We can't help but wonder how far can it go. It is clear that the current trend is slightly different than the one that hit us between 2017-18. There aren’t many people who haven't heard of Bitcoin yet, due to the recent interest in the most famous cryptocurrency and the history behind it. Let’s refresh our memory regardless, and, most importantly, let’s see how the Bitcoin is doing in the times of coronavirus crisis.
It is still unknown who created bitcoin or where it came from. However, the person in question made sure that the currency remained independent of all world banks and thus not centrally influenced. Using complex algorithms, they also set the total sum of virtual coins, which is exactly 21 million.
Both of these facts are attractive for investors. Unlike the traditional currencies, bitcoin will not be subject to inflation, meaning it's not possible to create more Bitcoins and reduce their value. The last Bitcoin will be mined in about 120 years, sometime around 2140. However, the vast majority of Bitcoins will be mined in the following years, with about three quarters of the coins currently circulating on the market.
The greatest potential
Although the Bitcoin value has grown rapidly in recent years, it is still not an established currency. It has the greatest potential of all other cryptocurrencies, though. We will likely not experience the moments where its value multiplies threefold again, but perhaps, when the market calms down a bit, it will attract other investors, who might no longer see Bitcoin as a risk investment. After all, it is the trustworthiness and demand that set its price. The higher they are, the more expensive Bitcoin becomes. However, there are some who disagree with the flatter curve and think that it can still multiply several times:
"I’ve seen Bitcoin increase its value tenfold, twentyfold and thirtyfold in a single year. If the value increases fivefold in the next year, it wouldn’t be as crazy as people think,"
says Brian Estes, an investor from Off the Chain Capital agency.
To the very top, never down?
The rise of Bitcoin was rather dramatic, and whilst it was used to pay for pizza, for example, its current value is around half of million Czech crowns. However, the things that are attractive the most for speculators (the unstable exchange rate and the vision of an easy profit), are, in fact, off-putting for investors. It is the instability of Bitcoin that determines it will never become one of those "safe havens", a term used mainly for precious metals and gold, which are gaining value steadily.
This year truly shows how unstable and fickle the Bitcoin can be. It was hovering at $7,000 at the beginning of the year, and although it was growing steadily to $10,000 until February, a sudden drop below $5,000 came shortly after. Within a few short days, all those who had invested in this cryptocurrency (or a fraction of), lost half of their money. But Bitcoin has risen again and showed its strength when it returned to $10,000 a few months later, from where it slowly began to rise to today’s maximum level.
Historical record broken
In October, Bitcoin added $3,000, and $5,000 in November, surpassing its peak in 2017. Some people predicted a sudden drop again, which doesn’t seem to be coming now, as the value is steadily rising again. We can record an increase of $5,000 so far, up to a $24,000 level. On top of that, it seems that the institutions, not just the private investors, are pushing the price at the moment.
"The investment institutions role is more than obvious from the data," says Philip Gradwell from Chainalysis. Since September, the company has recorded quite a big number of investors that have started trading in the last year and have already bought more than a thousand Bitcoins.
Bitcoin at the times of coronavirus
It almost seems as if Bitcoin wasn't affected by the coronavirus crisis, but that's not the case. The lowest cryptocurrency decrease was recorded when the crisis reached its peak. On the other hand, the growth was supported by the banks' activity, as they began to invest more money into the economy, signalling a decline in exchange rates. This, in general, means a great opportunity to invest your assets in stocks, precious metals and many other products.
That’s why Bitcoin returned to its original level after the initial drop. The US election may be the reason for the further increase, too, as Donald Trump didn’t have a positive relationship to cryptocurrencies in general. Joe Biden doesn’t openly oppose them, which also supported the demand for cryptocurrencies, among others. This shows how the value of Bitcoin literally responds to the current mood and trustworthiness in the society.
There was one more thing that supported the current trend, a so-called halving, which means that the potentially mined bitcoins are split in halves. This event occurs approx. once in every four years, and usually means a price increase.
What about the other cryptocurrencies?
Although Bitcoin plays the major role, you can invest in other cryptocurrencies as well. Most experts agree that there are even more interesting currencies on the market, depending on what you expect. The fact is, that the vast majority simply copies Bitcoin. It may be unfair, but it's clear that Bitcoin overshadows other cryptocurrencies, it's gaining people's trust and its value is growing, in fact more and more people trust cryptocurrencies in general - thus their value is growing gradually. However, none of them reaches the level of Bitcoin in terms of a value. The cryptocurrency most likely to start breathing on its neck could be Ethereum, a currency that some say might be more important, therefore more attractive than Bitcoin. Regardless, Ethereum works on a different basis, and there is no limited amount of it, thus its price can be manipulated, and inflation can have an impact, too.
Either way, we will hear about cryptocurrencies in the future for sure. The demand will be stable, even higher in the following years. This applies to both honest investors and shady embezzlers, whose only wish is to grab your virtual money and run. The Kasperski company warns us about what might happen as early as next year:
"For some, Bitcoin might be an attractive target, especially now, when the coronavirus crisis has brought some people to the edge of poverty,"
say the prospects for the next year. Still, the advantage of cryptocurrencies remains – you don’t have to keep them in your bank account, but you can keep them in a physical form, such as printed on paper or stored on a portable hard disk. But remember not to throw it away, which happened to James Howells. He threw away an old hard drive from his laptop, that stored Bitcoins worth more than four and half billion CZK. According to the newest information, Howells is still looking for an investor that would fund the search in the landfill where the old hard drive could be located.