The Future of Bitcoin

There is no question in today’s finance world that Bitcoin is one of the hottest, if not the most alluring, topics. Its popularity reaches the financial community and a brand new audience of young people who want to learn more about the world’s most popular cryptocurrency. But before diving into Bitcoin, we need to ask ourselves the question, “What is a cryptocurrency?”. To put it as simply as possible, a cryptocurrency is an online currency made up of strings of numbers meant to be a different way to store your wealth. For example, Bitcoin was made many years ago by an anonymous man who only allowed for a limited amount to exist and could only be uncovered by extremely powerful computers trying to mine them. Once this information is introduced, many people’s first question has to do with the worth of Bitcoin. Why is Bitcoin worth so much? The answer to this has to do with the decentralized nature of Bitcoin. Bitcoin is not owned by any person or any government and therefore gives some people who may fear the government’s power comfort, knowing that the government cannot control their money as long as it is in the form of Bitcoin. Others view it as a hedge against inflation, because unlike the average dollar, which is worth 2% less per year on average, Bitcoin’s value will only change based on the demand. Due to the limited amount of Bitcoin globally, the more demand there is, the more the price will go up due to simple supply and demand curves that tell us that as long as supply is stagnant, demand will equal price. Recently we have seen corporations such as Tesla, PayPal, Square, and Micro strategies allocate some of their cash to Bitcoin. What this has done in my eyes is give the popular cryptocurrency more credibility because if Elon Musk is happy purchasing Bitcoin, then why shouldn’t I be satisfied buying Bitcoin? Due to this, many believe that Bitcoin is entering a mass adoption period where Bitcoin will become a popular store of capital for not only companies but also regular people. If this is the case, then the price of Bitcoin will only go up as the rest of the world continues to open its eyes to it. It has also been predicted by Ark Invest, a famous investment firm, that Bitcoin will become a much more stable currency in ten years than it is today once people begin to treat and like gold. The point is that today, many people buy and sell Bitcoin aggressively, causing its value to spike and drop exceptionally quickly. Down the road, many people believe that Bitcoin will be seen as a safe store of value, like gold, one that will be held onto for long periods, not traded continuously. Whether Bitcoin reaches mass adoption or not, there is no question that Bitcoin is sparking lots of debate in today’s media and that it will remain a volatile asset, at least in the near term.