How far can Bitcoin go

Eleven years after Satoshi Nakamoto, the pseudonymous creator of bitcoin, made his first entry into bitcoin, its price breaks one record after another. The yield of the bitcoin cryptocurrency has exceeded 400% in the last twelve months, as from the levels of just over 7,000 dollars at the beginning of the year 2020, it came to move at the beginning of the new year over 37,000 dollars.

There are many reasons for the explosive rise in prices. After all, such a large price increase can never be justified by a single reason. The crucial questions are whether these reasons can support keeping prices at record levels and whether they can also support further price increase.

An important reason for the increase in the price of bitcoin lies in the fact that it is based on blockchain technology that is expected to change the world more than people can imagine.

Another reason is its philosophy as it is based on decentralization and independence of the central authorities since decisions for its self-improvement are made by its users through a common space of policies and actions.

A third reason lies in its finite number, since, as time goes on mining for new bitcoins becomes more difficult.

Obviously, there are significant weaknesses in this currency, for example, in terms of its security, but mainly in the fact that there is a lack of holistic rules and regulations for cryptocurrencies, so it makes it vulnerable to its use as a vehicle of opacity, in the fight against money laundering activities and terrorist financing.

On the other hand, the fact is that more and more institutional investors are adding it to their portfolios as they consider it a safe haven like gold. The market capitalization of all cryptocurrencies has reached $ 1 trillion. Bitcoin remains the market leader with market capitalization today [7/1/21] being close to $ 690 billion. If it is indeed a competitor to gold as a safe haven, then it is far behind as the gold capitalization reaches roughly $ 10 trillion. This fact, given the instability created around the world by rising debt, the pandemic, low fixed income returns, declining growth and new geopolitical constants, raises serious expectations for further increases in the price of a relatively new and innovative currency such as Bitcoin. Which as it is global and independent has the conditions to be able to function as a safe haven.

This dispels skeptics' criticism that bitcoin is not useful as a real currency, as it cannot be spent in most places, since this seems to be indifferent to investors. In fact, in 2020, investors decided they did not want to spend it as they now see cryptocurrencies as a legal asset to be kept in portfolios as a long-term investment that provides security. This also invalidates the second criticism that Bitcoin could not go very far. Eventually, it exists for more than 10 years, and it seems it will continue to exist for a long time.

Ultimately, most bitcoin now belongs to long-term institutional investors, as it is estimated that less than 25% of existing bitcoin is traded. This assessment could be considered positive in principle for the further course of the currency; however, the large concentration of fewer investors could also increase price volatility.

On the other hand, institutional investors are the ones who guarantee the viability of a product. And this is because the institutional investors are the ones who at the end of the day, create the rules, to ensure the duration of the product they are investing.

Thus, it is very likely to create an environment of holistic operation of this product with common rules and regulations. If this happens, then we are probably at the beginning of the introduction of a new function of currencies that, as they evolve, will prove that they have come with the aim of establishing them.