Bitcoin emerged as a so-called digital currency, designed to take the place of ordinary money and redefine how we conduct transactions. It has some very interesting perks in attempting to serve these purposes: its blockchain network is believed to deter fraud and in some ways automate record keeping, and its encrypted, decentralized nature makes it easy to secure wealth and conduct safe transactions. Despite these benefits however, the public has been relatively slow to adopt bitcoin as a payment system or alternative to fiat currency. The average brick-and-mortar merchant still doesn’t accept bitcoin, and while some larger online stores have gotten on board, the cryptocurrency is by no means ubiquitous in internet marketplaces. Indeed, lately the conversation has turned to why retailers aren’t accepting bitcoin, as opposed to when they will, or which ones are in.
If bitcoin is struggling as an everyday payment option however, it’s thriving as a commodity. Some financial firms have in fact officially designated it as such, and in a more general sense it’s become undeniable that much of the public views bitcoin and other cryptocurrencies as assets, rather than as alternatives to money. Early adopters were handsomely rewarded for this outlook when bitcoin topped $19,000 late in 2017, and though it has since fallen considerably it’s still being traded as a commodity.
This in effect opens up a whole new market for investment. Cryptocurrency is still brand new, and as excited as many amateur traders are to buy in, even the experts are still figuring out how to analyze the market and project the price. This is something we certainly can’t do exactly, but we can point to some of the important factors to consider for those interested in investing.
1. The Price Is Naturally Volatile
If you follow bitcoin for even a few days, you’ll quickly notice that it’s incredibly volatile. It’s not uncommon for the price to move several hundred dollars in the space of an hour or two, and in some cases more dramatic swings have occurred. There are various reasons bitcoin is so volatile, but basically it can be chalked up to the fact that it’s new, unique, and attractive to a range of investors. Basically, it’s naturally volatile because no one has quite figured out how to handle it yet.
2. Numbers Change All Day & Night
This is quick point, but an important one. When you think of bitcoin as a commodity you might be naturally tempted to assign ordinary trading hours to it. The reality though is that bitcoin exists outside of any one market or economy, and is thus traded 24 hours a day.
3. There Are Avenues Of Adoption
Despite the fact that retailers have been slow to adopt bitcoin, there are still avenues of adoption. Perhaps most notable is the online gaming business, which actually handles a huge amount of financial activity. With PayPal joining popular payment providers for sites operating in this area, bitcoin is looking to catch on and compete – to the point that there are already bitcoin-specific gaming platforms. Developments like these at least keep the idea alive that bitcoin will become more practically useful, and more valuable as a result.
4. Regulation Shifts Regularly
In the early days bitcoin operated largely without restriction or regulation, because frankly it wasn’t taken particularly seriously by financial institutions and governments. It’s still the case in most of the world that bitcoin can be mined and traded freely, but we have started to see some tightening of regulations in certain major countries. And in fact even the suggestion of tighter regulation can significantly impact the markets.
5. Other Cryptocurrencies Are Catching On
In very general terms, cryptocurrencies tend to move in similar patterns. That is to say, when one goes up, the rest do also. However this is by no means an established law of cryptocurrency, and as “altcoins” gain more legitimacy we’re starting to see some rise to a level at which they could conceivably compete with bitcoin rather than move alongside it. Options like ripple, dash, and ethereum in particular have become very trendy in 2018, and could become viable alternatives as commodities, which would of course affect the outlook for bitcoin.