The Bitcoin price currently stands at Canadian $13,845 on the CEX trading platform. It has increased in value by almost 1,000 percent since the beginning of the year which is an incredible feat. Economists are still trying to uncover the reasons behind its accelerating growth. The nature of the cryptocurrency is volatile and it could still be in a price bubble that is about to burst.

Rampant Fraud

Since the transactions made using Bitcoin are anonymous there is no way to track the movements. The exchange is not regulated by any government body either which is why there is no check and balance. It is said because the information is encrypted the Bitcoins are being used to take part in illicit exchanges. Whereas with the banks there are high regulations and bets are made on stocks, bonds, currencies and other trading commodities every day. Cryptocurrency can be manipulated like any other currency by making a large number of bets.

Valuation

A commodity is value through the past, present, future earnings from stocks as well as their dividends and sales. Similarly for a currency you look at its value in comparison with other currencies. Bonds are valued using the ability of the issuer to return the value to investors. But in the case of cryptocurrencies there is no benchmark since it has no earnings or any regulated exchange through which the market bids can be gathered. There isn’t a price or earnings ratio either. The market is created by computers linked all around the world but there is no transparent method for price discovery. The users bid on Bitcoin with the belief that it is worth something which is why there continues to be a demand for it even though it is not traditionally used for buying and selling.

Next World Currency

Bitcoin could be the future universal currency since it is traded worldwide. It can help the world move towards a cashless and bankless society. But to help the currency become accepted all over, governments and banks need to stop interfering in the currency market and there should be global agreement stating the rules of trading and valuation of the currency.

Financial pundits have predicted that the Bitcoin will continue to rise in value and they may or may not have a financial interest in the cryptocurrency but the thing that needs to be worried about is whether it is due to a price bubble that’s waiting to burst.

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