In 2009, Bitcoin, the world’s first decentralized cryptocurrency, was created. Just nine years later, Bitcoin has just passed the Indian rupee to become the world’s fifth largest currency by amount in circulation. That is right, number five on the planet. This makes it more significant than almost every country in existence. The only bigger currencies in the world are the U.S. dollar, euro, Chinese yuan and Japanese yen. Bitcoin’s value continues to grow exponentially. During 2017, Bitcoin’s value increased by a not exactly modest 1,370%.
Although Bitcoin now faces a number of rivals as cryptocurrency increases in importance on the information superhighway, it is by far the biggest kid on the block. There is also there is plenty of room for more currencies. Eastman Kodak recently announced plans to issue its own form of cryptocurrency. The company stock price shot up immediately afterwards, proving again that investors continue to believe cryptocurrency will keep gaining in importance.
Following its impressive 2017, Canaccord Genuity analyst Michael Graham described Bitcoin as a “legitimate economic force” Despite its dramatic increase in importance, Japan to recognize Bitcoin as legal tender. Perhaps a better way to make that statement is the world’s third largest economy recognizes bitcoin as legal tender.
Cryptocurrencies are expected to continue gaining in importance during 2018. More institutional investors are adopting digital currencies. In 2017, more than $2 billion was raised by about100 cryptofunds. As further proof of Bitcoin’s importance, Cboe and CME, is the world’s leading and most diverse derivatives marketplaces, are now offering Bitcoin futures. Yes, Virginia, you can now speculate on the future value of Bitcoin by using the major derivative marketplaces, just like those old fashioned other currencies.
Despite this very rosy outlook nothing is perfect.
One possible source of difficulty for Bitcoin is lengthy transaction times. It currently takes an average of approximately 66 minutes to process transactions in Bitcoin. This has kept it from being adopted as a payments solution. However, there are already a number of solutions to improve the comparatively sluggish transaction speed, particularly the Lightning network. This new technology would potentially allow for transactions and microtransactions utilizing Bitcoin to take place instantaneously. So, one problem apparently solved. You might say the information superhighway takes care of its own.
Other difficulties remain, but they are not likely to cause any catastrophic problems. One potential problem, which involves multiple digital currencies, is the fact that many of the 1,300 or so initial coin offerings (ICOs) that have been held may have violated US securities law. This may spark a number of SEC enforcement actions. Even if this occurs, it probably not severely impact Bitcoin, but it could have at least a modest negative effect.
Competition from an increasingly large number of other cryptocurrencies is always a concern. However, Bitcoin is such an overwhelming player and totally dominates its marketplace that such competition will not cause any serious harm. The only serious possible effect would be to slow down the insanely rapid pace of its growth. Other cryptocurrencies are very far from being significant enough to do serious harm.
