Yesterday the value of Bitcoin Wildly surged to all time high $3,000, continuing the trend of massive demand in the Asian market. The digital currency has had a stellar year, rising by more than 200 percent and easily outperforming stock market benchmarks like theÂ S&P 500Â Index and theÂ Nasdaq compositeÂ in 2017. The cryptocurrency has now more than tripled in value since trading at $968 on Dec. 31, and has gained nearly 30 percent in June alone.
This scenario naturally leads us to think about the last quarter of 2013, whenÂ Bitcoin price jumpedÂ from $130 to over $1100. After this boom, we didnâ€™t see a sharp correction, but a long and steady decline to the unit price of $200, followed by a long and steady increase period. Can the same steady decline happen in 2017? The main difference between 2013 and 2017 is that the ecosystem of Blockchain and cryptocurrencies is widely more developed.
We went from theories and white papers to proof-of-concept, real world applications and significant investments. Nonetheless, little are those who truly understand the underlying technology powering this ecosystem.
High Speculations further adds on to the sharp fluctuations on the market:
Investors have been pouring capital into the market, betting that consumer demand will propel future growth. Cryptocurrencies are therefore subject toÂ significant speculationÂ backed by very little analysis, which makes this asset class particularly volatile. The cause of speculation is lack of adequate understanding or knowledge of the market trends in the recent years.
Reaching the market stability:
According to Robert Sams, a cryptocurrency economics consultant, the volatility of Bitcoin against the dollar on a Bitcoin exchange is about five to seven times the volatility of traditional foreign exchange trading. Having said that, market stability could be reached whenÂ power shifts from investorsÂ seeking to profit from price fluctuations, to consumers actually using cryptocurrencies.
While most of us agree on the transformative potential of Blockchain within every industry, from incremental changes to true disruption, the road to realizing all those lavish promises is a long one to take.
The gap between true potential and illusionary promise will without a doubt lead us to more rallies and retreats along the journey.
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