Henry Blodget, the editor and CEO of Business Insider, has an interesting take on the bitcoin phenomenon, pointing out that it can reach $1 million in value just as easily as it can fall to $0. He argues that the cryptocurrency has no intrinsic value and that, in his view, its value will be determined by its volume of transactions over time, which, according to a chart he shows, bodes very well for the currency, as adoption of this cryptocurrency continues to grow worldwide.
Blodget argues that bitcoin is the perfect asset for a speculative bubble because unlike stocks that have metrics such as profit or cash flow for gauging a fair value, bitcoin lacks them. He also argues that the mathematics may work out for those with the means to speculate in the cryptocurrency, because while investors may lose everything they put into the coin, the gains can potentially be infinite given the difficulty or perhaps impossibility in assigning it a particular value.
These considerations aside, there is a growing trend toward digitization and decentralization worldwide. Bitcoin is the quintessential cryptocurrency to meet these global needs, given that it is not under the control of any central authority, cannot be inflated at whim as is the case with fiat currencies such as the U.S. dollar, euro, yen, and pound, has an immutable ledger known as the blockchain, and is very resistant to hacking at its core (though third-party exchanges or wallets may be vulnerable).
Bitcoin also has a very powerful brand that is continually strengthened over time, as the very first cryptocurrency created. So while it may be true that it has no intrinsic value, such as commodities like gold and silver that are used for industry and as a form of money, that the name bitcoin springs to mind among investors as soon as cryptocurrencies are discussed is worth a substantial amount, arguably billions of U.S. dollars.
The biggest risk or hurdle for bitcoin at the moment is the internal fighting taking place in its community as the network gets bogged with slower transaction confirmations and higher transaction fees due to its current scaling problem as more people have adopted the cryptocurrency. The community is divided on how, or even whether, it should deal with the scaling issue, and no quick or easy resolution seems likely given its decentralized nature. Thus, bitcoin may eventually split into two or more cryptocurrencies, known as a “hard-fork,” if factions within the community decide to take matters into their own hands to deal with the scaling issue, creating similar yet incompatible versions of the cryptocurrency. If bitcoin is to overcome this problem and continue to build its brand and trust over the long term, then a price that is multiples higher than today is more likely than $0.
Ultimately, it is up to investors and enthusiasts to weigh the risks of bitcoin and other cryptocurrencies and decide for themselves how they will allocate their wealth for these speculative assets. While opinions on the future price of bitcoin may differ, there can be no doubt that the cryptocurrency has created a new financial revolution, empowering its users and those of other cryptocurrencies.