A guest bloggers perspective on the future of Bitcoin. (22nd)
Does it have any future whatsoever? Everyone asks. Personally I am as green in this field. But let’s find out from our guests perspective. Across the street however Tom, Dick and Harry asks me to join their Bitcoin networks. They say it’s the in thing lately. I tell them “can we talk about your Bitcoin venture after Elections?” Then I slide into oblivion.
Okay just like those days every one was ringing home saying they want a piece of quail eggs. And they bought with might and that poor bird became famous than the famous Goose😁. Okay that beside for quails are no more! Neither are quail eggs with their “miraculous cancer healing sensations” Today however, all and sundry talk about Bitcoins as the new rich! Just as you would pick from scars from the past (read quail farming for example) there is the battalion that says “look you guy, this Bitcoin thing is a fallacy, a bubble in the waiting and just like a mother would sound, be wise.” But then again there is the brigade that thinks Bitcoins are the newest slay_est queen on the block. As expected there’s the school of safe players who choose to watch and wait. Time will tell…
Here a cut_cross Narrative by two different thinkers and yourself to judge:
ARE WE ABOUT TO EXPERIENCE A BITCOIN BUBBLE?
Guest: James Amolloh.
For starters, an economic bubble is a short period(usually not more than two years) when the value of something tremendously increases before suddenly falling. During a bubble, a company will make huge profits before making some of the worst loses. Most companies never pick up from bubbles.
Bitcoin is an online currency or virtual currency that can be used to buy and pay for goods and services. It gives helps conceal your online transaction footprints.
Senior economist Dr David Ndii has compared bitcoin to some of the bubbles in recent times. These bubbles are Tulip mania, Mississippi Bubble, South Sea bubble and Dotcom bubble. I would have explained all these bubbles but I feel that they are not necessary for this piece. So I am just going to go directly into why I think my senior Dr Ndii is wrong and why I think bitcoin is destined for greatness.
Let’s start by understanding economics 101, how the value of a currency is determined.
There are several factors that determine the value of currency. They include but are not limited to; supply and demand, exchange rate and the expectations for the future. I have deliberately ignored the value of treasury notes and money held in foreign reserves because it is my feeling that they are irrelevant in this case. All the aforementioned factors have been used to determine the value of currency but then they don’t necessarily apply when determining the value of cryptocurrency. So how is the value of bitcoin(or any other cryptocurrency) is determined? The following are some of the factors that help in determining the value.
1. How bitcoin is made.
When Satoshi Nakamoto invented Bitcoins in 2009, he had foreseen a situation where they would flood the market and reduce the value as a result. He therefore created the system is a way that just a certain amount of the coins can be generated through a very very complex process called mining. The system is also made in a way that once 21 million bitcoins are generated(by the year 2140), it shall stop new generations. What this means is that it shall be impossible to buy a single bitcoin as the price would effectively skyrocket to billions. Imagine having only 21 million coins for a population of about 11 billion people by then.
2. The fact that bitcoin is not regulated by authorities.
Unlike the dollar, cedes, euros, pesas etc, bitcoin is not regulated by any authorities. It’s value therefore self-adjusting. That is why you will sleep today when the value is at 17000$ then wake up tomorrow to find the value at 21000$. That is something that is impossible with regulated currencies. Kenyan shilling for example is regulated by the central bank that ensures that it doesn’t experience such unexpected value decreases and increases.
3. Ability to pay and be paid without being traced/”invisibility” nature of the currency.
This is the reason why bitcoin’s value increases every minute. People in the dark web and black market have been looking for alternative ways to pay and receive payments, concealing their identify. Drug lords like the late Pablo Escobar would transact in hard cash which was bulky and hard to store. They couldn’t bank the money of course. What bitcoin is offering is the long awaited solution. Now drug lords(and other bad guys/guys you don’t want to mess up with) can transact deals running into billions using bitcoin completely unnoticed by the authorities.
4. Supply and demand
This is the simplest way to determine value of currency and that or commodity at the same time. Assuming that bitcoin is the commodity here and given the fact that factor number one still stands, you’ll realize that the demand is increasing while the supply is decreasing. People are continuously buying bitcoins, the demand is increasing while the process of mining them is not producing enough of them. There is a shortage of them as a result. This is always going to be the case. I am foreseeing a time when many more cryptocurrencies will come up to supplement bitcoin. By that time the price of a single bitcoin will be way beyond the reach of most people.
