Bitcoin (BTC) has undergone a tumultuous two weeks after a few cryptocurrency exchanges reported technical malfunctions, particularly Mt. Gox. The value of bitcoin has fallen to as low $102 following a flash crash and has since steadily stayed between $600 and $650 per one bitcoin. When will it bottom out?
It’s unclear as to when bitcoin will bottom out. Will it be when the exchanges resolve its issues? Will it be after the United States federal government announces its intentions regarding bitcoin? Will it bottom out when the market experiences a correction?
Some make the case that what is transpiring right now with bitcoin is a sign that it’s going the way of Holland’s tulips. In other words, the bitcoin bubble is on the verge of popping. Others, meanwhile, say that bitcoin’s popularity is growing exponentially and experiments need to be corrected, exchanges need to fix their problems and bitcoiners need to adapt.
If the bitcoin bubble doesn’t actually pop then is it likely that it could eventually surpass its previous high of $1,200? If this is the case then this could very well be the last great buying opportunity – that is if you invest in bitcoin as a deflationary speculative asset instead of a truly alternative Internet currency.
In the last year, bitcoin has gained a reputation of being used primarily for illicit transactions and drug deals. This has been retorted by Brian Klein, former Assistant U.S. Attorney and Chair of the Bitcoin Foundation’s Legal Advocacy Committee, who recently stated that the dollar is used more for criminal activity than any other cryptocurrency.
The value of bitcoin is complicated to measure. The reason it’s not higher is because of the negative publicity surrounding bitcoin, such as the hackings, central banks’ reports and volatility. The reason it’s not lower is because numerous merchants are adopting bitcoin, venture capitalists are pouring money into startups associated with bitcoins and many governments are not cracking down on bitcoin.
The recent vote regarding virtual currencies in the state of California is a prime example of why bitcoin has stayed in the $600, $700 and $800 range for the past month or two. Late last month, the California Assembly passed a final round of voting that would expand its definition of “lawful currencies” to include virtual currencies.
Just imagine if the federal government made the same move!
At the end of last year, the Winklevoss Twins posted on Reddit that they see one bitcoin eventually being worth $40,000. At the time, many scoffed at the prediction, but with so many tech enthusiasts clamoring at the idea of bitcoin competing against the likes of Visa and PayPal, it might be in the realm of possibility.
“Small bull case scenario for Bitcoin is a 400 billion USD dollar market cap, so 40,000 USD a coin, but I believe it could be much larger. When this will happen, if it happens, I don’t know, but if it happens, it will probably happen much faster than anyone imagines,” wrote Cameron Winklevoss.
Yet again, there were high hopes for tulips too, according to Peter Schiff, president of Euro Pacific Capital: “A bubble is a bubble. And there’s a bubble in bitcoins.”