Bitcoin has exploded, quadrupling in price since September. Traditional money managers are worried about cryptocurrency and are wondering if the Bitcoin bubble is about to burst. Is bitcoin a good investment? Experts are split on the matter, but one thing is for certain, cryptocurrency probably isn’t going anywhere soon.
What is Cryptocurrency & How Does It Work?
For those unfamiliar with Bitcoin, which has been the leader in the space since being introduced in 2009, cryptocurrencies are hardly understood by banks, the government, and even most of the people who trade it on a regular basis. Bitcoin and other digital currencies are simply “limited entries in a database that cannot be changed without fulfilling specific conditions.” Bitcoin is not run by a traditional payment network, instead, by a decentralized computer network that keeps track of transactions.
This process is known as “Bitcoin mining” in which transactions are verified and added to a public ledger known as a block chain. This process is essentially a race in which mining participants need to complete a complex programming puzzle to place the next block on the block chain.
The miner who completes the process first is rewarded with newly released bitcoin and the reward is halved every 210,000 blocks (a process that takes about 4 years)
These algorithms are incredibly difficult on the miner’s network, using a significant amount of energy, with some estimating the amount of energy being used to mine bitcoin could power over 3 million U.S. households.
Aside from its investment potential, Cryptocurrency is popular among cyber criminals and is a popular request from those harnessing ransomware, because accounts are completely anonymous.
Bitcoins do not have any physical backing, and are available in dividends of up to 8 decimal places.
What Experts Think About a Possible Bitcoin Bubble
The price of Bitcoin is largely based on buying and selling activity backed by its owner’s trust in the technology. Bitcoin wasn’t designed to be an unlimited commodity, with a cap of 21 million coins expected to peak in the 2040s. That creates some supply and demand dynamic.
Experts are split on whether bitcoin is a good investment. John McAfee, whom you may know from his antivirus products, is optimistic about Bitcoin, having faith the digital currency will reach $1 million by 2020. It’s trading a little below $20,000 right now and was at $800 last January.
Nobel prize winning economist Robert Shiller has less rosy thoughts on bitcoin, saying it’s too ambiguous to put a price on.
Jack Bogle, the founder of Vanguard and creator of the index fund sees the same problem, saying there’s nothing to support Bitcoin except for the hope that you can sell it for more than you purchased it for.
Is Bitcoin a Good Investment?
Unfortunately, here at ThrottleNet, we’re not qualified to offer you financial advice. We’re here to look after your network whether Bitcoin is up or down.
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