Jameel Ahmad | FXTM
It’s been another historic week for the price of Bitcoin. The crypto currency managed to climb to a new all-time high above $5000 on Thursday, before advancing above $5,800 during the early hours of trading on Friday morning. The most recent milestone represents a rally of nearly 800% over the past year and while critics of Bitcoin are unlikely to go away, there is no denying that the attention Bitcoin is attracting across the globe is warranted. While there tends to be a negative narrative around the asset in the media, there are some significant influencers who are charting a more positive line of commentary – politicians, central banks and even leading investment banks are showing more than passing enthusiasm for crypto currencies.
The exact point of departure for another aggressive price surge in Bitcoin is difficult to place, but there are a number of reasons that may have encouraged renewed buying interest. Reports earlier in October, suggested that Goldman Sachs might be considering opening a Bitcoin trading desk and this was seen as a leading institution being receptive towards the potential of crypto currencies. Given that investment banks are traditionally conservative, especially in the wake of the 2008 credit crunch, their interest is counteracting the dismissive comments. There have even been reports in the last 24 hours, that China might be considering reversing its ban on Bitcoin exchanges, something that if confirmed, would represent a remarkable turnaround, considering China’s ban on Bitcoin exchanges was seen as the sole catalyst for the decline to $3000 not so long ago.
The emergence of Bitcoin this year has been absolutely spectacular and the truth is, many are still unsure what the crypto currency really is. That includes myself, who is now needing to monitor the ongoing fluctuation in the value of Bitcoin because of how much attention it is gaining across both investors, and the financial headlines. However, I can understand why Bitcoin attracts criticism. It is not a conventional asset, and the ongoing volatility (it is not unusual for the price of Bitcoin to swing by 5+/- % in a matter of minutes) means that anybody who wants to invest in Bitcoin needs to be aware of the possible risks. This is a volatile instrument and due to traders not always understanding the risks around investments, it is only fair that commentators point out that Bitcoin is not regulated. Most regulators and senior officials have actually been caught off guard by the revolution of crypto currencies, because few believed that they would gain enough traction to warrant a regulatory framework.
It is no surprise that tech savvy Japan has embraced cryptos, and they are taking a leading role to develop a licensing program. Regulatory frameworks would represent a huge step towards the critics becoming more open towards the prospects of Bitcoin, and silence those who have claimed that Bitcoin is just a bubble and snake oil. Rumour has it that Amazon might be considering Bitcoin as a payment method in the future. They will not be the first major retailer to accept Bitcoins, companies from real estate firms to software re-sellers now accept the currency as payment.
There is a lot of hype around cryptos and some of the coverage is speculative in nature but if a leading e-commerce powerhouse like Amazon took the step towards accepting Bitcoin, it’s only a matter of time before other major online corporations follow suit. Predicting the future of Bitcoin and other crypto currencies remains an exercise in speculation, but it definitely deserves attention from investors. I doubt its spectacular rally is not over, but neither is another fall from grace on the back of market jitters.