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Bitcoin Surges Past $ 16K: Will the Bubble Burst?

Cryptocurrency bitcoin soared to US $ 16,777 on Thursday, reaching a market capitalization of $ 274 billion, according to Bloomberg's composite of exchanges. That was up from just $ 10,000 last week, and up some 1,500 percent from the beginning of 2017.

The latest price increases have been recognized as a form of currency

The Commodity Futures Trading Commission (CFTC) last week announced that it would allow the trading of bitcoin derivatives on the CME Group and CBOE Global Market exchanges.

The CFTC's move makes it easier for investors to buy and buy bitcoins at a future date at a pre-agreed rate.

However, investors should be aware of a potential high level of volatility with the currency, the agency warned.

Bitcoin was introduced as a decentralized digital currency in early 2009. Its system works with a central repository or single administrator; transactions between users take place directly through the use of a cryptography. Transactions are verified on network nodes and recorded in a public ledger, or blockchain.

Bitcoin's exact origin is still somewhat mysterious. It was invented by an unknown person, known only as "Satoshi Nakamoto," and released as an open source platform.

A True Market Cape

Bitcoins are generated via digital mining, which utilizes complex computer algorithms. Each and every bitcoin is tracked through the network's shared transaction ledger. In total, there can be only 21 million bitcoins in the entire world. As of Dec. 5, 16.7 million have been mined.

Even with each bitcoin valued at roughly $ 16,000, the currency represents a small drop in the bucket of the world's wealth.

"We have $ 200 trillion in the world right now in stocks, cash, bonds and gold – and all of it is overvalued," said Ronnie Moas, founder of
Standpoint Research.

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That is roughly $ 25,000 for every man, woman and child in the world.

"If 2 percent of that ends up in a cryptocurrency, that is just $ 4 trillion of the total world wealth," Moas told the E-Commerce Times.

Given that there is a limit to the amount of currency in the world, the currency is structured to have a true cap. Unlike a national currency, such as the United States dollar, it will be impossible to create more.

"We do not know how much is still in the ground, but we know how much is there, and there is no way to turn the printing press," noted Moas. "The dollar loses value every time the United States prints more, but bitcoin has a set amount.
 

Highs and Lows

Except for times of greatness of upheaval, traditional currencies do not tend to see such massive gains in such a short period of time. Bitcoin is made of a number of factors

For one, bitcoin's sudden increase is a response to the initial coin offerings (ICOs), suggests Mark Nunnikhoven, VP of Cloud Research for Trend Micro.

The fact that bitcoin has been introduced into the world of hyperinflation or sudden discovery

"Blockchain technology is mathematically sound and provides the basis for the latest round of cryptocurrencies, and has more technology innovations," said Nunnikhoven told the E-Commerce Times.

"As the system behind Bitcoin is transparent and moderated, basic economics kick in and supply and demand," he added.

The recent spike in value could be seen in the ICOs popping up everywhere.

Confidence in the Currency

Bitcoin's meteoric is more expensive than it is, but it can not be more expensive, or even crashes – in price. That is why some businesses will not take a bit of money

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The online gaming service Steam, for example, has not been accepted.

"It's understandable that some services would be supported by this volatility, depending on the flexibility of their internal systems," said Nunnikhoven.

Volatility is a significant concern for businesses.

"The logistics of accounting for the value received / paid can be difficult when the value of a double overnight," Nunnikhoven explained. "Companies that conduct transactions in bitcoin should evaluate their ability to handle rapid fluctuations in the value of the currency and whether or not they can continue to accept this form of currency."

Currency of the Future

The eventual limit of 21 million bitcoins in the whole world could allow the fluctuations to stabilize,

For perspective, bitcoin's present worthy of some giant multinational companies, including IBM, McDonald's and Disney, for example.

As for bitcoin's top future value, "$ 150,000 is my estimate and that is conservative, as some others have forecast up to $ 1 million," suggests Moas.

"Right now, bitcoin is a top currency and it is at the same level as China's currency or gold," he pointed out. "Right now, it's not even close to how high it could go."


Peter Suciu has been an ECT News Network reporter since 2012. His areas of focus include cybersecurity, mobile phones, displays, streaming media, TV pay and autonomous vehicles. He has written and edited for numerous publications and websites, including Newsweek Wired and FoxNews.com.
Email Peter.