Bitcoin boomed to almost $20,000 ($19,783.16) and has now busted to $3,334 with no indication of what comes next. Despite such a drop, in countries with troubled currencies like Turkey;
“Since October, as bitcoin suffered record losses, trading volumes on Turkish cryptocurrency exchanges increased by 37 percent.” – Slate
Even with an 83% drop in price, Bitcoin is seen as attractive in countries where the currencies are crashing, and where governments are losing credibility. Citizens are choosing to put at least some of their assets into cryptocurrencies that are outside the control of central authorities. Cryptocurrencies are recognized as risky, but they are considered less risky than conventional, and in some cases dysfunctional, institutions. Bitcoin is relatively young, and is innovative enough that its true value hasn’t been established. Currency crises like these help sort out inherent value. One consequence of the Bitcoin price crash may drive the prices down further. One estimate prices the cost of producing a Bitcoin at $5,000. With the price below that, there’s much less incentive to create more of them, thereby limiting supply at the same time that demand is increasing. The balance point hasn’t been found, but on balance, people are finding other reasons to buy them.
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