Bitcoin is more valuable than ever, despite several controversial forks coming up over the next few weeks.
Just hours after Reuters reported bitcoin prices reached a new all-time high of $6,450 on Wednesday, CoinMarketCap estimated the price has reached $6,610. It’s likely that prices will continue to rise in the wake of the recent announcement from CME Group Inc that the market will offer ‘bitcoin futures’ derivatives to mainstream brokers before 2018, assuming regulators sign off.
A recent CME report compared bitcoin’s appreciation to gold, saying gold has seen 3,500 percent gains since 1971, compared to bitcoin’s 6 million percent increase since 2010. The researchers theorized bitcoin will continue to be seen as the standard “crypto-gold” as the broader cryptocurrency market matures. There are around 2,000 different cryptocurrencies around the world today.
Increased regulation and institutional adoption for bitcoin, the first and most popular cryptocurrency to date, could eventually lower the market’s overall volatility. “I think the price of bitcoin is going up because they are scarce,” Erik Norland, executive director and senior economist at CME Group, told International Business Times.
The process of acquiring new bitcoins is called mining. Just like gold, there is a finite supply of raw materials. The bitcoin protocol has a hard-wired limit of 21 million bitcoins, which Norland expects miners will reach in a little over a century because the process is slowing down as the number of coins rises. The vast majority of bitcoins that will ever exist have already been mined, Norland estimates around 80 percent overall. A company owned by several of Russian President Vladimir Putin’s advisors even launched a new token this summer as part of an official effort to promote local cryptocurrency mining, hoping Russians will become global marketplace power players. It’s hard to say what bitcoin’s stabilized value will be as we draw closer to the global cap.
“Bitcoin has already experienced a few price bubbles before,” Noland added. The bitcoin market first crashed in 2011, around two years after the open source project started. According to Bitcoin Magazine, the price dropped from almost $32 per bitcoin down to around $10.25. Obviously, bitcoin has bounced back after several crashes to become even bigger and more valuable.
Regardless of volatility, Norland said it’s important to remember gold isn’t the only precious metal. Just like silver and platinum prices can impact the value of gold, the growth of diverse cryptocurrencies offers an example of how the cryptocurrency market can continue to expand despite the slow pace of bitcoin mining. “Is it [bitcoin] a bubble? Maybe. But that doesn’t mean it can’t go a great deal higher before the bubble pops. And it doesn’t mean it can’t keep going higher after that because of the very limited supply.”