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Bitcoin price soars, cryptocurrency market remains volatile

The value of bitcoin currency nears $17,000. PHOTO COURTESY PIXABAY

In recent weeks, Bitcoin’s value has reached record heights: The price of an individual bitcoin rose from $11,364 on Dec. 4 to $16,222 on Thursday — its peak.

At press time, a single bitcoin was worth $14,448.

Bitcoin is just one of over a thousand cryptocurrencies that exists across the world. Cryptocurrencies are digital currency created and stored electronically in blockchains, according to The Economic Times. Bitcoin, the most well-known of the cryptocurrencies, was developed in 2009 and has been gaining popularity and growing in price ever since.

Dan Terry, marketing associate at Chainstone Labs, a Boston-based company that works with cryptocurrency and blockchain, said Bitcoin’s record breaking price hike is interesting but not ground-breaking.

“The price increase is a cool reflection of its growing value, but it’s not a big deal right now,” Terry said. “It’s pretty volatile, it could hit $100,000 in a few months or drop to zero.”

Though bitcoin fluctuates in price every minute, many people are convinced investing and trading bitcoin will make them rich quickly.

Mark Williams, a professor in the Questrom School of Business finance department, specializes in risk management and said he has been focusing on discussions about cryptocurrencies in recent years.

“It’s been a speculative mania,” Williams said. “Lots of people are investing money in new technology they’re not familiar with.”

What makes digitized currency like Bitcoin possible is the blockchain technology, which is a way cryptocurrency is recorded and valued. Blockchain is used to store and interact with the data relating to Bitcoin. With blockchain, users can look at increases or decreases in value and how prices have changed.

“Blockchain is like railroad tracks and Bitcoin is the engine that sits on the tracks,” Williams said. “Blockchain technology [needs] lots of tracks and depending on the tracks you need to have a certain engine of cryptocurrencies.”

The growing popularity of blockchain and Bitcoin have created a wrinkle in the financial system as a whole, Williams said. Blockchain changed money flow and allowed for transactions to occur without the need for banks. As people use banks less and bitcoin more, banks are beginning to feel threatened, criticizing the cryptocurrency trend.

Compared to traditional banking systems, Terry said, blockchain is safer and often more efficient.

“This network is a lot harder to hack than a centralized ledger, like a bank and it also eliminates the need for a lot of intermediaries, reducing the settlement time and the cost of transactions,” Terry said. “The higher price is cool, but to me, this is all about how we can do things better, and some cryptocurrencies simply do money better.”

Terry added that Bitcoin offers an alternative to strictly regimented financial behavior fostered by banks.

“It gives us the same sort of freedom with our financial expression that we have with our artistic or religious expression,” Terry said, paraphrasing the words of Erik Voorhees, CEO of ShapeShift.io, a conversion company for Bitcoin.

On campus, the Questrom FinTech Club is getting involved with the system of blockchain and how to “mine” bitcoin, a term which bitcoin aficionados refer to collecting and trading the currency. The club and Williams are working to get more students educated on cryptocurrency and how blockchain works.

“As I study the economy and its ups and downs, I’m curious to know how bitcoin will affect it,” said Sadie Safrit, a freshman studying economics in the College of Arts and Sciences. Safrit said bitcoin is becoming a popular subject of discussion in finance and economic lectures.

Between the surges and declines in prices, Bitcoin’s future is uncertain. Though people will continue to invest in Bitcoin despite its price inconsistency, nobody can be sure if it will ultimately have a negative effect on cryptocurrency, Williams said.

“There’s no question that Bitcoin is in a bubble, the question is when will it pop,” Williams said. “The hope is that when the bubble pops that it’s not going to have a negative effect on cryptocurrencies.”

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