Bitcoin – The number one Cryptocurrency

Cryptocurrencies are digital assets that use cryptography to allow users to make transactions. Bitcoin, created by Satoshi Nakamoto, is currently the largest cryptocurrency (blockchain network). It is described by the creator as a “peer-to-peer electronic cash system”.

I was watching business day about a week ago and they had an analyst discussing the rise of Bitcoin. To my surprise he predicted that the boom would not last very long and he attributed this to (amongst other things) its volatility. So I decided to do my own research on the matter. There seems to be a mixed reaction from analysts (and the public) regarding the future of bitcoin and other cryptocurrencies. Some think that they will one day replace money and change the banking system as we know it (I think not), others are a little more sceptical and believe that they will collapse as suddenly and as dramatically as they rose, some analyst believe that the time for bitcoin has already come and gone.

The value of bitcoin in the past year. Currently one Bitcoin equals 52613.48 South African Rand. 

I think the answer to wether or not Bitcoin is a good investment at the moment lies in the reason behind its sudden boom. It’s mostly speculative but it may include the formalisation of the cryptocurrency in Japan, the increased demand due to increased media coverage (A pick & pay store in Cape Town is now accepting the currency as payment for a limited time), the growth in international money transfer services that use Bitcoin to move cash from one country to another. None of these reasons are good enough for me and although I don’t believe that it will collapse, I agree with the business day analyst, I don’t necessarily think that Bitcoin is the next best thing. I struggle to see how it will sustain its growth.

There could be potential for Bitcoin in the African market, a large number of people in developing African countries do not have access to bank accounts and so in the same way that M-Pesa (A mobile money transfer service) was a success in Kenya, Bitcoin, which is already popular in South Africa, Nigeria and Zimbabwe, could also succeed. However, many people in Africa still live in poverty, some without access to the internet therefore the idea that they would invest the little money they have in a cryptocurrency is far fetched and highly unlikely.

Also on the downside, the anonymity of the cryptocurrency makes it the preferred tool for cyber criminals involved in money laundering/ransomeware.

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