Bitcoin is on a tear. As of this writing, the cryptocurrency is currently trading at more than $8,300. BTC is up about 40% in just the last month.
The best part about all of this?
Bitcoin isn’t even close to finished.
The world’s most recognized cryptocurrency stands poised to clear the $10,000 milestone. It’s not a matter of if, but when.
All the focus about cryptocurrencies focuses on Bitcoin, but the real reason crypto is here to stay is the Blockchain. This is the technology on which Bitcoin is built. Blockchain is a decentralized and distributed digital ledger used to record transactions across many computers. This ensures records can’t be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. Put simply, a blockchain is a unique type of database, and it can revolutionize all types of industries, from education to voting to financial markets. Blockchain technology is a barely tapped resource currently only known for Bitcoin, but as the technology improves, so too will the currencies built on top of it.
In the U.S., cryptocurrencies are unregulated. The IRS classifies cryptos as property, meaning that Bitcoin and other digital currencies are subject to large capital gains taxes. That’s being rectified as the Cryptocurrency Tax Fairness Act is currently working its way through congress. This act would classify cryptos as a foreign currency, exempting them from the capital gains tax and allowing consumers to utilize Bitcoin in everyday transactions, greatly increasing Bitcoin usage — and price.
Wall Street Wants In
To date, Bitcoin is a forbidden fruit for large investment firms. While individuals have been buying up BTC, hedge funds can’t touch it because of its lack of regulation. It’s not an asset. Or an index. Or a stock. As such, traders can only buy Bitcoin as individuals rather than under the umbrella of their Wall Street firms. This leaves billions in fees and profits on the table for Wall Street.
But that’s changing.
In March, the co-creators of the Gemini exchange Tyler and Cameron Winklevoss, were the first group to submit an application for a Bitcoin ETF. That application was rejected by The SEC because of a lack of regulations, and because Bitcoin has no index to monitor. Both ProShares and VanEck, two major investment firms, submitted applications for Bitcoin ETFs. However, those applications are now on hold, since the Bitcoin futures they want to track don’t yet exist.
To solve that, CME Group Inc., the owner of the world’s largest exchange, announced plans for Bitcoin futures by the end of 2017, barring regulatory interference. Wall Street is drooling to get into Bitcoin, and once they do, prices will soar even higher.
Safe and Sound
One of the characteristics that makes Bitcoin so unique is the safety aspect of it. Now, to be crystal clear, in this case we’re referring to safety as protection from theft rather than a “sure thing”. Yes, there have been hacks where people have lost millions in Bitcoin, but these cases are extreme outliers and a result of extreme user error by the exchange. Bitcoin is a decentralized currency, making it much safer than traditional banking.
Think of a bank sitting on $100 million. That bank makes for an appealing target for thieves. If they set their target on the bank, they’ll eventually get in. It may take years, but if they’re persistent then hackers can find their way in. But what if instead of one bank with $100 million you have 100 million banks each sitting on $1? At that point, there’s no longer any financial incentive to go after funds.
That’s what decentralization is. The currency is spread across the Blockchain, offering more security than ever before. Plus, many BTC traders take advantage of hardware wallets, which store all BTC offline in a physical digital storage device.
With the exception of hacks like Mt. Gox where the exchange itself was hacked (twice!) due to lack of security and user error, blockchain technology is an extremely reliable safeguard, bringing in more and more people and pushing Bitcoin up higher.
Bitcoin is seeing momentum grow in 2017. The cryptocurrency has shot up more than 1,000% this year, and 40% in the last month alone. A key metric to track when considering any investment is userbase. For Bitcoin, that metric has grown exponentially. In 2009, Bitcoin was seeing under 100 transactions a day. In 2011, the peak amount of transactions in one day was 11,200. In 2013, that number rose to 68,000. Fast forward to 2015 and the peak number of transactions nearly tripled to 166k. Today, Bitcoin’s lowest number of transactions in one day more was 207,000, with users regularly processing more than 250k transactions per day.
(Chart courtesy of Blockchain.info)
The number of transactions on the blockchain is growing daily. More people than ever before are trading Bitcoin. And as that number continues to go up, Bitcoin will rise with it.
As these trends continue, Bitcoin will take aim at $10,000 and blow past it.
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