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Article by Neill Barston | 28th June 2018

Will the Bitcoin Bubble Burst?

Having hit the headlines numerous times over the past year, Bitcoin’s rise as the leader of the digital ‘cryptocurrency’ pack has proved quite remarkable.

While it has received much recent fanfare, this enigmatic financial force has actually been around for nearly a decade, gathering momentum. At its most basic level, the system operates as a peer-to-peer digital payment, which is not formally regulated by the banking sector or government.

Bitcoins have effectively been described as an online equivalent to cash, which can be used to buy a wide range of products or services – though significantly, they are not accepted in many stores due to the fact they are not subject to standard financial legal regulations.

In terms of how they function, Bitcoin computer files are contained within a digital wallet app, which could be on a smartphone or computer. You can be sent Bitcoins in whole or part, and vice versa, with each exchange being logged in a public register, which is known as a Blockchain. 

Bitcoin’s origins remain shrouded in mystery, simply attributed to a group known as Satoshi Nakamoto, which is believed to have established it as a means of payment free from the
ties of conventional currencies.

Inevitably, interest ramped up in the currency when its value surged by a reported level of 900% last year, which prompted heavy investment from financial speculators. Such seemingly improbable results are said to have made it the strongest performing asset of 2017.

Consequently, it has been seen as the ‘next .com digital boom’, which in turn has led economists to fearing a significant crash could be just around the corner.

Indeed, Bitcoin’s value fell to a figure of below £6,000 each, which was the lowest for some months, in the wake of news that governments around the world could be on the verge of clamping down on such currencies. 

Its value also dipped upon news that Facebook would no longer be permitting advertising of such digital currencies – which has previously proved a key advertising platform for its activities.

There are now thought to be hundreds of cryptocurrencies in existence since Bitcoin burst on to the scene, and are collectively known as altcoins. These have come in various guises ranging from the Bananacoin, Trumpcoin, through to the Jesuscoin to name a few. 

However, due to the lack of government-backed scrutiny of such alternative currencies, economists have warned that such currencies could represent a highly risky source of potential investment. Few are thought to have actual businesses behind them, which for the savvy investor would offer plenty of an alarm bell in itself.

History will be the judge of prospects for alternative digital currencies, yet so long as they continue to operate outside the conventional banking system, it’s hard to see how they will prove viable in the long-term.

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