Bitcoin was the talk of the town in 2017. Everyone seemed to know someone who either invested or was planning to invest. The value rallied astronomically but, as is the case with any high, it had to come down. You see this very often in the stock markets, the value reaches an astronomical high and then falls back down almost all the way. At its peak, a single bitcoin sold for $20000 USD. In a matter of days, it had come down to a tenth of that. Thousands of people lost their life savings. But was it really a failure?
Bitcoin is a cryptocurrency, a digital asset designed as a medium of exchange, with each one storing individual coin ownership records in a computerized database with a cryptographic format. Cryptocurrency cannot be tampered with; it is anonymous and untraceable. These features make it extremely viable. So why did it crash so hard? The answer when it comes to financial assets is always the same, the huge rally was being sustained by continuous trading. Bitcoin is very similar to the stock market, and stock value sees this all the time. So why hasn’t crypto bounced back like all the other stocks? It is because investors lost confidence in the system and decided it wasn’t worth it.
Compared to buying stock crypto doesn’t create value in the economy, and all through the money invested generates wealth doesn’t contribute to the local economy. This needs to change, a system can easily be implemented in this tamper-proof and anonymous to contribute to small business, but the value of a single coin is still too high for daily transactions.
In the aftermath of 2017, many companies all over the world invested heavily in blockchain and we are still seeing improvements in every aspect of the technology. Its use case is so much higher than that of an expensive currency and we have only scratched the surface. IBM has several projects in blockchain including one for music distribution and another for storing supply chain statistics. Many banks have launched official cryptocurrencies for people to trade-in. But this is financially tied to the economic conditions of the bank, unlike bitcoin. One of the positive reasons for buying bitcoin was its independence from all banks, currencies, and their political landscape.
Today bitcoin is worth $ 9500 USD around half of what it used to be; people are starting to invest again slowly but surely. It’s highly likely that bitcoin will reach that high again within the next 5 years or less. Like all financial assets bitcoin too will follow the business cycle, it is not be feared, hated, or even loved, it is just there but now on the winning end of the cycle.
