My 2c:
Investing in Bitcoin in 2010 made sense on hindsight, because it was equivalent to early stage venture financing of a break through technology (decentralized currency). On hindsight, the underlying value of Bitcoin as a "currency" lies in its ability to do transactions and transaction value has increase from <US$10k in 2010 to >US$1B today. So you can say, by that metric, the raise in Bitcoin price is justified.
https://www.quandl.com/data/BCHAIN/ETRVU...Volume-USD
However, moving forward, I think a lot of Bitcoin success as an "investment" lies in it's success as a true replacement of fiat currency to a certain degree. And in my humble opinion, these things must happen:
- substantial equilibrium transaction volume
- volatility must fall to an acceptable level
- sufficient transaction fees to support mining infrastructure
- adequate security to protect virtual assets
- sufficiently widespread real world adoption and exchanges to other currencies
- Government support
I would say the last part is the most difficult part. Unregulated cryptocurrency market is vulnerable to systematic and security risks, the the government's job is to minimize such risks to average investors. Also if cryptocurrency becomes a runaway success, it will be competing with the value of fiat currency.
But all of these don't mean that it would not continue to appreciate and stabilize at a value higher than today (or collapse to oblivion for that matter). Also, potential investor should consider the possibility that better tokenized currency, with much lesser carbon footprint, which also addresses all the above issues, may come into circulation someday; making existing cryptocurrency soup obsolete.
(not vested in cryptocurrencies)
Investing in Bitcoin in 2010 made sense on hindsight, because it was equivalent to early stage venture financing of a break through technology (decentralized currency). On hindsight, the underlying value of Bitcoin as a "currency" lies in its ability to do transactions and transaction value has increase from <US$10k in 2010 to >US$1B today. So you can say, by that metric, the raise in Bitcoin price is justified.
https://www.quandl.com/data/BCHAIN/ETRVU...Volume-USD
However, moving forward, I think a lot of Bitcoin success as an "investment" lies in it's success as a true replacement of fiat currency to a certain degree. And in my humble opinion, these things must happen:
- substantial equilibrium transaction volume
- volatility must fall to an acceptable level
- sufficient transaction fees to support mining infrastructure
- adequate security to protect virtual assets
- sufficiently widespread real world adoption and exchanges to other currencies
- Government support
I would say the last part is the most difficult part. Unregulated cryptocurrency market is vulnerable to systematic and security risks, the the government's job is to minimize such risks to average investors. Also if cryptocurrency becomes a runaway success, it will be competing with the value of fiat currency.
But all of these don't mean that it would not continue to appreciate and stabilize at a value higher than today (or collapse to oblivion for that matter). Also, potential investor should consider the possibility that better tokenized currency, with much lesser carbon footprint, which also addresses all the above issues, may come into circulation someday; making existing cryptocurrency soup obsolete.
(not vested in cryptocurrencies)