Fate of Bitcoin would not have been a 'Bubble' for want of these things; Check bizarre similarity with top 10 most expensive stocks on BSE
Bitcoin is a cryptocurrency. A decentralized digital currency without a central bank or single administrator. It can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries.
There was a time when we all wished that we were in possession of even one Bitcoin at the start of 2017. Everyone who did not hold a Bitcoin and watched it roar to an extreme level of $20,000 creating a new era in the trading world, regretted deeply within. Thoughts like these roiled the imagination: What if I had purchased Bitcoin even in the mid 2017 or as a matter of fact even October 2017?
Background check: In December 2017, Bitcoin craeted many billionaires, millionaires and crorepatis by rising to a high of $20,000 with total valuation of $276 billion. From 2013 - 2017, Bitcoin managed give return of 18,329.91% or 184.30 times. The way Bitcoin made headlines, it was breathtaking. Interestingly, not many favored the cryptocurrency even as many others jumped in and invested huge amounts.
However, the master of trading, Warren Buffett called Bitcoin rat poison squared in an interview to CNBC. The equity king was totally against investing in Bitcoin as he firmly believed that cryptocurrencies are headed for bad ending. Well, looking at the current situation, this is very much true. Bitcoin had its glory days and now has become one of the biggest crises in trading history.
Bitcoin has tumbled by nearly 70% since December 2017 till now, and has even touched $6,007.80-mark in the month of August. The market cap fell more than half to $103.38 billion compared to the valuation in December 2017. Today, Bitcoin was trading at $6,589.99 up 1.90% with market cap of $114.03 billion, at around 1404 hours.
Not only this, the MVIS CryptoCompare Digital Assets 10 Index has plunged by over 80% since January 2018. This index tracks 80% of overall cryptocurrencies market valuation. Under the index, Bitcoin has top weightage of 35.30%, followed by Ethereum by 22.30%, XRP by 13.53%, Bitcoin Cash by 9.34%, EOS by 5.61%, Stellar by 4.84%, Litecoin by 3.67%, Cardano by 2.09%, Dash by 1.84% and Tronix by 1.47%.
The tragedy with Bitcoin is that many believe the trading in digital coin is an illusion and was created out of thin air. Since it was introduced by an anonymous individual, it does not serve the purpose as an instrument to buy and sell goods. Not only this, it is the biggest bubble, which is ready to burst almost any time.
Simply put, Bitcoin is a startup without regulatory background, central bank and management.
No one knows where it will head, many speculate it creates a new phase in the world of internet trading. However, for something that is not controlled and is freely available, the volatility is high.
In fact, not even Bitcoin can help itself to escape the bubble, because it lacks control of a proper management, market regulator and government control.
Recently, the world’s largest Bitcoin miner Bitmain Technologies showed interest in entering on Hong Kong stock exchanges via initial public offering (IPO).
Bitmain said in its draft, “There is no assurance that usage of cryptocurrencies will continue to grow. As our business focuses on cryptocurrency mining and relies heavily on the cryptocurrency market, any lack of usage of or fade in public interest for cryptocurrencies may adversely affect our business, future prospects, results of operations and financial conditions."
This is enough to scare any investor, because Bitcoin is a medium used for trading with anonymous players, or in other words of government it is used for tax evasion.
Interestingly, we bring examples that can help in understanding the fate of Bitcoin. Firstly, Bitcoin would not have entered into a bubble phase not today, not anywhere. To help you understand, we bring you top 10 most expensive stocks on Sensex, which have similarities in trading to Bitcoin. This will help you come to a conclusion as to why Bitcoin needs a regulatory and management background to actually change this aspect of internet trading.
These 10 companies are - MRF, which has touched a high of Rs 81,423 per piece, followed by Rasoi with a high of Rs 47,500 per piece, Page Industries worth Rs 36,335.95 per piece, Eicher Motors at Rs 32,762.90 per piece, 3M India at Rs 26,679.25 per piece, POLSON at Rs 26,336.55 per piece, Honeywell Automation at Rs 24,178 per piece, Bosch at Rs 22,400 per piece, Shree Cements at Rs 19,842.30 per piece and Nestle India at Rs 11,700 per piece.
These are the all time highs of the above mentioned stocks which were touched between start of 2017 till date.
Similarities between these stocks and Bitcoin is simple - they have limited number of stocks available in market for trading, the demand for these stocks is high and there are no announcement of split or bonus shares by the companies.
Available for trading since 2009, Bitcoin has a fixed supply capped at 21 million and the currency's inflation rate is programmed to decrease by half about every four years. Everyday, around 1,800 Bitcoins are released into the market.
Earlier an Incrementum research report says that this rate of supply will be half to 900 Bitcoins per day by 2020, and then to 450 Bitcoins per day by 2024. The study estimates that the last Bitcoin will be mined in the year 2140 AD.
Further, it explains that the finite supply gradually enters the market according to a mathematical algorithm that releases approximately 12.5 Bitcoin into the network's supply of Bitcoin every ten minutes.
Also, considering Bitcoin does not has any regulatory or management backup, there is definitely no announcement of bonus issue or split in stock.
Hence, the only difference is regulatory and management backup. Because analysts can predict the BSE expensive stocks future course. There is a trust among investors when it comes to trading in BSE expensive stocks, they have a detailed statement of their company.
These expensive stocks have also made some of their investors rich, especially the ones who have invested before 2009.
There was a case regarding MRF discussed on on Zee Business TV where a man revealed his grandfather bought 20,000 shares of MRF in the year 1990 - he has relevant physical certificate as proof. Simply put, his grandfather's investment in MRF is now worth over Rs 130 crore!
While to hold a Bitcoin, the best strategy is to mine them, but this option also presents a considerable amount of risk.
Mining hardware for Bitcoin would cost an upfront investment ranging from $10,000 to $1 million. The technology, used to build mining hardware is rapidly advancing, shortens the useful lifetime of a miner to approximately 1.5 to 2 years, as per Incrementum.
Mining is a specialized division of labour, and is not the best strategy for an investor who simply wants to gain exposure to fluctuations in the price of Bitcoin.
Because of Bitcoin’s rise, many companies have opened their own Blockchain trading, however, some are already trapped by the fate of Bitcoin. Most recently, India’s largest exchange, Zebpay has stopped issuing Bitcoin. There have also been crisis like cyber threat in Bitcoin trading, which is even more risky, as you tend to lose an extreme part of the investment.
Considering the above, it can be said, if Bitcoin actually had a regulatory and management back up, the future would have had been different. Who knows, Bitcoin may have actually created a new trading pattern, but now it is heading towards doomsday for all intents and purposes.