Investors around the world are paying more and more attention to cryptocurrencies. And there are several reasons for this.
Cryptocurrencies are a new, but very fast-growing market. Many analysts even call Bitcoin and Altcoins "assets of the future." Today we will understand, is this true and why.
But first you need to understand why cryptocurrencies such as Bitcoin (Bitcoin) are considered promising assets and attract more and more attention from investors all over the world. Let's start with a brief insight into the history of money, determining their value and other factors that make cryptocurrency perceived as a trustworthy asset.
Money history
Money has existed for several millennia and performs three main functions:
- Means of accumulation (money allows people to keep their savings in a way that everyone can understand);
- Means of circulation (money acts as an intermediary in the exchange of goods);
- The unit of account (money allows you to measure the cost of goods or services in a way that everyone can understand).
During its existence, money has evolved greatly: at first there was a simple barter, then shells and pebbles appeared, then precious metals, paper bills, plastic cards, and now we have come to digital currencies. Cryptocurrencies such as Bitcoin are the first kind of fully digital money, with which the modern Internet generation can safely make and save money without leaving the Web.
Determination of value
The cost of bitcoin and other cryptocurrencies depends on supply and demand in the market, which is true for most common assets, such as gold, stocks and real estate. Bitcoin emissions are limited to 21 million tokens, just over 17 million of them are now in circulation, and the number of people interested in them is constantly growing. The demand is due to the fact that BTC is a convenient means of accumulating and circulating capital on the Internet. This means that if demand continues to grow, the Bitcoin rate will also increase, since the number of these tokens is limited.
It is also important to note that no matter how high the price of bitcoin may seem right now (hovering around $ 8500 in May 2018), its total market capitalization is still relatively small ($ 140,4 billion) when compared to asset classes such as gold and securities, whose markets are valued at trillions of dollars. This is why bitcoin is so vulnerable to frequent market shocks that lead to high volatility in its exchange rate. As this asset class matures and is valued at several trillion dollars, its volatility should decrease.
Figuratively speaking, Bitcoin is a small boat that sways on the waves emanating from a cruise ship of world fiat currencies. And each new wave then throws it up, then, on the contrary, throws it down.
Availability and Liquidity
Fiat money lovers always ask the same question: “How can I cash the bitcoins? How can I get my wonderful depreciating money in my hands? ”
Well, today there are many services in the world thanks to which you can easily make such an exchange. There are tons of ways to convert your digital assets into cash and vice versa. Localized versions of such services are rapidly being created around the world, since the Bitcoin protocol is open and anyone can connect to it and develop their own product based on it. Users can conduct transactions through websites and applications such as Coinpesa, which are connected to the usual payment systems - banks, PayPal and mobile money. In addition, there are ATMs and peer-to-peer services like localbitcoins, whose users meet each other in person and make a transaction offline. All of this infrastructure is driving Bitcoin's trading volume to roughly $ 5 billion per day today.
Dynamics of the course and market conditions
Over the years, the digital asset market has grown, and its capitalization amounts to billions of dollars. During this time, various cryptoactives, for example, Bitcoin, generally yielded greater profits than traditional asset classes. Most likely, this trend will continue in the future - as the class of cryptoactive assets grows stronger. This is how the dynamics of the Bitcoin course looks compared to popular traditional assets.
From this table it follows that bitcoin investors have succeeded much more than those who prefer other markets. In addition, the table shows that this was not a non-stop upward movement: Bitcoin also had periods of tremendous volatility, as in the 2014 year, when the market collapsed. The fall in 2014 was caused by two important factors: firstly, the late correction of the market after the excellent previous year and, secondly, the collapse of the largest cryptocurrency exchange Mt.Gox. This should not be forgotten, but in the future, as the market matures, such events will have less serious consequences.
The class of digital assets is still small compared to other traditional assets, and it is expected that in the next couple of years it will grow and occupy one of the leading positions in the market. This means that newbies still have the opportunity to make incredible profits.
Should I invest in Bitcoin
Since 2012, investments in blockchain and digital assets have been growing seriously every year. There are a variety of ways to make money in this market. Some investors buy assets for long-term storage, others are engaged in day trading, others are involved in mining, others are building their companies, and so on. There are many ways to make money. If you analyze this field of activity with the help of numbers, you get the following picture:
- Since 2012, blockchain startups have attracted about 3,2 billion dollars from venture investors;
- In May, 2018, the average daily trading volume of digital assets is 22 billion dollars;
- Five years ago, Bitcoin's market capitalization was 1,6 billion dollars, today this figure rose to 141 billion dollars;
- In 2017, the number of unique active users of cryptocurrency wallets was approximately 11,5 million; four years ago there were from 0,6 to 2,6 million;
- The average daily remuneration of Bitcoin miners in May 2018 amounted to 16 million dollars, five years ago this amount was equal to just 46 thousand dollars.
Obviously, smart money is already playing a big role in this market, which is experiencing a period of exponential growth.
Recommendations
The world is likely to continue along the path of tokenization and in the next five years the capitalization of the main cryptocurrencies will amount to trillions of dollars. If this happens, then the rate of such cryptocurrencies, like Bitcoin, will grow to hundreds of thousands of dollars for a token. John McAfee, the founder of the McAfee antivirus software development company, is confident that in 2020, the Bitcoin rate will be 1 million dollars. It is impossible to predict exactly what will happen in the future, but now everything indicates that the world will become tokenized, and most of the world's capital will be turned into digital assets.
Therefore, today it is definitely worth investing in self-education. Getting to know this fast-growing industry in advance may be your best long-term investment. Knowledge is power, and now is the time to prepare yourself for the coming industrial age.