Is experiencing rapid inflation, causing people to anticipate a sizable compensation for their investments in Bitcoin. Bitcoin is a type of digital currency that is worth about 10,949 US dollars as of January 25, 2018, but has grown over 800 percent in the past year. The main question revolving around Bitcoin is: “What is the future of Bitcoin?”. There are a variety of answers from a multitude of people answering this question, most people who support Bitcoin are convinced that Bitcoins will be used to replace the long-established government run currencies we have today, while people who oppose Bitcoin believe that it is simply a trend that will recede in the near future.
Bitcoin is considerably challenging to predict for several reasons with the primary reason being its volatility. Bitcoin is extremely volatile and experiences significant changes every day. One example representing its volatility is on January, 17, 2018, Bitcoin lost more than 22 percent of its value for no clear reason (Bird, 2018). Extremes like this can be observed frequently when studying Bitcoin and can create difficulties in predicting what will happen to Bitcoin.
However, the prediction that Bitcoin will be a successful currency can be justified by: looking at the history of other digital currencies, why people buy Bitcoin, and Bitcoin futures.
Other Digital Currencies While Bitcoin is a relatively new concept, game currencies can provide a hint to determining bitcoins future. Game currencies are the most accurate way to predict Bitcoin because of how recent Bitcoin is and how many similarities Bitcoin and game currencies have.
One important circumstance in which game currencies and Bitcoin are similar is that they are entirely online and that users are responsible for regulating it rather than a government . This shows that when trying to predict Bitcoin’s future is reasonable to look at game currencies as a similar concept. Yermack’s paper explains the origin of Bitcoin and its first usage, he states that the first Bitcoins were used in an online game called Mt Gox and were traded with other players for cards. Yermack’s paper is highly credible because it was published by the National Bureau of Economic Research and Yermack is a finance professor at the NYU Stern School of Business, New York University. Another way game currencies are similar to Bitcoin is because they are traded directly from player to player so that no third party is necessary making it better and more efficient for online transactions. Thomas Kim, affiliated with the University of California Riverside, published a paper through PLoS ONE, a scientific journal that provides researchers with peer editors creating an organization of reliable research papers showing that the information provided is accurate and relevant.
This paper provides an in depth evaluation of the history of game currencies and comes to the conclusion that by looking at new game currencies, it is clear that they are just as volatile as Bitcoin while most matured game currencies are about one-third as volatile as Bitcoin (Kim, 2015). This shows how time and increased usage helps stabilize digital currencies. This information could prove to be highly important when trying to foresee the future because Bitcoin is a relatively new concept with little information about it and game currencies have more history and information to find trends and base predictions on. The fact that game currencies stabilize over time could mean that Bitcoin has a promising future. Kim’s paper also says “In virtual worlds, game currencies are a better method of completing a transaction than are real currencies”. This shows that as the world moves to become more technologically based Bitcoin will become more convenient as a form of currency. Overall, based on the success of older video game currencies, it can be predicted that Bitcoin will be a relevant and utilized as an alternative for current government-regulated currencies like the US dollar.
Why People Invest in Bitcoin The two main aspects of Bitcoin that people consider when investing in Bitcoin is its anonymity and its volatility. Bitcoin’s anonymity both attracts people and turns people away. With no government attached to it, individuals are required to circulate it by themselves, making Bitcoin anonymous and easy to use for illegal activities such as money laundering. However, a benefit to individuals regulating Bitcoin is that users are responsible for building their own ledgers. This removes any need for a bank or third party. Anonymity is an important aspect of Bitcoin that could affect its future because when people look at invest in Bitcoin they know that they have to regulate it on their own and with a growing distrust for many governments people will find a currency that is not tied to a government appealing (Narayanan & Clark, 2017). Narayanana and Clark’s journal explains how Bitcoin ledgers are used and where that concept originated from, this is a credible source because it was peer reviewed and published by acm queue, a magazine that publishes material on computer sciences.
Bitcoin’s volatility is another thing that is important to look at when predicting what will happen to Bitcoin because it is the main reason people do not want to invest in Bitcoin. Volatility may prove to be a major threat to Bitcoins success in the future with many critics saying that Bitcoin is unusable because of its extreme volatility (“Virtual currency,” 2017). This is accurate because it has been published by Columbia University in their Digital Encyclopedia. Even with this severe set back it can be predicted that with time Bitcoin will become more stable (Kim, 2015). Looking at why people choose whether or not to invest in Bitcoin is necessary to predict Bitcoin’s future because it shows that Bitcoin will be able to grow and be useful in the future. Bitcoin Futures Bitcoin futures are an important aspect of Bitcoin and are key to being able to predict the future of Bitcoin. A futures contract is an agreement between to people or companies to buy a certain number of assets at at set price at some point in the future (“Futures Contract,” 2018). Bitcoin futures work the same way; people or companies agree on a price to trade or buy a certain number of Bitcoins at some point in the future (Roose, 2017). Bitcoin futures only went on sale at the start of 2018, they are very recent and very few deals have been completely settled.
However the success in sales of Bitcoin futures not only suggest that Bitcoin will not be going away anytime soon but they also work towards creating a more stable Bitcoin (De Silva, 2018). De Silva is a writer for ETH News and specialized his writing in Bitcoin, his article is a credible source for that reason and also because it has been reviewed and published by ETH News, a source that specializes in modern technology. People being willing to buy Bitcoin futures is also a very good sign because it shows that people are willing to risk larger amounts of money by putting it into Bitcoin, this is significant because buying futures is almost the equivalent of placing a bet on the success of a company. That shows that people buying Bitcoin futures shows that people believe that Bitcoin will dissipate in the near future. Overall, Bitcoin Futures show that Bitcoin will be a suitable currency in the future.Conclusion In conclusion, Bitcoins can be predicted to be usable in the future by looking at trends between other digital currencies, why people choose to invest in Bitcoin, and the sale of Bitcoin futures. In the future Bitcoin could be used as a currency to replace the traditional government regulated money that is used today. Many people throughout the world are supporting Bitcoin and investing with hope that it will continue to thrive in today’s society. People have become obsessed with Bitcoin and are driving it to grow and increase in monetary value and relevance continuously.