5 Top Questions About Bitcoin

Bkc Blockchain Knowledge Centre -Hong Kong Update 1 nov 2017

In case you haven’t followed Bitcoin news, there are plenty of current events that are affecting the industry. Here are the top questions about BTC and cryptocurrencies so you can stay updated on key trends.Read on and catch up!

Will Bitcoin’s rise continue after record-setting 2017?

Bitcoin’s record-setting year is well-documented in the media. But with BTC pushing $6,500 price levels and $109.4 billion in market capitalization, what’s in store for the world’s most popular cryptocurrency?

Famous investors Ray Dalio and Warren Buffett are warning of a bitcoin bubble. But other Wall Street analysts see bitcoin perhaps reaching $10,000 or even $25,000 by next year. BTC dipped to $3,200 in mid-September and has since rallied to over $6,500. Heavy trading (of nearly 300,000 daily transactions) can lead to volatility. But investors are also weary of fiat currencies that lose value over the long-term. As an asset, fiat money almost always devalues. And investors know that with Bitcoin and other cryptos, their money has a fighting chance to appreciate in value. Despite the naysayers, it’s possible that we’ll see Bitcoin go over $10,000 in early 2018.

How do scaling limitations impact Bitcoin’s future?

Bitcoin’s 1 megabyte limit began to reach its ceiling in early 2017, and the 1 megabyte size is slowing processing times from 10 minutes to a few hours for each transaction (the average confirmation time stood at 118 minutes in early March 2017 and has further slowed down since). Transaction fees are also increasing as Bitcoin miners rely more on fees for their reward; fees that miners collect have grown exponentially since 2016, reaching a high of $2.12 million in a single day in late August 2017.
Perhaps sensing both risk and opportunity, investors and speculators are diversifying their crypto holdings and allocating more capital in Ethereum, Litecoin and other coins. There’s a need for convenience and speedy confirmations when users make smaller retail payments. Other cryptos are better suited for such payments, more so than Bitcoin. The scaling limitations won’t necessarily affect Bitcoin’s price because the investor community, by and large, see BTC as the flagship coin among all cryptocurrencies.

Will the rise of cryptos overshadow Bitcoin?

A few cryptocurrencies are rising in value and some feature faster processing times and lower fees. These are attributes that are favorable for a retail payment system. These upstart coins include Ethereum, Litecoin, Dash and others, to name a few.

The total market capitalization of all cryptocurrencies is $184.5 billion as of November 1, and Bitcoin’s $109.4 billion market cap represents 59.7% of that. BTC’s dominance continues as the most popular and valuable coin. However, Bitcoin’s market share has somewhat eroded as more coins enter the marketplace and investors diversify their holdings.

Cryptos have different features which means coins differentiate themselves by being useful for specific applications. In other words, many coins aren’t trying to replicate Bitcoin; their designers are trying to create something original. For example, an ICO may create a new coin that appeals exclusively to the transportation industry or medical profession and so on. The appeal to different crowds will eventually mean more diversification of crypto investments instead of most capital being allocated in bitcoin.

What other tech features are possible for cryptocurrencies?

Bitcoin remains solid but some analysts view it as a “settlement layer” used for sending large financial amounts instead of using Western Union or traditional wire transfers. Similarly, it’s argued that Bitcoin may be viewed more as an asset class rather than payment medium for small retail transactions. In the same breathe, other analysts continue to view Bitcoin as a currency which can be used for retail transactions and as an electronic cash system.

Some analysts believe that Bitcoin might be eclipsed by another cryptocurrency (perhaps a coin not yet in existence) that features advanced capabilities. For instance, Ethereum grew in popularity because of its smart contracts feature. It’s possible that, in the near future, an innovative crypto could provide even more convenience, security and anonymity than the original peer-to-peer, blockchain-based network.

What are the top risks for Bitcoin holders?

Hacking and scams remain the top risk for Bitcoin holders. Exchanges that shut down or passwords stolen from devices can easily wipe out a person’s bitcoins. Moreover, governments and central banks from various countries are starting to impose limitations on the use of cryptocurrencies.

Digital coins clearly threaten the political and economic establishment, and the regulatory environment can quickly change with the stroke of a legislative pen. Banks and governments typically use familiar language in the media, such as the need to protect consumers from new risks.

We are hearing familiar talking points from politicians who are getting pressured from the banking lobby. It seems that the root cause of the status quo’s actions in 2017 is to protect fiat currencies and traditional financial interests. Competing digital coins represent a potential end to the government’s monopoly of the monetary system.