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Screenshot of a breaking news alert e-mail from Q2 2017
While Bitcoin’s price is rising swiftly as 2017 draws to an end, many are now talking about the possibility of Bitcoin going to $100,000 in the future. However, as such prediction may be too far to consider, there are some major issues associated with the potentiality of the digital currency going “through the roof” in the foreseeable future.
First, the energy that it takes to mine one Bitcoin is enormous, with current estimations that miners are now using the electricity that Denmark is using for the whole country to mine Bitcoins. Seeking Alpha observed the following:
“Because the market for Bitcoin mining comes close to being a perfect competition, miners have incentives to increase their capacity (and energy use) up to the point where it equals the revenue from mining. This is an unintended consequence which would lead to extreme electricity consumption if Bitcoin would rise to levels of $100,000 or higher.”
Yet another weakness of a $100,000 Bitcoin is the bitcoin transactions themselves. Since the mining community “agrees” on these transactions and “solves” them, the processing power used to the production of Bitcoin gives the underlying value to the cryptocurrency. These transactions will become increasingly more complex with the increasing value of Bitcoin.
Another problem can be eventual liquidity problem that Bitcoin may face. The staggering number $100,000 sounds too good to be true, but at what cost? Once the cryptocurrency hits such a level, and with the certain corrections and saturation of the market, liquidity can become an issue, meaning that if there are a lot of sells, there won’t be the same number of buys, just because that is the price level of “expectation”.