Bitcoins are Here to Stay, They are Not Tulip Bulbs
$BTCUSD, $CME, $CBOE
Bitcoin is here to stay, and when supply is limited and demand increases, the price goes up.
And when speculators drive the prices up, we can expect a major correction, after the correction, the real value of Bitcoin will be seen.
Y 2017 was a big year for Bitcoin, as it opened at $1,100 and peaked at almost $20,000 before retracing $13,000 into the close of the year.
This highly publicized run put Bitcoin on the map, and started a rush by the public to get in on once-in-a-lifetime gains.
Almost everyone we spoke to asked about buying Bitcoin, as they talked about the 1,200% gainer.
The Big Q: What is Bitcoin?
The Big A: Bitcoin is a private sector currency that can be used over the Internet between the buyer and seller, avoiding proprietary financial highways built by banks. It uses the most advanced cryptography to keep transactions secure and a public ledger that permanently records every transaction, to establish transparency.
Bitcoins can be bought on exchanges the same way GBP, EUR, and JPY are. And like all currencies, Bitcoin is not backed by Gold. And unlike all currencies, Bitcoin is not backed by confidence in a government. Instead, Bitcoin’s value is determined by the free market: in other words, supply and demand determining price.
Bitcoin supply is limited.
There are 21-M Bitcoins and that’s all (ever?), and 16.7-M have been produced to date.
Bitcoins are divisible.
The smallest unit is 100 millionth of a Bitcoin; many own just a fraction of a Bitcoin. And it is estimated that between 2-4-M have been lost by their owners.
Demand for Bitcoin is increasing.
Some demand for Bitcoin comes from citizens living in countries where the government’s paper (fiat) currency is risky, like Venezuela, Nigeria, and Zimbabwe.
Demand also comes from countries with capital controls where citizens need a way to transmit capital in and out of their country, like Brazil, Argentina, and China.
Entrepreneurs are driving up demand by buying Bitcoins for other uses. One of the Key technologies powering Bitcoin is its public ledger. Its ability to permanently recording transactions has a broad range of other uses.
But, the recent increase in demand has come from investors and speculators.
Recently Bitcoin has become accessible to the general public, and there are now regulated exchanges and Bitcoin futures available via the Chicago Merc (CME) and the Cboe. The result; a global user base expanding from around 5-M in January 2017 to almost 30-M in December 2017.
We are seeing that many of the new owners of Bitcoin are speculators who are not using it for currency. Hence the talk of The Bitcoin Bubble and the oft comparison to the 17th Century Dutch Tulip frenzy.
Again, Bitcoin is here to stay, and when supply is limited and demand increases, the price goes up, Bitcoins are not Tulip Bulbs.
Currently Bitcoin is trading at: 14,731.7949, -1,196.17, -7.51%, as of 2:13P GMT, the market is open
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