It is nigh on impossible to observe financial news without hearing about the rise of cryptocurrencies, particularly Bitcoin, which recently surpassed the $15,000 mark and is continuously setting new all-time highs. As a record number of people are investing in the cryptocurrency, and an ever-increasing number of businesses now accept it, global usage and adoption of Bitcoin is set to increase.
Of Bulls and Bears
The claims of many senior figures in the banking and tech industries provide a bullish outlook on the future of bitcoin and assert its permanence in society today. In the view of cybersecurity pioneer John McAfee, Bitcoin is likely to surpass $1m by 2020.
To best evidence just how rapidly Bitcoin’s popularity has surged in 2017, the cryptocurrency’s value has increased more than twelvefold since the beginning of this year. With around 360,000 transactions per day, Bitcoin’s utility and applicability in the global market is rapidly expanding, in turn, boosting its attractiveness. Stan Miroshnik, CEO and MD of investment bank Element Group, summarizes this well:
“The bitcoin economy is supported by all the goods and services you can buy with bitcoin, as well as the infrastructure investments made by thousands of people to support the distributed bitcoin network. All of this has fundamental value. I can pay in bitcoin faster, cheaper and more secure than with PayPal, this is a fundamental value.”
Despite claims – perhaps enshrouded in optimism rather than total rationality – that bitcoin’s rise is unstoppable, the disagreement from other senior figures casts some shadows of doubt on whether is Bitcoin is worth its hype and clamour. Jamie Dimon, CEO of JPMorgan and Chase, has branded people purchasing the cryptocurrency as ‘stupid’ and labels it a ‘fraud’. The comments of Credit Suisse CEO Tidjane Thiam are analogous; in his view, Bitcoin is ‘the very definition of a bubble’.
The agreement with such cautiousness from other notable figures will undoubtedly unsettle a first-time investor seeking to jump on the Bitcoin bandwagon. Warren Buffet has ridiculed Bitcoin, stating: “stay away from it. It’s a mirage, basically…the idea that it has some huge intrinsic value is a joke in my view.”
Despite the widespread criticisms of Bitcoin, its continuously surging value, as well as its increasing utilization across the world, give it hope that its current high value is here to stay. Major financial institutions’ adoption of the cryptocurrency is evidence in itself of the cryptocurrency’s regard within financial spheres growing.
That Facebook, Google and Apple have all implemented a browser API that will facilitate easier purchasing of goods and services online with cryptocurrency displays the currency’s expanding nature.
Furthermore, that companies operating with blockchain – the technology on which bitcoins and other cryptocurrencies are traded – have cumulatively raised $4.5bn in private funding this year (a new record) further epitomizes the growth of cryptocurrencies.
The decision by other major international firms, such as Microsoft, PayPal and Tesla, to accept Bitcoin further underlines its growing reach. Indeed, the increasing number of countries accepting Bitcoin and cryptocurrencies as legal tender further strengthens the argument that cryptocurrencies are here to stay. Significantly, the adoption of Bitcoin from accounting giants EY and PwC is a further exemplification that its utility and prevalence is growing.
The arguments that Bitcoin is little more than public excitement about something with no substantiated or intrinsic value are understandable. Many critics are quick to point to the bubbles – and subsequent crashes – of the Dotcom boom and US housing in the 2000s.
Ripple’s XRP, the cryptocurrency that many critics hail will follow the footsteps of Bitcoin, is also likely to experience a price surge in the near future. Currently worth around $0.25 – increasing 20% in value since early November – the currency is being adopted by a number of global banks, such as Amex and Santander. Further, the announcement of Michael Arrington, founder of TechCrunch, that he has created a $100m hedge fund that will be denominated in XRP will most likely boost XRP’s value.
Developments in the last decade have made it evident that digital is the future. Bitcoin, along with other cryptocurrencies such as Ripple and Ethereum, is surging in popularity – with the adoption of cryptocurrencies from an increasing number of businesses and corporations, this is set only to continue. Whilst various price corrections may occur, and the proverbial ‘bubble’ may inflate and deflate, Bitcoin is highly unlikely to burst.
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