By Theodore Mattheiss
Elm Staff Writer
Bitcoin has turned into a modern-day gold rush, but if you’re looking to get rich quick, you may want to look elsewhere.
You may have heard the term “Bitcoin” floating around the internet, or maybe a friend has mentioned it before. For the uninitiated, here’s what it is: Bitcoin is one example of what’s called cryptocurrency. Unlike the dollar, it has no physical representation, and only exists in the digital realm.
Bitcoin is decentralized, which means it’s not controlled by any bank or administrator. Instead, it’s transferred directly between individuals. It is a completely anonymous payment system, due to high levels of encryption, which is where the term cryptocurrency comes from.
This concept of a decentralized currency became popular in America after the 2008 financial crisis, and, sure enough, Bitcoin was invented only a year later. At the time of its conception, one Bitcoin was worth about nine cents. At the start of 2017, it passed the $1,000 mark for the first time. By December of that same year, its value had skyrocketed to over $19,000. Investors that had stuck with Bitcoin from the beginning suddenly became millionaires.
However, as is taught in any basic economics course, after the boom comes the bust. Bitcoin lost more than half of its value in the weeks that followed, plunging below $8,000, and is showing only the smallest signs of recovery.
So, where does it go from here?
At press time Monday, one Bitcoin is worth $8,700. To be fair, it’s still a very strong currency, and seems to have stabilized somewhat after its awful fall. When one looks at the history of Bitcoin, it becomes apparent that it’s still doing very well. Even so, people have been shaken by the crash. Their faith in Bitcoin is wavering, and their eyes are glued to the market. One more hiccup in its value could be an absolute disaster.
In the midst of this situation, Cameron Winklevoss, half of the famous Winklevoss twins who have lately become the first Bitcoin billionaires, has claimed Bitcoin could one day be worth 40 times what it is today. This seems like a thinly-veiled attempt at stimulating the market and ironically reduces my faith in Bitcoin. I mean really, 40 times? Bitcoin will never be worth $348,000. No currency is that strong. Whether it’s excessive optimism or a calculated maneuver, this claim only highlights the instability the Bitcoin market is experiencing right now.
That’s really the main problem right now: instability. It spells disaster whenever it appears in economics, because naturally people will only want to participate in a market that they’re confident will generate profit for them. Boundless confidence is what pushed Bitcoin to $19,000 in the first place. Nobody wants to go all in on Bitcoin when it could crash again tomorrow, and return to the three digit value that it held for nearly a decade.
Whatever Bitcoin’s future holds, it’s more than worth paying attention to, because it’s only one of many cryptocurrencies that now exist, and its fate, whatever that may be, will say a lot about the future of cryptocurrency as a whole.