What is Bitcoin?
Have you been living under a rock? If not, you’ll almost certainly have heard of Bitcoin. It’s the most exciting new development in global finance since…well, since the invention of money itself.
Bitcoin has the potential to revolutionise everything from global payments to asset prices. It will change how we invest, how companies raise money, and how we buy and sell goods in the online and physical world.
It’s like nothing else the world has ever seen. In our view, it’s the biggest development the world has seen since the internet. And it’s just getting started.
Why has the price of Bitcoin gone sky-high?
Bitcoin hasn’t been without its dramas. The arrest of Ross Ulbricht, the brains behind illegal Deep Web site Silk Road, saw the price of Bitcoin crash in 2013. The Cypriot banking crisis then saw it skyrocket. In 2017, the price of Bitcoin simply went nuts.
But for all the ups and downs, since its inception in 2009, it has seen a mind-bending price rise.
Compared to the price in 2009, the price of Bitcoin today is more than 2,000,000% higher. That’s not a typo by the way. Today, Bitcoin is steadily trading over US$2,000. It is also showing far less volatility than it did in its early days.
However, in the last two weeks, Bitcoin had what many pundits call a ‘crash’. Going from US$2,800 to $1,900 in the space of a couple of days. That’s no crash. That’s just a bit of profit-taking from traders. It shook a lot of new investors in the digital asset, but we weren’t worried one bit.
And now, once again, Bitcoin is trading around the US$2,400 mark. But where to from here? Is it too expensive, or too late to get it? Or is this revolutionary technology still cheap?
What now for the price of Bitcoin?
Currently, there are 16,365,112 bitcoin in circulation. The total volume will never exceed 21 million. Estimates are it will still take another 123 years to mine all the remaining bitcoin. That gives it a pretty long runway to establish itself as a global, dominating financial system — decentralised from government and central banks.
And right now, if you tally up the value of all bitcoin in circulation, it’s worth around US$40 billion. That makes the total supply of bitcoin currently worth less than NASDAQ listed gaming company Activision Blizzard Inc. [NASDAQ:ATVI]. It also makes it a fraction of the size of other global tech companies like Netflix, Yahoo!, MasterCard, Visa, Microsoft or Apple.
When you start to understand the impact that Bitcoin will have long-term as a digital asset, and then ultimately as a digital medium of exchange, then, right now, it looks cheap. Ambitious but realistic forecasts for Bitcoin could see it become a US$1 trillion financial system in the next decade. By then, roughly 20 million bitcoin will be in circulation. And if that value target is achieved, a single bitcoin could be worth as much as US$50,000.
But if it becomes even more important, more widespread, and more widely accepted, then $1 trillion could be a drop in the ocean.
So ask yourself this simple question: If you could potentially turn US$2,400 into US$50,000 (a 1,983% gain) in 10 years, would that be something you’d want to invest in?