• The Basics.

What is Bitcoin? In short – it’s a decentralized digital currency. That means no government or bank controls it. Partially cutting out the middleman, it should allow for safer transactions over the web, which sounds very enticing for myriad reasons. The technology that governs those transactions is called a blockchain. The currency can be ‘mined’ by those willing to lend their hardware for the needs of the system (processing transactions and securing the network, for example).

• The Origins.

It may seem that Bitcoin appeared out of nowhere, but it is the oldest of the cryptocurrencies and this makes it the most valuable one as well. Bitcoin is almost 9 years old at this point, and dates back to 2008. This is the year, when the first proof of concept was published by the creator of the currency – Satoshi Nakamoto.

• The Creator.

If you want to know more about Nakamoto, well, you’re not the only one. That name is just a pseudonym adopted by the mysterious demiurge. No one has been able to confirm the real identity. A number of people stepped up to claim the title, including an Australian businessman and computer scientist Craig Wright, but none had the evidence to back up their claim. Real Nakamoto moved on from the project back in 2010, and has not surfaced since. Whoever that is, that person can definitely afford the anonymity, as they are estimated to own almost a million Bitcoins.

• The First Transaction.

First documented Bitcoin transaction was made back in May, 2010, when Laszlo Hanyecz (who went by the pseudonim laszlo) purchased two pizzas for 10,000 Bitcoins. At this point, that would be more than $170 million.

• The Future.

It’s difficult to say what the future has in store for the first cryptocurrency. Its latest gains have been utterly staggering, but the jury is still out on whether or not this is indeed the future of finance. Bitcoin definitely has its proponents, including Tim Draper and Winklevoss twins, who invested considerable sums into the currency, but there are quite a few detractors as well.  Famously, Warren Buffet advised investors to “stay away” from it.

If you do want to understand all the intricacies of the world of cryptocurrency and understand whether or not this is something you are interested in, you’ll need to find a reliable source of information. And our blog will be happy to provide it.

If you look at what has happened in the past when it comes to reaching those type of heights, be it tulip bulbs or a bunch of other things over the centuries, the odds are against those who actually think that this is going to be the future.
Stefan Ingves, Governor of Sveriges Riksbank

So, what should we expect if this cryptocurrency surge is indeed a bubble?

The prices will most likely fall and become a lot more stable. Current volatility actually works against the cryptocurrency’s main purpose – facilitating access to the financial services. If the cost of blockchain transactions can increase tenfold or more in a very short period of time  due to the price hikes that become rather common, how can we expect to build a stable foundation for anything?

A significant number of currencies will fade away into oblivion, leaving only the most common and stables ones. Bitcoin and ethereum appear to be the two most likely survivors at the moment. There seems to be enough momentum behind those two to keep them afloat even in the grimmest scenarios. Provided the volatility issue is dealt with, these currencies can indeed become a significant part of our financial future, even if traditional banking is not likely to disappear altogether.

Despite the skepticism towards the surging and volatile cryptocurrencies, UBS is pretty optimistic regarding the broader issue of blockchain technology. Here is what the report has to say about this:

While we are doubtful whether cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, healthcare, and utilities. We estimate that blockchain could add as much as USD 300-400bn of economic value globally by 2027.

 

Shrewd investors should be focusing their attention on the tip of the spear of the blockchain tech – companies that enable its adoption and use the technology in interesting new ways. And, as the report states, the applications of said technology are almost limitless. While some industries stand to gain more from the integration, most of them will likely benefit from the tech.

Another important point of the paper is its prediction about the bright future of hardware manufacturers, whose products will be vital for blockchain network realization. The processing speeds vital for the technology will undoubtedly mean increased business for companies that produce the necessary hardware.

Until now, every major drop has been accompanied by high volumes, with low volumes leading to significant hikes. It’s not the best dynamic, as it shows that the supply overtakes the demand. We might be at a tipping point for the currency – something known as the “Last Point of Supply” or simply LPSY. This means one thing – the highest price point in this cycle has been reached, and we are looking at the downward trend in the nearest future. The demand has pretty much been exhausted at this point.

This does not mean that the Bitcoin value will plummet, but we should be prepared to see the lower end of the trading range. There should be enough momentum to stabilize the prices and check the price drops, however, passing the LPSY means the prices are on the way down.