Bitcoin is soaring past $11,000, two weeks after a spectacular crash saw it fall below $6000. The flagship cryptocurrency is now trading at an average $11,468 on major exchanges and rising. This is a nearly 100% recovery in two weeks, once again proving its highly volatile nature.
Critics didn’t miss a chance to take a swipe at bitcoin in what has been a very turbulent period over the last one year. Mark Carney, Governor, Bank of England said bitcoin “had pretty much failed” both a store of value and as a currency.
“It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” he told students at Regent’s University, London.
Carney does not however dispute the underlying blockchain network which he reckons can be used for many applications. Bitcoin is a decentralised ledger kept in thousands of computers across the world. By so doing, it eliminates the need for third parties like banks in transactions. No one has control over the network.
In December, bitcoin reached an all time high of $20,000 before hovering around $14,000 for a good part of 2018. The crash in February was precipitated by a number of events including harsh regulations from China and banks rejecting bitcoin purchases.
Governments have increasingly grown weary of bitcoin’s growing popularity which directly challenges the traditional financial infrastructure.
Bitcoin has for example gained more than 900% in value over the last one year as more people jostle to get a piece of the fastest growing asset. There is however the genuine need to protect the less knowledgeable from the sometimes damaging volatility and from scams that always accompany such a new sector.
Huge Crashes Not New
Huge plunges have been the hallmark of the cryptocurrency since its inception in 2009. The most recent crash compares very well in scale with the one it experienced in 2011 when it lost over 90% of it value. A subsequent dip in 2013 saw it lose more than 70% of its value.
Sceptics have long been warning of a bubble burst although this has largely been way off the mark.
Based on past behaviour, bitcoin could hit new highs as early as July. Bitcoin’s recovery after the severe crash is giving investors some level of confidence about its resilience and more are expected to pump in money in the coming days and months.
Bitcoin’s scalability issues and high transaction fees makes it unfit for everyday use. The cryptocurrency is capped at just 21 million coins. With each unit exchanging for over $11,000 at the moment, it is obviously unsuitable for micro-transactions.
Several forks based on the bitcoin network have been emerging with better properties like faster speeds, low transaction costs and clear use case scenarios. If a clear winner emerges, it could check bitcoin’s rise.
Other cryptocurrencies are making impressive recoveries too. Altcoins were particularly hit hard during the crash. Their price movements are more or less correlated with bitcoin.