As bitcoin prices climb north of $8,000, with backers claiming the sky is the limit, critics are sounding the alarm and questioning its legitimacy.
Some crypto-backers say the digital currency will grow to over $20,000 price-wise in a few years. On the other side are high-profile critics such as Warren Buffett and Saudi Prince Alwaleed.
“It’s a mirage, basically,” Buffet has said of bitcoin. “The idea that it has some huge intrinsic value is a joke in my view.”
Meanwhile, Prince Alwaleed called bitcoin “Enron in the making,” in an Oct. 23 interview on CNBC. The crypto-currency is “ready to implode,” he added.
To be fair, other high-profile business and finance figures take a more positive view.
Virgin Atlantic CEO Richard Branson supports bitcoin, while computer industry legend Bill Gates approves of block chain, the underlying technology platform for digital currencies.
“Bitcoin is exciting because it shows how cheap it can be,” Gates said in a recent Bloomberg Television interview. “Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”
Bitcoin is a peer-to-peer digital currency system that relies on a block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet.
‘Going to go Higher’
Bitcoin promoters are quick to quash down critics of the cryptocurrency. They say the data tells the story, and it’s a winning one.
“There’s every indication bitcoin is going to go higher,” said Andrew Bard, a business professor who teaches a cryptocurrency class at Southeast Missouri State. “When you have 20 million out of eight billion people using it, there’s only enormous growth ahead.”
Like any masterfully marketed product or service, bitcoin benefits from great word of mouth, and that alone can carry the cryptocurrency for a while.
Square, the mobile payments company, is testing a feature that allows consumers to buy and sell bitcoin. That might encourage competitors to offer the same, Credit Suisse said in a research note Monday morning.
“I still think bitcoin’s value will grow because it remains a speculative investment with a lot of interest/buzz around it,” said Evan Tarver, investments analyst at FitSmallBusiness.com. “As long as the buzz is there and it gets talked about in the mainstream media, the higher its price will go.”
Take any criticism from high-profile sources with a grain of salt, say other currency and investing experts.
“There is very, very rarely anyone that speaks out against bitcoin that does not have a vested interest in its downfall,” said Luke Jordan, U.K.-based cryptocurrency expert and investor.
“Take Jamie Dimon of JP Morgan, for example. Dimon said bitcoin will blow up and that he would fire anyone investing in it.”
JP Morgan is part of the Ethereum Enterprise Alliance, and Ethereum is a competitor to bitcoin, “even if not on an exact basis,” Jordan explained.
Bitcoin — and block chain technology in general — represents a “huge shake-up” to the establishment, including governments, banks, and big technology companies, he added.
“This is why people like Saudi Prince Alwaleed and Vladimir Putin tend to speak out critically about bitcoin,” Jordan said. “They like the power they have and it would be much easier for them to maintain the status quo rather than giving some power back to the people.”
Can it Meet Demand?
There are some genuine investor concerns about bitcoin, such as whether it’s capable of meeting demand.
“But there can be no denying that it has laid the foundations for a new age of the internet,” Jordan said.
Being a finite resource will help bitcoin continue to grow in value, he said.
“The only thing that could stand in its way would be blanket banning (like Putin proposes) or heavy regulations designed to seriously harm its potential,” Jordan said.
That’s not holding bitcoin proponents back from expressing their enthusiasm for the digital currency.
“I’m holding on to my coins until the end of time,” Bard said. “We have a technology in front of us that allows us to send wealth anywhere in the world without oversight, without regulation and without government intervention.
“If that even gets 10 percent of the world excited, we’re in for one hell of a ride.”
Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms. Brian may be contacted at firstname.lastname@example.org.
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