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Where to now for the price of Bitcoin?

by , 14 July 2014

Since its inception, Bitcoin has scaled the dizzy heights of over $1,100 to come flying back down to only a few hundred dollars. Over the last couple of months, the Bitcoin price has consolidated somewhat. And it looks like this is the start of Bitcoin's move upwards. Let's take a closer look at where the price of Bitcoin looks likely to go…

Bitcoin is similar to the Internet back in the early 90s

Marc Andressen, a venture capitalist who brought the Netscape web browser to the market, believes this is the case. His browser helped make the Internet what it is today. In 1994, Netscape helped to accelerate wide use of the Internet.

Now 20 years later, who could imagine life without the Internet?

You can also compare Bitcoin with the likes of social media sites like Facebook, David Zeiler in Money Morning US.

Ten years ago, it was a social network used by a few thousand students at Harvard University. Now Facebook boasts over 1.2 billion active users. And the company has a market capitalisation of around $172 billion.

Facebook moved from a new technology to widespread use in a matter of ten years.

Bitcoin is set to benefit from the ‘network effect’

Yes, the market for Bitcoin is still small. This makes the rate at which people use the digital currency important. And this is all down to the ‘network effect’.

Think about it this way, back in the 1990s, email wasn’t a popular mode of communication. Think now how many people use email. Once a critical mass of people use a technology, it becomes a necessity.

And the number of people using Bitcoin will have a critical effect on its growth. The more people that use it, the more people it will attract.

Bitcoin is already appealing to a wider audience

This appears to have already started.

For example, across the world a large number of Bitcoin ATMs have popped up. These allow anyone with a virtual wallet to exchange their fiat currency for Bitcoin. Not only that, many US corporations now accept Bitcoin as a form of payment.

And the more people that use Bitcoin, the more people will start using it. And this will drive the price of Bitcoin higher.

Could Bitcoin reach $50,000 a piece?

An angel investor for digital currency start-ups, Michael Terpin, believes the price of Bitcoin will rise to $50,000. That’s 77 times its current price.

In Barron’s a couple of weeks ago, Mr Terpin said that even at this early stage in its life, Bitcoin has the “potential to disrupt large sectors of the financial, banking, e-commerce and securities markets in ways that could create wealth across its various components in excess of $1 trillion”.

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He believes that despite the risks involved with investing in Bitcoin, it makes sense to buy Bitcoin for “the high-risk portion of a balanced portfolio”.

Getting in now means riding the Bitcoin learning curve higher as it increases in popularity. And the price of Bitcoin should rise with that.

So there you have it, where the price of Bitcoin could be going.

Where to now for the price of Bitcoin?
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