How would you like to buy a genuine Porsche for 300? Bitcoins that is. One man did and, while it doesn’t sound like a great deal of money, have a look at the figures. The man bought his Bitcoins at $4 each so 300 of them equals $1200. Still, sounding good? By the time the purchase was made, those 300 Bitcoins were worth approximately $39,000. Even better. A Porsche at that price? But, who determines the value of Bitcoins? And how?
Like anything, it comes down to supply and demand. The more people want them, the more they will be worth – for the time being. For those who don’t know, Bitcoins are an unregulated form of digital currency. They have been used, in the past, for nefarious purposes, including money laundering and drug cartels. According to several altcoin cryptocurrency guides, these coins are essentially an experimental form of currency. Its future is completely unpredictable and is really just a system of bartering. Instead of services or goods, you are trading on a dream that may or may not become reality.
In the current economic climate, it’s not really all that surprising that people are looking for an alternative currency. Some have been caught by the scaremongers who claim that the dollar is going to plunge into a black hole, never to be seen again. Others are just wary that they will be caught out in a situation similar to the recent ones in Greece and Cyprus.
The recent explosion in the interest in Bitcoins has not been caused so much by these problems, more that some of them have made quite a tidy sum out of Bitcoins. Let’s face it, if someone told you that an investment of $1200 would turn into $39,000 wouldn’t you be interested? Wouldn’t you want to give it a go?
It is worth noting that there is not an unending supply of Bitcoins. They are mined on a reasonably regular basis but that is due to be phased out in the near future, with the hope that there will be enough in circulation to sustain the currency. As it is, right now, it is not a sustainable currency and it is up and down like the proverbial yo-yo. The price recently jumped from $30 per Bitcoin to $250, followed by a plummet back down to $60. Dangerous? Risky?
To be honest, money really isn’t something that should be speculative, especially in the midst of a financial crisis. Think of it as purchasing a mortgage on a new home – you want to know exactly how much it’s going to cost you each month. Consistency is the key to success and that’s something that Bitcoins cannot offer. The price may be good right now but who knows what is around the corner? At the moment it is a huge bubble that is slowly getting bigger and bigger. Unfortunately, we all know what can, and often does, happen to bubbles – they burst. The bigger the bubble, the bigger the fallout.