Every week is a new high week for bitcoin, the largest cryptocurrency and the most popular around the globe. Traditional investors are used to an annual stock market return of 7% inclusive of dividends and re-investments. With bitcoins, the returns are already at 640% since January 2017 with each coin trading at $7,454. Bitcoin is at present the most preferred investment in 2017 as it assures security in the financial sector. With the sinking of the dollar over the past years, investors are shifting their focus from gold, which has been the best alternative as a store of value for wealth protection in harsh economic turmoil. Nevertheless, investors are nowadays shifting focus to the bitcoin as a store of value due to scarcity, security and lucrative high value.
Undeniably, it is a great year for bitcoin investors. However, these investors could be making a crucial mistake by placing too much emphasis on the cryptocurrency. Using the bitcoin as a means of payments means that it is hard to get off the system. Its lengthy settlement times, volatility, and transaction fees always work against recruiting more agents into the virtue currency hence forcing the government to intervene to create regulations that may work against investors.
The low barriers to entry into the global cryptocurrency market mean that big businesses can band together and create their own virtual currencies to favor their businesses. This outlaw the bitcoin blockchain as a preference for businesses. Currently, there 150 organizations testing a version of Ethereum’s blockchain through small-scale pilot programs under the Ethereum Alliance. Bitcoin’s major competitor, Ethereum has a smart contract’s feature built in the blockchain to facilitate, verify, and enforce contract negotiations. With these features, Ethereum will become the preferred blockchain, which is where the tangible of cryptocurrency lies. Bitcoin investors may be buying into the wrong catalyst that might not be beneficial in the end.
Lastly, Bitcoin investors seem to be misplacing their faith on the blockchain. In August, bitcoin split into two separate virtual currencies, bitcoin and Bitcoin Cash, due to differences between the bitcoin communities on the best option to upgrade the blockchain. Bitcoin Cash chose to expand capacity within existing block chains while, bitcoin upgraded to SegWit2xS, by taking off information to boost capacity, speed up settlements, and reduce transaction charges. The move was made to attract big businesses but depicted the chances of a future split-up between the entire bitcoin communities, which will harm future business endeavors.