Will Bitcoin make new all-time highs?
- There is no sure way to predict that bitcoin will make a new all-time high.
- If 4-year cycles are true, Bitcoin could see another high in 2025.
- The bitcoin price has primarily rallied in past due to limited supplies and speculation.
Bitcoin is digital currency that operates independently of any central body or bank or government oversight. Anonymous peer-to-peer technology, cryptography, and decentralized architecture are the basic tenets of bitcoin transaction.
It was founded in 2009 by a mysterious individual or group under the codename Satoshi Nakamoto, which appeared on a 2008 white paper that originally defined the blockchain technology that would serve as the foundation of the whole cryptocurrency industry.
Bitcoin has rallied and dipped several times in its value in the last decade. There are various reasons why it might not reach an all-time high anytime soon.
Bitcoin does not have any intrinsic value
Bitcoin's intrinsic value (worth in and of itself) is determined by the confidence of its users i.e. perceived value, supply, and demand.
Bitcoin has no inherent value compared to fiat money like USD or euros. The stability of the government issuing the currency and the connection between supply and demand determines the value of fiat money. Central banks play a role in keeping the value stable and determining the amount of currency in circulation.
Bitcoin doesn't have any stable institution backing and regulating it. Bitcoin relies on the strength of its decentralized nature, anonymity, and blockchain technology. Bitcoin's price remains volatile because the bitcoin value is based on speculation of how valuable its strengths are, not on the regulation and stability of institutions.
Bitcoin prices have rallied in the last ten years
In 2009, when Bitcoin was first released, it had a meager value. When early adopters started trading in digital currency a year later, its value was only a fraction of a cent. The first time the cryptocurrency reached $1 was in 2011.
In November 2013, as it began to gain popularity worldwide, Bitcoin passed the USD 1,000 threshold.
In 2017, Bitcoin had the second significant price increase but fell to USD 3,300 in the following 12 months.
Bitcoin passed the USD 20,000 milestone in December 2020 before reaching an all-time high of USD 64,895 on 14 April of the following year.
There are strong arguments that the cryptocurrency valuation is a bubble that may burst
Some prominent financial experts contend that cryptocurrency valuation is a bubble that might burst. The factors responsible for inflation and pop of the bitcoin bubble are:
- Valuations, according to transaction data, make little sense
- Businesses have been sluggish in embracing blockchain technology.
- There is essentially no entrance barrier.
- Centralization remains a concern
- Elon Musk's comments have fueled the speculation and artificially inflated the cryptocurrency market, contributing to the bubble's demise.
- Not all governments approve of cryptocurrencies.
- No identifiable real-world links exist.
- Leverage haunts the cryptocurrency market
- Investors usually exaggerate the potential of new technologies.
Blockchain technology in Bitcoin has limitations that has put a question mark on its value
Bitcoin's value has risen from the claims that it is truly anonymous and scarce, with a total cap of 21 million bitcoins.
Bitcoin is not truly anonymous, as governments have been able to track transactions several times. Also, scarcity by itself is not a source of long-term value if the original foundations of anonymity are not that strong.
There have been concerns over several other limitations.
Over the years, Bitcoin has become inconvenient, sluggish, and costly to use. Validation of most bitcoin transactions takes roughly ten minutes, and the transaction cost has averaged $20 at its peak.
The volatile value of Bitcoin has rendered it an unviable means of trade. It is as if a hundred-dollar note is valued to purchase a car one day and a cycle the next.
Bitcoin mining contributes to carbon emissions because of power requirement, making it a policy issue for most governments
Bitcoin has also been criticized for the energy consumption used in mining bitcoin. Bitcoin mining is a process that requires a huge computational process to maintain the distributed ledger and validate transactions to obtain the new bitcoin.
As more bitcoins are "mined", the computational difficulty of obtaining them increases. Hence, more and faster hardware is added by bitcoin miners regularly, contributing to carbon emissions and electronic waste.
While some big institutional bitcoin miners are moving to green energy, it remains a slow transition. This might become a government policy issue that will affect the value of bitcoin in the long term because all governments have carbon emission goals.
Bitcoin's short-term price depends on macroeconomic factors
Macroeconomic factors impact Bitcoin's capacity to create value, and demand for the currency varies.
People may allocate to alternative assets like Bitcoin at higher rates during economic expansion and wealth increase. Investor stances on risk may influence how Bitcoin is viewed compared to more conventional assets like bonds or shares.
The popularity of alternative currencies also influences the demand for bitcoin, which can increase in nations where the local fiat currency is unstable or less useful.
Due to an impending global recession that may last until 2024, the bitcoin value may decline.
Bitcoin prices will likely stabilize in the long term
The halving of Bitcoin available for mining ultimately causes the price to grow. After this occurrence, the price rallies. This phenomenon happens every four years.
In addition, Bitcoin's value has fluctuated due to the ongoing mining and constant addition of new cryptocurrencies. At this pace, the price will not stabilize until all 21 million Bitcoins established by the creator have been mined.
As with most commodities, assets, investments, and other items, Bitcoin's price is highly influenced by supply and demand. As a rapidly embraced asset by investors and traders, price speculation has a significant role in Bitcoin's value at any time.
The industry adoption of bitcoin has been slow but steady. This will contribute to lower price fluctuations as more companies adopt it.
Media sources, influencers, business moguls with strong opinions, and well-known bitcoin enthusiasts generate investor anxiety, resulting in price volatility.
- ↑ Chohan, Usman W. (2022-02-05). "A History of Bitcoin". Rochester, NY. Cite journal requires
- ↑ "Fiat vs. Crypto & Digital Currencies". Gemini. Retrieved 2022-11-07.
- ↑ "Boom and bust: How Bitcoin prices have swung wildly since 2010 - What's behind the big Bitcoin crash?". The Economic Times. Retrieved 2022-11-07.
- ↑ Pellegrino, Silvia (2022-09-02). "Has the crypto bubble burst?". Tech Monitor. Retrieved 2022-11-07.
- ↑ Prasad, Eswar (2021-07-20). "The brutal truth about Bitcoin". Brookings. Retrieved 2022-11-07.
- ↑ "Bitcoin Energy Consumption Index". Digiconomist. Retrieved 2022-11-07.
- ↑ Jiang, Shangrong; Li, Yuze; Lu, Quanying; Hong, Yongmiao; Guan, Dabo; Xiong, Yu; Wang, Shouyang (2021-04-06). "Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China". Nature Communications. 12 (1): 1938. doi:10.1038/s41467-021-22256-3. ISSN 2041-1723. PMC 8024295 Check
|pmc=value (help). PMID 33824331 Check
- ↑ "Bitcoin's Price Is Back Above $21,000 After Hitting 3-Month Low. Here's What Investors Should Make of It". NextAdvisor with TIME. 2021-07-26. Retrieved 2022-11-07.
- ↑ "Bitcoin could fall to $3.5K as recession intensifies and stocks collapse - Gareth Soloway". Kitco News. 2022-10-18. Retrieved 2022-11-07.
- ↑ "'Crypto Winter Could Be Over' If Bitcoin's Price Does This, According to One Expert". NextAdvisor with TIME. 2022-07-19. Retrieved 2022-11-07.