Bitcoin’s Foggy Future

Sadie Keljikian, Express Trade Capital

In a roller coaster season for traders, Bitcoin’s value dipped below $10,000 USD twice last month.

Bitcoin was introduced in 2009, but didn’t receive significant attention until the fall of 2017. In the last few months of the calendar year, the cryptocurrency saw a remarkable rise in value, peaking at $19,343 USD in December. All the while, competing cryptocurrencies like Ethereum and Ripple grew concurrently, though they’ve yet to attract as much attention since they are newer and haven’t reached Bitcoin’s astonishing market value.

Shortly before the shocking sell-off, South Korean finance minister Kim Dong-Yeon mentioned potential plans to rein in, or even shut down speculative cryptocurrency trading in a radio interview. Prior to the interview, there had already been some discussion of regulatory updates in South Korea and China – two of the biggest cryptocurrency markets in the world. Both countries are concerned about anonymous traders engaging in disreputable or illegal exchange via cryptocurrencies. Several experts blame the finance minister’s comments and the rumors surrounding them for the sell-off and subsequent drop in prices across the cryptocurrency market, saying that he “spooked” investors and caused a fear-based fluke.

In mid-January, Bitcoin’s value dropped nearly 19% within 24 hours reaching a low point recorded at $9,199.59, or less than 50% of its peak last month. Although the cryptocurrency (along with its competitors) bounced back to a more reasonable price by the end of the day and continued to rise that week, traders are beginning to wonder if the Bitcoin bubble is bursting. Regulators have been concerned about the extremely volatile nature of Bitcoin and its potentially illicit uses for some time.

Experts are quick to point out that despite the recent spike in use and market value, consumers still rarely use Bitcoin in transactions beyond currency trading. Many wonder if it will ever be used universally enough to achieve the convenience of credit cards and digital payment methods like PayPal. Goldman Sachs recently released a report saying, “We think the concept of a digital currency that leverages blockchain technology is viable given the benefits it could provide: ease of execution globally, lower transaction costs, reduction of corruption since all transactions could be traced, safety of ownership, and so on. But bitcoin does not provide any of these key advantages.”

As of now, processing for each bitcoin transaction can take up to 10 days and conversion rates can vary wildly (up to a 31% margin) depending on what exchange traders use. Fortunately, the Goldman Sachs report also stated that since cryptocurrencies make up only 3.2% of US GDPs and .8% of global GDPs, so a Bitcoin bubble burst probably won’t significantly affect the economy at large. It is, however, looking more and more likely that Bitcoin won’t be useful beyond currency trading, since fewer businesses are accepting the cryptocurrency all the time. Most recently, Microsoft, Stripe and Steam have all announced that they will no longer accept Bitcoin due to high transaction fees, price volatility and an overly congested network.

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