Is Bitcoin a real investment?

For several years now people have been trying to make sense of Bitcoin and determine how it ought to be used. Paul Bryant aims to enlighten us.

Is Bitcoin a real investment?

For several years now, people have been trying to make sense of Bitcoin and determine how it ought to be used. Some believe it’s an up-and-coming payment alternative that will eventually replace mainstream currencies. Others see it as little more than an ambitious technological joke destined to fade into obscurity.

But more and more each day there are those who view Bitcoin from an investment standpoint, eyeing it as a commodity that could be purchased with the hope that its value increases over time.

This last point of view regarding Bitcoin has been strengthened by recent news that the Commodity Futures Trading Commission in the US officially designated Bitcoin as a commodity. This has no direct or actual bearing on the cryptocurrency’s utility or purpose, but it does assist the argument of those who see it as a resource rather than as functional currency.

On the other hand, we also saw a recent ruling by the EU that Bitcoin should be treated as a currency, which of course strengthens the opposing argument. All of this recent news has only served to emphasise just how much conflict there is regarding what we should make of the cryptocurrency’s financial potential.

A currency or investment

So given all of that, should Bitcoin be treated just as a currency that may continue to emerge over time, or is it really worth consideration as a source of investment?

The key aspect of these questions actually isn’t the debate of currency vs. commodity but rather the simple issue of whether or not it’s believable that Bitcoin stands to increase significantly in value over time. This is a very hard idea to get a firm grasp on simply because even in its very short history the digital currency has been exceptionally volatile. In 2013, it spiked to a value just under $1,200 per Bitcoin, before plummeting to lows under $200 at the beginning of 2015. But over the course of 2015, and particularly towards the end of the year, Bitcoin has experienced one of its steadiest periods of upward trajectory – not a single dramatic spike but a slow, consistent rise in value.

The question of whether or not such a rise in value stands to continue over time essentially comes down to whether or not Bitcoin will be more widely implemented in our day-to-day lives (and thus whether demand for the digital currency increases). Though in the past Bitcoin has had a somewhat shady reputation as an anonymous financial transfer system, it can now be used for a wide array of legitimate transactions with household name brands. It is even being implemented increasingly in brick-and-mortar store locations. While it’s still not an everyday currency for a lot of people, there’s no denying that Bitcoin acceptance has become more prevalent as mentioned in bitcoinogg.com.

Furthermore, we’ve begun to see more instances of Bitcoin being taken seriously (though not officially accepted) by governments and major financial institutions. In both Argentina and Greece, there have been rumours to the effect of Bitcoin becoming a federally recognised currency simply because poor economic conditions are leading citizens to trust the unregulated peer-to-peer currency more.

And in major banks in both Europe and the US there’s been talk of implementing blockchain technology (the foundation of Bitcoin transfers) for transparency and tracking purposes. Neither of these developments directly increases the ways in which we can use Bitcoin, but stories of this nature do lend the digital currency further credibility, if only because it’s remaining newsworthy.

There’s no definite answer as to whether or not Bitcoin is worth an investment, just as in general there are no sure things in investing. Forecasts for the value of Bitcoin in 2016 and beyond vary greatly, and there are sound arguments both against and in favour of growth. However, given the commodity-like nature of the digital currency – regardless of any official distinction – it has at least become reasonable to view Bitcoin as a potential investment. Whether or not it’s worth buying into is up to each individual to decide.

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