After my analysis, I can comfortably recommend bitcoins to you. Invest in them. The price will always go up. You might even become a billionaire with within months. Giant companies like Microsoft, Reddit, Virginia and Overstock have incorporated bitcoins as one of the accepted methods of payment in their system.
An original post by James Amolloh 2017.
Cryptocurrency’s crash is a matter of when, not if
CRYPTOCURRENCY’S CRASH IS A MATTER OF WHEN, NOT IF
(Lisa Kramer: Contributed to the GLOBE and Mail_ Dec 7, 2017_ Lisa Kramer is a professor of finance at the University of Toronto.)
Cryptocurrency aficionados seem to be crawling out of the woodwork.
They used to lurk only in the dark recesses of the internet, occasionally exploding with angry reactions to proclamations that bitcoins are in the throes of a bubble. But with prices reaching even greater stratospheric heights this week, there are increasing numbers of otherwise sanguine investors, the sort of folks who would normally keep their cash under a mattress, considering whether they too should “invest” in bitcoins.
The underlying feeling is called a fear of missing out, and it’s a terrible basis for making investment decisions.
Will the price go higher? I suppose it will, driven by frenzy. Will the market, at some point, crash? Almost surely. Do I know when that will happen? Absolutely not. Will I ever recommend that anyone should hold bitcoins? No, not except the most risk-seeking gamblers who can afford to lose their full stake.
Unlike traditional currencies, cryptocurrencies lack the backing of an established government or financial institution, and transactions occur under an “anonymous” cloak. For some people, this is the appeal. Cryptocurrencies are favoured by criminals who hack computers and hold them for ransom, by individuals who aim to move assets from countries that enforce currency-exchange controls and by those who seek to avoid taxation. (Cash offers this same anonymity, but it’s more conspicuous to send people suitcases full of money than it is to send bitcoins.)
However, the purported anonymity of bitcoin transactions may not be as airtight as advertised. Each transaction is associated with the sender’s and receiver’s bitcoin wallet address. And anyone who wants to convert bitcoins into dollars, to facilitate spending in the real world, will need eventually to perform a transaction that associates their cryptocurrency wallet with their bank account (and personal identity). Additionally, regulatory agencies have begun demanding data from cryptocurrency exchanges in an effort to identify money launderers and tax evaders.
Stay tuned for likely limitations on currently unregulated initial coin offerings, by which any company can invent a new cryptocurrency to fund its risky undertakings, accepting investors’ hard-earned traditional dollars in exchange for issuing its independently created “coins” of dubious merit. Watch as well for regulatory restrictions on looming introductions of cryptocurrency-based investment funds and exchange-traded funds.
Legal risks aside, bitcoin is even bad for the environment. The bitcoin transaction-verification process involves certain users known as “miners” tasking their computers to solve complex cryptographic problems, a resource-intensive activity that is currently estimated to account for about a tenth of 1 per cent of the world’s energy consumption, exceeding the amount of power used by all of Ireland.
And, by the way, cryptocurrency transaction-verification can take time, so how long do you have available to wait for the coffee you opt to buy using bitcoin.
While the typical cryptocurrency transaction takes only 10 or 20 minutes to confirm, recent congestion in the verification process has occasionally come with hours- or days-long delays in transaction confirmation, which is awfully inconvenient. Each transaction comes at a financial price as well, recently peaking as high as $20 a transaction. That makes cryptocurrency virtually infeasible for small, routine purchases.
To be clear, I have nothing against the technology that underlies cryptocurrencies. Blockchain has many promising applications in fintech, for instance offering the possibility of improving the way stock-market transactions are recorded. But the fact that crypocurrencies are built on blockchain doesn’t lend them any credibility.
“Investors” are entitled to seek an exceptional rate of return in the speculative world of cryptocurrency if they have the appetite to do so, but a more direct expression of this appetite is to visit a casino. Unfortunately, many people appear to be captivated by the recent price gains and are willfully blind to the risks and drawbacks of cryptocurrencies that render them unsuitable as investments.
A theme in financial markets is that it’s often those who seek to outperform the fair-market rate of return who, sadly, end up underperforming on average. I won’t rejoice when cryptocurrency prices come back to Earth, but I also won’t be surprised.
². Is this the truth?
³. Gates would say…
Interview with CEO of Belfrics, the Bitcoin Exchange in Kenya is Live! Check it out here. Lots of great insight into trading volumes in Kenya: https://www.youtube.com/watch?v=DiAWhxfhyFc