(Update: At 6:50 p.m. Central time (U.S.), Bitcoin crossed the $5,400 barrier on the GDAX.com exchange.)
(Update: At 11:24 a.m. Central time (U.S.), Bitcoin crossed the $5,300 barrier on the GDAX.com exchange.)
Bitcoin’s price rose to an all-time high over $5,200 in the overnight period in the United States today.
Last month, Chinese regulators banned cryptocurrency exchanges with some of the largest in the country shutting down operations, CNBC reported. The government also banned initial coin offerings (ICOs), a way for cryptocurrency start-ups to raise money through issuing tokens.
However, reports have surfaced in recent days that Bitcoin trading could resume to some extent in the world’s second-largest economy. Cryptocoinnews.com, citing Chinese state-owned news company Xinhua, said that bitcoin trading will likely resume with more regulation. This could include new licensing and anti-money laundering regulations to be implemented by exchanges.
Last month, Bitcoin prices dropped from over $5,000 to near $3,000 after the Chinese regulations were announced, causing some pundits to cry once again that Bitcoin’s end was near.
The Bitcoin Coaches have consistently stated that Bitcoin is here to stay, and that its price trend will continue to move upward indefinitely as more and more of the world becomes aware of it and wants to acquire some of it.
Another factor driving the interest in Bitcoin, according to Forbes, is the possibility that Amazon.com is looking into it as an accepted currency. According to Forbes:
The idea of Amazon adding bitcoin as an acceptable form of payment is intriguing. Its revenue last year was $135.98 billion. Adding bitcoin on their platform would confirm Bitcoin as an acceptable form of payment. If Amazon successfully implements and brings bitcoin on their platform, it would only be a matter of time before we hear eBay making a similar announcement. After all the entire idea to remain in the game of the online shops is to provide users the best and most efficient way of shopping and Ebay’s annual revenue is $8.97 billion.
We posted an article on this topic a few weeks back, and it currently is the most-read article on the BitcoinCoaches.com website, confirming the fact that there is high interest in what Amazon may be considering.
In the wake of yet another appreciation and all-time high in Bitcoin value, here is our Bitcoin Coaches statement of “What we believe:”
Bitcoin is here to stay
“Bitcoin’s design as an economic system is revolutionary and therefore would merit an economist’s attention and scrutiny even if it had not been functional. Its apparent functionality and usefulness should further encourage economists to study this marvelous structure.”
Those are the words of Columbia University Business School researchers Gur Huberman, Jacob D. Leshno and Ciamac Moallemi in their August 2017 paper, “Monopoly without a Monopolist: An Economic Analysis of the Bitcoin Payment System.” Their work was done on behalf of the Bank of Finland, which sought to better understand the evolving Bitcoin system.
“Bitcoin is not regulated. It cannot be regulated. There is no need to regulate it because as a system it is committed to the protocol as is and the transaction fees it charges the users are determined by the users independently of the miners’ efforts,” the scholastics said in their research paper.
The decentralized Bitcoin infrastructure cannot be regulated by governmental bodies. What governments can do, and have done in several cases, is make it a crime for its citizens to invest in Bitcoin or to run a Bitcoin exchange. But since Bitcoin operates via a web of connections between innumerable computers worldwide without a central server, there is no place for governments to go to “shut it down.” So even if the Chinese government makes certain types of Bitcoin transactions illegal, you have no worries if you hold or trade Bitcoin in one of the other 194 countries in the world.
Bitcoin transcends borders, and no regulatory authority can affect its supply. This is one of the primary reasons Bitcoin has grown in value over the past five years. In countries where the governments made moves that devalued their own currencies, some investors moved their money out of the local currency and into Bitcoin, because they saw Bitcoin as a safer store of value. Venezuela and China are two examples.
Supply and demand affect Bitcoin’s value
In many ways, the value of Bitcoin fluctuates the way the values of equities and commodities do on open markets. News reports can cause a sudden rush to purchase or to sell, and corresponding increases and declines in price. This happened with Bitcoin in early September 2017, after reports that the Chinese government would be shutting down Bitcoin exchanges based in that country. Bitcoin speculators in China were selling off madly, to avoid getting stuck with Bitcoin that they couldn’t trade through an exchange in their country. And, speculators around the world were selling off, perceiving that the government action could greatly reduce Chinese participation in the Bitcoin economy moving forward.
As is always the case when Bitcoin value dips, there were articles saying, in essence, the end is near for Bitcoin. What many of those armchair critics don’t realize or understand is that the only way Bitcoin can cease to exist is for the Internet to cease to exist, because Bitcoin was designed to operate the way the Internet operates: no one central server or power source.
The Internet is designed to bypass any servers that go down for any reason. Signals are detoured to other servers that can keep access available for the Internet users. Bitcoin was designed to operate on innumerable computers around the globe linked by what is known as the “blockchain,” which operates continuously via computers that are turned on around the world. Computers in the chain that are turned off or disabled are bypassed, much like the Internet. Bitcoin transactions are processed continuously, even when some of the computers around the world running the Bitcoin program are unavailable.
There is no central bank of computers or servers where Bitcoin lives, which is by design. This is one of the ways Bitcoin’s creator made it impossible for any singular government or coalition of governments to disable it. The decentralized format also makes it nearly impossible to maliciously hack, because there is no one controlling focal point or server to target.
There will always be value
In 2014, a Bitcoin exchange named Mt. Gox, based in Japan, was hacked. Cyberthieves stole more than $460 million worth of Bitcoin that was in the online wallets of thousands of customers. The theft cast a worldwide spotlight on the insecurities of some cryptocurrency exchanges, and the anger and sorrow of Bitcoin investors who lost some or all of their holdings.
Bitcoin’s value dropped thereafter, and languished for months. But there were Bitcoin holders who saw the long-term value, and held their cryptocurrency. From a post-Gox low of $214.08 on Jan. 12, 2015, the value went as high as $5,013.91 per Bitcoin on September 2, 2017. The reports of Chinese government intervention into Bitcoin exchanges followed shortly thereafter, driving the price down. We believed that was a temporary condition which would change, and indeed it did, slowly regaining the value lost during that September span.
As with any asset, buy low and sell high is great advice. We continued to buy Bitcoin during the price slump, because we believe the underlying value always remains unchanged. We recommend buying Bitcoin at any time, but particularly when the price slumps. Its history has shown that the price will always recover – a similarity to the U.S. Dow Jones Industrial Average.
We believe Bitcoin is as sound of an investment as any equity. If you are interested in learning more about the technical aspects and history of Bitcoin, we have written a book about it which is now in its third edition. And, if you want to try purchasing some Bitcoin (we recommend VERY small amounts for beginners), check out our quick start guide.
We believe Bitcoin is the most important technical innovation in the world since the Internet. Companies in all industries are exploring ways to replicate its blockchain. The value – both tangible and intangible — that the Internet has brought to the world will be in many ways reflected in the value we will see brought to bear through Bitcoin. Its value will continue to increase because more and more people will desire it. Countries, collectives and cultures will eventually turn to it as primary currency. When that happens, the demand will skyrocket. As will the value.
(Note: This “What We Believe” piece is our opinion, and should not be considered a guarantee of return or of value.)
We invite you to follow us on social media, or sign up for our newsletter (both in the right-hand column of this page) to keep up with the authors of one of the first books on Bitcoin, “Bitcoin Decoded,” which was an Amazon best-seller.