It has been an interesting week for Bitcoin and other digital currencies like Ethereum. Both hit an all-time high, with Bitcoin reaching $3018 and Ethereum well over $400 dollars. Like clockwork, Bitcoin's price fell dramatically after this, but that is par for the course with this long-standing cryptocurrency. Historically, there is a dramatic price drop any time the currency peaks, but it always rebounds beyond what that crash point was. Such corrections in currency value are largely due to day-traders cashing out on their investment. However, there are other causes as well, for example the recent cyberattack on coin exchange Bitfinex, and ongoing SEC rulings on related Exchange Traded Funds (ETFs).
There is certainly a lot of volatility in the crypto market, but most technology enthusiasts are not losing sleep at night. Over the past several years, they have watched Bitcoin reach "bubbles", and crash, and then resiliently come back to life pushing new boundaries. So, what is the future of Bitcoin as a currency, and is it really in a bubble? In multiple recent tweets, Mark Cuban claims that it is, which many think sent investors into a tailspin.
The reality is that Bitcoin may be in a bubble, but if it is, there are likely more bubbles of greater value and significance to come. The unfortunate part is that such Crypto volatility can be attributed to a rise in investors who do not understand the technology itself. It is not just about the currency; the currencies are products of, and fuel for, the underlying technologies that support them. While it is possible to send funds internationally (for less than some banks charge), and even pay with Bitcoin in some retail outlets, its widespread adoption as a currency is far and away. Each cryptocurrency and its blockchain is actually designed with its own purpose, and they are not all created equally. So, the more important valuation is that of the decentralized systems, or blockchains, that drive interest in the currencies they produce.
The key driver for its increasing price is increasing adoption rates by countries, not just investors. For example, Bitcoin prices spiked after April 1st this year when Japan legalized Bitcoin as a currency. Ethereum, which continues to gain traction alongside Bitcoin, also saw a price increase after Vladimir Putin met with its founder, signaling Russian interest in its technology. These spikes in price are not based on pure speculation, nor should they be classified as a bubble; each is a market reaction to real-world events.
Underneath all of the hype and investor hysteria, the potential uses of the technology are being seriously considered by industry key players. Perhaps, the most important development is the recent creation of the Enterprise Ethereum Alliance. This alliance consists of hundreds of members in the industry who support the Ethereum blockchain for commercial use, including JP Morgan, Microsoft, and Intel. It's important to realize that Blockchain technologies are driving new innovation, and are paving the way for new and creative business applications in supply chain management, finance, and even human resources.
But beyond its industrial use cases, crypto currencies are seeing high adoption rates amongst developing nations, increasing access to funds while reducing remittance fees. It's true that crypto currencies might seem like a religion to some people, rooted more in faith than in logic, but when you see it making a difference across the globe, it is hard to ignore its potential.
If you want to get started with digital currencies, you can purchase any fraction of a coin that you want. To get started, create an account on Coinbase.