For a digital asset that began its life in 2009 and began the year trading around $1,000, the fact that Bitcoin is set to break the $10,000 ceiling is certainly impressive. Other than the many celebrations that will surely follow this milestone, interspersed with a mix of investor remorse or Casandra’s calling this the digital twin of Tulip Mania, many questions remain about the advantages and disadvantages of digital assets. Crypto numismatists who have been collecting Bitcoins are surely happy these days.
Investors and early adopters like these assets because they are untethered from the regular economy where fiat currencies, more traditional forms of exchange and value transfer reign the day. It is not without a sense of irony that part of Bitcoin’s rapid ascent this year is owed to the fact that traditional economy players are now paying close attention to this asset class. While some of this attention remains negative, profoundly confused or ambivalent, such as China and South Korea banning initial coin offerings (ICOs), along with ongoing attempts to regulate a fundamentally decentralized platform. Add to these negative views Jamie Dimon’s full-throated attack on Bitcoin including the threat of terminating any JP Morgan employee caught trading in the digital asset, and the unwelcome news levied against digital assets continues to mount. With each puff of hot air, however, as if in open revolt to traditional economic order, Bitcoin continues to defy the odds taking investors to stratospheric heights where the air begins to thin and bubbles traditionally deflate.
And yet the appreciation in Bitcoin’s value is buoyed in no small measure by serious institutions, like the CME Group, which is going long on the digital asset class. CME’s announcement that they will soon offer futures trading on Bitcoin marks a serious development and coming of age for digital assets. Herein lies the irony for an asset that is completely untethered and ungoverned by traditionally centralized structures. The fact that Bitcoin is gaining its greatest appreciation the more it plugs into the traditional economy, says a lot about its strengths, weaknesses and limitations. Against this backdrop, questions remain as to whether Bitcoin is an asset, currency or a collectible. Perhaps more permanently, 2017 may very well mark the year when digital assets, in the otherwise fleeting world of investor interest, gained their permanence.