As we are only a week away from the new year, it is a good time to reflect on what went on with the global markets this year. Without a doubt the most fascinating instrument to watch in 2017 was the world’s most famous cryptocurrency, Bitcoin.
Bitcoin entered into 2017 at the modest value of around $990 and gained over 1000% of its value by now. It surpassed the level of $2000 in May, then steadily climbed to about mid-November. Then, for the past month and a half Bitcoin began a steep upwards movement and broke multiple records, stopping short of $20,000 last week. Even though this week Bitcoin has marked only losses, it is still remarkable what this instrument was able to achieve in just a year, especially towards the end.
Unlike regular currencies, Bitcoin and other cryptocurrencies such as Etherium and Litecoin are produced through a process called “mining” which uses computer power to make coins slowly over time. Because of this, they are not regulated or tied to any real-life asset, so their real value is unclear. As a trading instrument, they are influenced by traders’ speculation.
The steady growth of Bitcoin during the second half of 2017 was largely the result of increasing efforts to accept cryptocurrencies into the established family of securities. This was believed to be a measure to help solidify their status and make them more widely used, with more and more businesses accepting cryptocurrencies as payment. While exchanges such as CME markets are still moving ahead with offering Bitcoin futures, ever since they premiered last week the price of the cryptocurrency has tumbled down dramatically down to $13,130, previously reached at the beginning of December, which is a 30% drop from last week.
The drop in price is due to several reasons. For starters, another instrument which was recently separated from Bitcoin – Bitcoin cash, was suspended from trading on Coinbase due to suspected insider trading. In addition, the Bitcoin futures which launched days ago also opened way lower than expected, perhaps due to profit-taking as traders fixed their positions for the end of the year. Troubling news also came from South Korea where a digital currency exchange was targeted by hackers attracted to the high price of Bitcoin. Still, it is possible that the current decreases are simply a price correction after a few very hectic weeks for Bitcoin – after all, this is not uncommon with any currency.
While the price of Bitcoin was rising, experts were making the case against cryptocurrencies, from the viewpoint that since they are not regulated, it is difficult to gauge their real value. “Shark Tank” star and famous investor Kevin O’Leary recently spoke to CNBC about the trouble of using Bitcoin, stating it is impossible to use it as a currency, since between the time a payment is made and received, the value of the instrument can change a lot, making it unreliable for such transactions. However, he pointed out that as a speculative asset it has excellent potential for traders who can play with its value.
All in all, Bitcoin is still the most successful asset of 2017, since even with its recent losses it is worth more than 10 times what it used to be last year at this time. As long as you are prepared to view the instrument as a bit of a gamble, since it is so volatile and prone to quick changes, then you can definitely take advantage of it and make substantial profits.
