crypto market. Extreme market highs are often followed by steep corrections before the market again stabilises.

Bitcoin’s rollercoaster pricing moves over the second half of 2017 are part of the reason why many analysts are referring to the crypto coin as a bubble. However, a realistic look at the financial market gives grounds for believing that bitcoin and other cryptocurrencies might define the future.

Fall from glory of fiat currencies

Even though bitcoin was initially often portrayed the criminal underworld’s currency of choice, its uses and applications have far exceeded expectations. One of the reasons behind this is the fall from glory of fiat currencies all over the world.

Historically, gold was the store of value against which many major currencies got their backing. Such currencies were relatively stable because the economies behind them matched the volume of the precious metal in circulation.

By the end of the 1800s, the global economy began to expand faster than the availability of the commodity. This led to instability and widespread deflation. The aftereffects led to the removal of gold backing from US dollars, and other major currencies followed suit.

Bitcoin can't be manipulated

Monetary value in most countries at the moment is totally dependent on government activity. This at times leads to undesirable effects that cause inflation and other economic disasters. The beauty of gold was the fact that it was beyond manipulation. No single entity had the power to produce it or control its availability.

Currencies require such protection from manipulation and that is what the cryptocurrency framework has to offer. Bitcoin mining difficulty might not be ideal but it is a step in the right direction.

Central banks and their fiat currencies are failing. This means that the world needs a stable transaction unit that has solid backing. This is what bitcoin and other digital currencies can potentially provide. They might still require some fine tuning to reach their optimal performance but they are definitely light years ahead of fiat currencies.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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