It is with much trepidation that I would approach the word “mirage”, especially when it is being linked to cryptocurrencies. Bitcoin, in particular. I would also vehemently protest if blockchain is also described similarly. Blockchain is a technology with immense possibilities and it has already illustrated it’s feasibility by being the backbone of digital assets.
And that brings me to Cryptocurrencies. Bitcoin, in particular. Now, the question might be asked as to why just single out Bitcoin, when a thousand other tokens are in vogue. The answer is simple. Bitcoin, being the firstborn, is not just the most influential but largest of all the cryptocurrencies put together. It holds a bit more than 50 % of the market cap of the entire crypto universe. Any changes happening to Bitcoin will have a direct influence on the other cryptos and this has been proved on numerous occasions, earlier. The most major being when Bitcoin crashed from a high of $20000 to a low of under $6000, in 2018.
Now since cryptocurrency is synonymous with Bitcoin, the question beckons.
Is Bitcoin a mirage?
In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen — with ups and downs — from almost nothing to $10,000 at current valuation.
Bitcoin’s rise is spectacular. Its price is up almost thirtyfold in the past three years. Currently, the value of Bitcoin in circulation is more than US$250 billion, greater than the market capitalization of McDonald’s. This is remarkable because unlike McDonald’s, which has stores in almost every corner of the world, Bitcoin as a virtual currency is hardly even transacted in the real world.
Hence, there is a possibility, that since it has no shape and form, it’s viability is always a question mark. But then the rising stock of Bitcoin may also suggest that digital assets are the future.
The rise in Bitcoin’s value reflects speculation about its future value: This digital currency will have long-term value as long as it is accepted as a medium of exchange and a store of value.
The greater its acceptance, the more it will be worth it. However, it is difficult for Bitcoin to be accepted as real money. Therefore, the high volatility of its value largely reflects changes in the perceived degree of acceptance. By design, there are inherent weaknesses that prevent Bitcoin from becoming real money. Once these bottlenecks are removed Bitcoin has the potential to become the currency to own.