Bitcoin, the cryptocurrency built on blockchain technology, is fast becoming a major player in the currency market. Since the beginning of 2017, the value of “XBT” has rocketed by over 150% and the simplistic reason for this would be that there is more demand than there is supply. Vinay Sharma, Senior Trader at ayondo markets tells Finance Monthly more about the current state of the bitcoin and its future prospects below.
Bitcoin uses encryption techniques to regulate the generation of its units and verify the transfer of its funds. It essentially allows people to cut out middlemen and thanks to its supposed security and independence from nations and central banks, its value, along with that of other cryptocurrencies, such as Ethereum and Ripple, has soared in recent months. In the Middle East, Africa, South America and Eastern Europe, for example, concerns over the volatile governments or consistent long-term currency inflation have contributed to Bitcoin’s rising valuation.
When you look at Bitcoin’s rise in the last seven years, the mind boggles. An investor who had bought 1,000USD of the cryptocurrency in 2010, would now own around 45millionUSD worth. The question many people are now asking is: is its value increasing due to mere speculation, or is it actually becoming a more widely accepted form of money? The currency is now available to many traders and investors to trade as a standard forex product. At ayondo, for example, we recently added Bitcoin to our product portfolio, meaning clients can now trade on its anticipated price movements without having to actually open up an e-wallet to purchase it on the internet.
While Trading Bitcoin does open it up to speculation, the cryptocurrency is also being accepted more widely as a medium of exchange, which after all, is the purpose of money in the first place. The number of businesses accepting Bitcoin is rapidly increasing, with the likes of Expedia, Etsy, Microsoft and Dell, to name a few, all accepting it as a form of payment, although it’s fair to say the UK is lagging behind in its Bitcoin acceptance.
So what’s next for Bitcoin? At the time of writing, its value is 2,735USD and one thing I am pretty confident of is that volatility lies ahead. Last week, for example, Morgan Stanley released a note saying that it doesn’t believe Bitcoin will be a viable currency in the future, and its value subsequently fell 20%. However, it has since recovered those losses, and whilst I largely agree with Morgan Stanley’s analysis, it certainly offers plenty of upside potential as a trading instrument, as demand in the short to medium term is more than likely to outstrip supply. Whether it will in fact become a viable medium of exchange in the future remains to be seen, but what’s undeniable, is that current interest is immense and its high variation in price offers an excellent trading opportunity.