The most popular cryptocurrency in the world Bitcoin is now worth more than $2,000 per coin according to the bitcoin exchanges including Coinbase and Kraken. According to this valuation, the total market cap of bitcoin and the number of coins in circulation stand at $32.92 billion.
In 2013, Bitcoin broke the $1,000 valuation mark but a combination of factors made the currency drop in value one more time. One of these factors was the implosion of then-top exchange the Mount Gox. The support from the financial institutions and the blockchain-based services made Bitcoin reach the $1,000 mark yet again at the end of 2016. The new stability regulation by China also hiked the value and since the start of 2017, it is continuously on the rise.
Over the past week alone, the price of a Bitcoin has risen about 12% which was around $1,343 at the end of April.
It is not only the Bitcoin which is continuously on the rise. Another cryptocurrency called Ripple which aims to be a settlement protocol for major banks has surged up to 1000% within a month’s time. Now, it is the second most valuable cryptocurrency (behind Bitcoin) in circulation.
Ethereum, a cryptocurrency designed to work as a blockchain-based computing platform for developers, is now being traded at $130 per coin. It represents a little more than 2x increase in the previous month.
Because of the increase in the value of other cryptocurrencies, Bitcoin is no longer the majority constituent of the market. A few months ago, it held 80% of the market but now, it represents 47% of the total of cryptocurrencies.
Why are other cryptocurrencies performing better than the Bitcoin? According to some people, it is because of the scaling issue which is faced by Bitcoin. The network has actually grown so large that it finds trouble in quickly confirming the transactions unless a hefty fee is attached for minors. Although SegWit or Bitcoin Unlimited seem to be a solution for the problem but the most powerful minors haven’t found a solution for the problem.
The 10x increase in a month seems to be an obvious sign of a bubble but it is slightly different with cryptocurrencies because no one actually knows their true worth. They don’t work like companies which have obvious assets and revenues as that helps in assessing a predictable valuation. So one can easily say that a market cap of $70B for a cryptocurrency is insane because there is no tangible value behind it.
Contrarily, if one or more of these cryptocurrencies replace a global reserve of gold, $70B holds no importance at all. Do you know what is the value of the gold mined around the globe? It is worth something around $8.2 trillion USD which means that all the cryptocurrencies combined cannot match even 1% of the total gold reserves in the world. Similarly, around $1.5 trillion USD are in circulation and this implies that cryptocurrencies are still worth less than 5% of that.
The currency is still at an unsure position at $2,000 but many pundits believe that it is going to hit $10,000 (or even more). In order to achieve this, the community needs to work on resolving the scaling issue as this will give confidence to the investors about the infrastructure of the Bitcoin.
- bitcoin soars: moneyweek