As the price levels, expect more customers to want to pay in bitcoin and make sure that you have the infrastructure to accept those payments.and more »
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Joel Comm is an internet entrepreneur, NY Times best-selling author, live video marketing expert and keynote speaker.
(Disclosure: Author holds investments in Bitcoin.)
If there’s one thing everyone knows about Bitcoin, it’s that its dollar price has been flying faster and higher than Elon Musk’s old Roadster. Someone who bought a single Bitcoin at the start of 2017, when the token was worth less than a thousand dollars, would have been sitting on $20,000 when the currency peaked before the end of that year. That rise has been enough to attract the attention of the mainstream press, which brought in commercial investors who pushed the price higher still. But the ups and downs have made it challenging for businesses to adopt the new digital currency for transactions.
If you were to ask new investors what exactly bitcoin is and how it works, you’d be likely to get little more than a shrug. Bitcoin’s early users were libertarian geeks keen to create a currency free of government control and designed for an international digital environment. The investors who have swapped their greenbacks for unreadable hashes since Bitcoin’s dramatic rise are much less aware of the workings of the blockchain, of Bitcoin’s block size limits or the way that mining works. Like investors in a biotech company with no idea how that company edits strands of DNA, they don’t care much. As long as the price keeps rising, they’ll be happy.
But, the price hasn’t kept rising. From mid-December to early February, the dollar price of Bitcoin fell by roughly two-thirds, dropping from just under $20,000 to below $6,000 before rising again. For anyone who joined at the peak, the fall has been sobering. One of the most popular posts on Reddit’s Bitcoin forum during the fall was the number of the National Suicide Hotline. After weeks of describing Bitcoin billionaires and discussing celebrity ICOs, the press was suddenly asking whether the Bitcoin bubble had burst.
For veteran Bitcoin enthusiasts, that question would have been moot. Even during its massive fall, Bitcoin only dropped to the level it had reached in November 2017. The loss of ten weeks of gains really shouldn’t have been too much to worry about. And what was left wasn’t just an asset that had still made a profit for anyone who invested before last November but something that had never been designed to function an investment vehicle. Bitcoin wasn’t meant to be an asset that would continue to rise in value like a rocket. It was supposed to keep a steady, predictable value so that buyers and sellers could use it to set prices and exchange goods and services.
As long as investors were pouring into Bitcoin to reap the benefits of the rise, then fleeing in panic when the dollar value fell, Bitcoin had little chance of being able to function in the way that it was intended. Its price has been too volatile, and competition for space in blocks has been too tight to keep transaction costs at an affordable level. So, if Bitcoin’s recent fall had the effect of frightening investors away, that might be no bad thing. To work as a currency, Bitcoin needs lower volatility than the movements generated by investors. It’s unlikely to create that low volatility while people are still using it as a get-rich-quick scheme.
That scaring away of investors may well be exactly what’s taking place now. Like a roller coaster that runs so fast it frightens away all but the most dedicated of amusement enthusiasts, Bitcoin’s sharp swings now seems to be bringing the coin back to its original purpose. Bitcoin trading volumes have always been as volatile as its fiat price but the trend of conversion from Bitcoin to fiat has shown a clear decline since mid-December. The current movement in Bitcoin price is now more likely to be driven by cryptocurrency enthusiasts looking for solutions to Bitcoin’s high transaction costs and limited scaling than to be driven by investors looking for quick profits.
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