Bitcoin，one of the many digital currencies but the most popular cryptocurrency in the world, has taken the market by storm. Since January 2017, the price of a single bitcoin has seen a dramatic increase of over 1000 percent. The digital currency recently topped $11000, however, slumped nearly 20 percent stoking fears that the bubble could burst soon.
Bitcoin unlike traditional currency, is decentralized not regulated by a central banks or government. Created in 2008 by Satoshi Nakamoto, the digital currency runs on a blockchain technology that records all the transactions. However, it is not known who Satoshi Nakamoto or was. Bitcoins are stored in digital wallets and traded through exchanges. A maximum 21 million bitcoins can be created. So far, about 16.7 million bitcoins have been released into the system. Governments are under tremendous pressure how to regulate bitcoin. Despite the hype, bitcoin is not widely accepted.
Though investors believe that digital currency is the future, however, critics have said make no mistake, bitcoin is a bubble. Over the years, Bitcoin’s situation has changed dramatically. In 2012, the value of a bitcoin was less than $10 but had risen to $750 a year ago and surpassed $11,000 for the first time on November 29 2017. The rapid growth in the value of a global cryptocurrency is indigestible. Even the banks and financial regulators are thinking how to respond. The Deputy Governor of a Bank of England, Sir Jon Cunliffe warned "investors should do their homework" on Bitcoin. Many financial experts believe bitcoin will eventually blow up. Some even claim that bitcoin is worse than Dutch tulip craze of 1636/7.
The virtual currency has been subject to risks and a lack of regulation putting its credibility under serious threat. The risk can be gauged from the fact from cryptocurrency Tether that recently reported a $31million theft, denting the image of cryptocurrencies and also plummeting bitcoin’s prices. Bitcoin has also links to money laundering and might be used for criminal activities such as human trafficking and for terror funding.
Overall, cryptocurrency is baffling. In short, one needs to understand the phenomenon of buying, trading and storing bitcoins before jumping to any investment. It remains to be seen how in coming years the price of a bitcoin will impact on the economy as a whole or the bubble is going to burst, only time will tell.