Pretty much everyone has heard of Bitcoin, but very few understand much about it, and despite its price explosion over the past year, even fewer actually own any Bitcoin, or any other cryptocurrency.
Bitcoin was the world’s first decentralized cryptocurrency, and since the public got wind of it just a few years ago, interest has skyrocketed.
Back in July 2010, a single Bitcoin was worth $.08. A person who invested $100 would have been able to buy 1250 Bitcoins at that time. As more and more investors started to take interest in Bitcoin, the price has gone parabolic, with the price as of December 10/17 sitting at $15,742. That means that $100 original investment in Bitcoins in July 2010 would be worth $19.67 million today.
With bitcoin’s recent price explosion, anticipation over the possibility that we’re heading towards a Bitcoin bubble is building, but is that true?
Bitcoin is digital money that is created and held electronically. At the core of bitcoin technology is a super database called the “blockchain.” The blockchain contains every transaction in the history of Bitcoin and is accessible to anyone.
While Bitcoin’s price is up massively since its inception, there have been many sharp declines along the way. To say it is volatile is a huge understatement – it is the “wild west” out there right now. In its early days, governments tried to label Bitcoin as a currency used only by criminals and terrorists, and cringed as Bitcoin and other cryptocurrencies gained in popularity. Generally, cryptocurrencies are anonymous, private, and not susceptible to government or central bank interference or oversight.
As governments continue to rack up unsustainable debts, resulting in more and more fees and taxes, those with any wealth are looking for ways to protect that wealth, and cryptocurrencies are another option, similar to gold, collectibles, and other tangible assets. But unlike most of those other assets, cryptocurrencies are digital and can be accessed via the internet from anywhere in the world. As more and more retailers, restaurants, and other businesses accept cryptocurrencies, they become much more attractive for those wanting to move their wealth to safer locations. For wealthy Russian, Chinese and others, cryptocurrencies offer a new and very portable means of keeping private capital out of the grasp of government.
Today there are over 1,000 cryptocurrencies, each building on blockchain technology in different ways. From Wall Street executives to venture capitalists, observers have weighed in as Bitcoin has risen about 132% over the past month, while Litecoin is up 144% in that time frame.
The recent Bitcoin and Litecoin price hike is just the continuation of a long-term bull run on the cryptocurrency, fuelled by the tsunami of speculative trading. Today is first day that Bitcoin futures can be traded on the CBOE Global Exchange, and in a week they can be traded on the CME Exchange. These are two key events that will open the door to greater inflows of institutional money, while also making it easier to bet on bitcoin’s decline. And just last week we learned that Nasdaq and Cantor Fitzgerald & Co. will list Bitcoin futures within the first half of 2018. Shawn Matthews, chief executive of Cantor Fitzgerald & Co., stated that cryptocurrencies are a new asset class that “is not going away,” and that Bitcoin is here to stay. He stated:
“The asset class is not going away. If you look at the next level, it will be the institutions coming in and being larger participants in the marketplace, especially as liquidity gets better.”
John D’Agostino, a former Nymex executive, told WSJ that every department of every regulated exchange is considering listing Bitcoin futures, and that the number of Bitcoin futures exchanges will drastically increase throughout 2018, as leading exchanges and markets such as CBOE, CME, Nasdaq, and Cantor move to implement bitcoin. D’Agostino said:
“Every research department of every regulated exchange is saying, ‘Can we do this?. The majority of costs associated with that are marketing. If people want to trade this thing, why wouldn’t you?. This is a gift from the heavens.”
Is it too late to buy Bitcoin? The answer is no…but there are many more options than just Bitcoin to generate potential significant profits in this dynamic market space.
We believe that cryptocurrencies like Bitcoin are here to stay. But think back to the 1990s and the original internet bubble. While the internet has grown to become an integral part of our lives, most of the high-flying names of the 1990s are long gone. After the boom, we had the brutal 2000-2002 bear market that shook out the weaker players, making room for the stronger ones.
We expect that we will see the same this time around in cryptocurrencies, as that is generally how new technologies play out.
One thing is clear, the new cryptocurrencies have brought with them technology that will change the way the world does business, and if you want to be in position to profit from this generational change, you need to get involved. The first step is to get informed.
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