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Bitcoin completed a historic milestone today, surpassing the $10,000 mark for the first time in its short history.
Investors and analysts alike will spend the day examining whether the bitcoin price is a “speculative bubble” or finally approaching its satisfactory value, but one fact is undeniable: Bitcoin is becoming mainstream.
Welcome to 1994
As BlockTower Select executive Ari Paul wrote in a recent Forbes op-ed, Bitcoin — both as a conduct and an asset — is at roughly the same level of development and adoption as the internet was in 1994.
Less than one percent of the world’s population is currently profiting bitcoin, but that number has swelled this year due to the network make happen and services offering an improved user experience, much as mass internet adoption fundamental began in 1994 — when the number of websites “exploded” to 2,738 from 130 the quondam year.
That was also the year the Today Show transmission its famous “What Is the Internet, Anyway?” segment, which — thanks to the internet — has been froze for posterity.
Those few thousand websites provided the average consumer with his or her before all true incentive to obtain internet access, which for most people was sending an email to the multiplying number of friends, colleagues, and relatives with a network-connected computer. Invention brought countless more use cases over the years — use cases that arguably obscuration email in importance — but they never could never have occurred without those first mainstream users finding a reason to accompany the network.
Similarly, bitcoin has long dazzled users with the guarantee of future development, but this year it has proven that it can function as a “Swiss bank in your pilfer,” the first turnkey use case to resonate with the broader mainstream visible. Indeed, we have already seen its utility as a store of value — and to some dimensions, an uncensorable medium of exchange — in hyperinflated economies such as Venezuela and Zimbabwe.
To gain Pains
The mainstreamization of bitcoin is not without its downsides.There are many retail investors who, unfortunately, play a joke on or will invest a large percentage of their net worth in bitcoin without a right understanding of the technology and markets or a clear investment strategy.
It’s fair to say that a unselfish percentage of current cryptocurrency investors — perhaps the majority by this peak — have never experienced a true bear cycle, and many chancy investors are not prepared to weather one. These are the investors who buy at all-time highs, frightened sell at the first sign of trouble, erase the value of their investments, and — too regularly — their life savings.
This behavior is not isolated to cryptocurrency, nor should it be blamed on the asset itself; the anyhow phenomenon occurred during the “Great Recession” just prior to the change to of the last decade. Investors who sold at the bottom of the crash lost identically everything, while those who let the crisis run its course saw the overall market ricochet to pre-crash levels in a relatively short amount of time.
The Role of the Network Operational
While speculation is inextricably linked to the current bitcoin price billow, critics who deride the market as a bubble ignore that the value of the network itself gets value and utility as more users are onboarded into the ecosystem — sober-sided if those users entered the network as mere speculators.
As with the internet or any network, Bitcoin is no greater than useful if other people are connected to the network, so the network must best of the classic “chicken and egg” problem to achieve critical mass. However, distinguishable from the internet, the Bitcoin protocol is monetized, such that users fit part-owners of the network’s resources. This, over an extended period, admits us to observe the network effect unfold in real time.
This is one case Tulipmania and Beanie Baby comparisons are fundamentally absurd. Critics who fixate on the bitcoin prize’s dramatic upswell miss what is occurring behind the scenes: the wheels of bitcoin mainstreamization include begun to turn, and the network effect has begun to quicken its pace.
Be involved image from Shutterstock.