Is bitcoin the new alternative investment or a bubble ready to burst?
The surge in bitcoin prices means that the cryptocurrency’s market valuation has now crossed * $75bn. Bitcoin prices have already quadrupled since the start of 2017, with a single bitcoin surging from a value of $1,000 in January to more than $4,760 in August. In their latest analysis of the global cryptocurrency value chain GlobalData, a recognised leader in providing business information and analytics, is currently tracking 57 cryptocurrency start-ups, of which 21 are headquartered in Asia.
Recent measures by governments in some Asian countries to regulate bitcoin exchanges seem to have had little detrimental impact on its price – quite the opposite in fact. Bitcoin prices increased by almost 70% in August itself, rising from $2,784 as on July 31, 2017.
According to Siddharth Agarwal, Lead Financial Analyst at GlobalData: “Regulations will legalize bitcoin and other cryptocurrencies, bringing them closer to national currencies and leading to even wider acceptance.”
The increasing regulation is intended to check money laundering, terrorism financing, and other illegal activities by discouraging use of bitcoin purely for the anonymity it offers. However, the regulation is also expected to have a positive impact on the fledgling cryptocurrency industry.
Agarwal believes: “As the regulatory environment is now stabilizing, we will see massive growth in startups dealing with bitcoin and other cryptocurrencies.”
The current growth witnessed in bitcoin seems to resemble the Nasdaq bull run during the dot-com bubble; the Nasdaq composite stock market index, which includes many technology companies, rose from around 800 in early 1995 to 5,000 five years later.
The real use-case of bitcoin is growing as it becomes increasingly mainstream.
However, the number of bitcoins that can be mined is limited to 21 million, of which 16.5 million bitcoins are already in circulation. As bitcoin mining becomes increasingly difficult, this could further drive bitcoin prices upwards. As a result, bitcoin could emerge as the new asset class for high-risk modern investors.