Bitcoin has had a chaotic few months. The price of one Bitcoin crossed the $5,000 mark in October, hit $19,000 in the beginning of December, and then plummeted down to $10,000, where it's still hovering today. A lot of new investors lost a lot of money, and analysts are scrambling to figure out what it all means. Will Bitcoin ever return to its former heights? Was it just another textbook bubble that popped for good? No one can be certain what the future holds for Bitcoin, but this article will explore the claims coming from both sides.

Why Bitcoin Was a Bubble That Has Popped For Good

Inexperienced Investors

The most obvious evidence that Bitcoin was a bubble has already been stated: the price skyrocketed by thousands of dollars and almost 300% in less than two months. The rise also corresponded to a sharp increase in media coverage, creating a feedback loop as new investors were drawn to Bitcoin investing. This means that a lot of the investors buying Bitcoin in that period probably knew almost nothing about the technology and were buying it because they saw the price rising. This kind of behavior is a recipe for inflating the price of an asset well above its actual value, which is the definition of a bubble.

New Regulations

Asian governments, especially China and South Korea, have begun to regulate Bitcoin trading and Bitcoin mining for fear of its effects on their economies. These regulations have hurt Bitcoin trading, and some observers point to it as the main reason for the decline in Bitcoin's price. Up until now, Bitcoin has benefited immensely from a lack of regulation, but this may change in the future, which could make a recovery very unlikely

Lack of Acceptance

There are only around 100 companies that accept Bitcoin as currency, and others have recently stopped due to its volatility. This low acceptance level makes it difficult for Bitcoin to function as a viable currency, which is supposed to be its purpose. Furthermore, Bitcoin is far from the only cryptocurrency out there and, if it remains this volatile, some of those others might start to squeeze Bitcoin out. The future doesn't look great for Bitcoin, but that's not the whole story.

Why Bitcoin's Price Will Rise

Volatility is Normal

Portfolio manager and cryptocurrency veteran Jeet Singh made waves at the World Economic Forum in January when he said he expected Bitcoin to hit $50,000 in 2018. He claims that Bitcoin's recent volatility is normal for any new technology and points to the volatility that Microsoft and Apple experienced when they went public. It's just part of being in a new sector, and seasoned cryptocurrency investors are used to it.

The Technology is Inherently Valuable

Despite recent losses, Bitcoin and the blockchain technology it is built on are fundamentally valuable. Many companies are already investing millions of dollars in blockchain, a technology that allows for efficient, trustworthy, decentralized databases, and because Bitcoin was the first blockchain and is still the biggest, it has an incredible amount of intrinsic value.

Fundamental Value as a Currency

Furthermore, Bitcoin has value as a currency. There are huge advantages associated with using Bitcoin, such as ultra-low transaction fees, high levels of security and privacy, and the fact that there's no need for third-party verification. Ideally, as the media hype dies down and prices stabilize, more and more companies will begin using Bitcoin to harness these advantages, and its acceptance as a currency will rise again.

There are certain niche roles that Bitcoin is perfectly suited for. It is a great option for people making international transactions because there is no governmental oversight; people in countries with inflationary currencies often use Bitcoin because its inherent deflationary nature allows them to maintain purchasing power; and, for better or for worse, it is the ideal currency for making illegal transactions. All of these factors that make Bitcoin attractive will raise its value in the long term. Investors just need to be patient.

There are reasonable voices on both sides of the argument, but it's still too early to tell what will happen. One Bitcoin is still worth around $10,000, so this ride is far from over.

Written by MyBitcoin Team Staff

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