Why Bitcoin Is Here To Stay And Not A Bubble

10/26/2017 - 15:51 UTC
Bitcoin not a bubble

The digital cryptocurrency Bitcoin has gone up by over 300 percent in the last ten months, since the start of 2017 and has recently surpassed the $5,000 mark.
Such returns on investment, as the cryptocurrencies lately provide, haven't been observed since the 90's with the infamous Internet bubble.
So it comes as no surprise that the traditional financial marketers are crying bubble.

Justcryptonews.com offers the top 5 reasons why Bitcoin is here to stay (and it is not in a bubble) :

Ever Growing Acceptance of Bitcoin as Legal Tender

One of Bitcoin’s most significant challenges so far has been, acceptance by lawmakers and financial regulators due to its decentralized nature and its unfortunate association with illegal activities carried out on the dark web. However, Bitcoin’s “official” acceptance is indeed on the rise.

In April 2017, Japan was the first country worldwide to announce, that it would officially begin accepting Bitcoin as a legal payment method, which immediately boosted the value of bitcoin and has led to a substantial increase in retailer adoption across Japan.

In the Philippines, citizens have been increasingly using Bitcoin to send and receive low-cost remittances. This has not gone unnoticed by the country’s central bank, which announced in February 2017 that it would regulate Bitcoin so that the digital currency can be used as an officially accepted remittance system and, thereby, granting it full legal status.

Countries such as Australia and Russia have recently made similar statements that could lead to Bitcoin becoming a fully accepted medium of exchange in their respective countries. This is a trend that is likely to continue, given the growing demand for Bitcoin as an investment as well as an online payment system.

Increasing Merchant Adoption

In the early years of Bitcoin, merchant adoption was limited to a few e-commerce stores, usually run by Bitcoin enthusiasts. This, however, has changed substantially as leading tech companies and e-commerce platforms have chosen to accept Bitcoin as a payment method. Dell, Microsoft, Rakuten, and Overstock are four of the most significant companies to accept Bitcoin payments.

With bitcoin’s sharp price rally, increased media coverage and newfound acceptance in places such as Japan, Bitcoin merchant adoption are on the rise and this trend will likely continue. As we have reported, some observers believe that Amazon, by far the greatest merchant of the world, will soon accept Bitcoin as a means of payment.

The arguments for online merchants to accept Bitcoin are very strong; fees are lower than for credit card payments, chargeback fraud is eliminated by design, new customers can be reached in regions where previously was hard due to underbanking,  and a new, tech-savvy consumer base can be attracted.

The more that merchant adoption increases globally, the more there will be regular and stable demand for the digital currency. And given the current low rate of merchant adoption, there is substantial room for upside.

Bitcoin Is Acting as a Store of Wealth in Distressed Economies

Another reason why Bitcoin is most likely not a bubble is that is a much-need real-world application in economically distressed countries. In places such as Venezuela, Bolivia, and Zimbabwe, for example, bitcoin has been acting as a store of wealth and as an alternative spending currency as local currencies are weakening into worthlessness. This can be witnessed by increasing bitcoin trading volumes that are negatively correlated with the performance of local currencies and economic growth in distressed regions.

Bitcoin also allows individuals and businesses in countries with strict capital controls, such as Venezuela, to receive much-needed remittances to stay financially afloat. In other words, wherever there is economic distress, Bitcoin demand will likely rise, and Bitcoin adoption will grow.

Bitcoin Has Just Gone Mainstream

You could say that 2017 has been the year in which Bitcoin has finally gone mainstream. Five years ago, if you would have asked the average person on the street what Bitcoin is, they would have most likely given you a bewildered look. Today, most people have at least heard of Bitcoin and many even know that one bitcoin is worth more than an ounce of gold.

Now that Bitcoin has become mainstream, the buying potential from new investors is immense, especially as institutional investors have started to open up to the idea of investing in bitcoin and other digital currencies.

Bitcoin’s Supply Is Limited

Finally, one of the critical reasons why Bitcoin has become so valuable is that its increasing demand is met with a fixed, limited supply.

Bitcoin has a limited amount of coins by design. Thus only 21 million coins can ever be mined. Furthermore, the rate at which new coins are minted slows down over time, which means the increasing demand for the digital currency is not only met with a limited total supply but also with a continuously slowing supply.

The discussion of whether Bitcoin is a bubble or not will likely continue indefinitely, but the comparison between Bitcoin and internet stocks does not hold true because a comparison between different classes of assets does not work.

In the words of Brian Kelly, investor and Forbes contributor :

Bitcoin is going to do to banks what email did the post office and Amazon did to retail. Understandably those at the center of the financial system are concerned.

Let us know in the comments your thoughts on the matter.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice on Bitcoin, Cryptocurrencies or finance in general.