In the last month, we have seen the total market capitalization of all cryptocurrencies hit record highs. As with any new market, there have also been significant drops as the market attempts to stabilize. But the overall trend of Bitcoin is on the rise.
The world is on the brink of a new financial era, an era in which cash and coins, tills, banks, and other financial institutions will be rendered obsolete. As the world turns to a variable array of cryptocurrencies, the question becomes about what is the best cryptocurrency? Which one will take the position of dominance for the financial revolution.
The value of Bitcoin has reached an all-time high of $4294 in these first few months of August. This is explosive considering that as recently as March of this year, the price of one single Bitcoin was valued at around $1000. That’s more than a $3000 gain in less than six months.
But what exactly is it that is causing this exponential rise in crypto value? One would have to turn to economics to explain this incredible phenomenon.
It seems as though there is no limit to which the value of Bitcoin and other cryptocurrencies might rise. This is caused by what is known as the network effect. Within a network effect, an object or service gains value based on the increasing number of users within a given population. The more that people start getting involved. The more that the object or service is regarded as having value within society.
Just look at the example of Facebook. When the idea originated, it was an interesting concept for social networking. A way to stay connected and share photos with friends. Shares in the company were worth almost nothing when Facebook began back in 2004. Fast forward nine years to 2015 and it’s ranked 12th largest company in the world based on its market capitalization.
There was no real tangible value to the program when it was created; it offered an alternative means to online communication. However, the more people that started using it, the more power that the company was able to wield in regards to communication. Until we are now at the point where we view Facebook as a fundamental thread in the fabric of our global community.
Now take for example the best cryptocurrency. Whether it is Bitcoin or some other derivative, it is striving to do just that. Cryptocurrencies are working hard to become the next foundational thread in our new economic era.
When it originated back in 2009, Bitcoin was an idea that only the most tech savvy could wrap their minds around. It seemed like an alternative way of facilitating trade but had little use for people outside of the tech world. That is until it was picked up in the depths on the Internet and proved itself. To be quite useful on the black market because of its somewhat paperless trail.
Cryptocurrencies Continued Gaining Traction
Despite Bitcoin’s less than savory beginnings, the cryptocurrency has continued to gain traction in mainstream society. Businesses and governments alike are looking for ways to utilize this new form of currency. To their advantage before it grows too large to control. But that’s just it, there is no real control and we are beginning to see that we are all just part of some larger financial experiment.
When a new cryptocurrency, like Bitcoin Cash (not to be confused with the original Bitcoin) hits the market, it experiences a surge in value almost immediately. In only three short weeks since its divergence from the original Bitcoin, Bitcoin Cash is valued at around $400 per coin. The ranking it as the fourth most valuable cryptocurrency on the market.
But who is to say that each new crypto to hit the market? That it isn’t just some piece of a larger experiment to see how far people will go in attributing value to something intangible?
There are critics on both sides of the coin. Nevertheless, the fact remains that the market cap on all the cryptocurrencies available continues to rise. Will you take the risk to rise with it?
Let us know your thoughts through here.