Bitcoin has come a long way touching over USD 50,000 since its inception in 2009, when individual coins ranged in value from USD 0.0008 to USD 0.08 in its first year alone.
Today, Bitcoin has reached an all-time record high in recent months, supported by the adoption of big players like PayPal, Mastercard, Elon Musk’s Tesla, BNY Mellon and the influx of institutional investors, which has brought some popularity and legitimacy to Bitcoin.
Bitcoin has also managed to catch the eyes of retail investors and general public. Last month, the currency was given a massive push when the US office of the Comptroller of the Currency stated that national banks can use blockchain network and stablecoins for payments, further legitimizing the digital currency.
Speculations around Bitcoin
However, the intense and unpredictable nature in its value still seem to be the norm, Michael Hartnett, the chief investment strategist of Bank of America, warned that the current run of the cryptocurrency market could be “the mother of all bubbles”.
Bitcoin has surged more than 1000% since the beginning of 2019. Hartnett believes that this is a bigger and faster surge than popular bubbles such as the dot-com bubble of the late ’90s or the housing prices before 2008.
Furthermore, the Financial Conduct Authority of the UK issued a statement citing the high risks associated with cryptocurrency investments. The Financial Conduct Authority said “If consumers invest in these types of product, they should be prepared to lose all their money”.
John Hunter, The business development director of Zedra said, “The news is not all bad”.
He further stated “Last month JP Morgan’s prediction proved to point the right way ahead based on the last days’ developments.”
JP Morgan, the banking mogul projected that the price of Bitcoin could hit $146,000 as more big corporations embrace it as an alternative to gold. Just because Bitcoin holds potentially a risky investment, doesn’t mean that there isn’t any interest or demand.
John Hunter further noted, “For long-term investors who went in early or when Bitcoin had a low valuation, Bitcoin can be a lucrative investment. Experienced investors who have significant capital available to invest and who can afford to take big risks in the hope of big rewards are all enjoying the Bitcoin ride”.
Risks associated with Bitcoin and Escrow Agreement’s role in it
Overall, investors investing in Bitcoin are aware of the risks, and they understand that if they have the potential to make a fortune, they might as well lose it. While this is widely accepted, investors still want to protect themselves when buying or cashing out Bitcoin.
Bitcoin transactions are recorded in ledgers but the relatively new nature of cryptocurrencies, the fact that all transactions are digital, and the lack of regulatory oversight all are part of it. Essentially, the investors investing in Bitcoin or withdrawing their investment into fiat money want to protect their interests. The point at which fiat cash and a cryptocurrency meet can feel like a natural weak point.
And so, the escrow agreements are more and more popular for Bitcoin transactions as they present a win-win situation for all parties.
John further explains that traditional escrow agreements are used to protect the interests of the seller and the vendor, and it is the same for Bitcoin transactions.
Escrow becomes especially important when the value of Bitcoin increases substantially and more cash needs to be deposited to buy Bitcoin, or there is a liquidation that turns into a significant amount of fiat money. Escrow is the ideal solution that protects both parties.
The functioning of escrow agreement
John further noted, “An escrow agreement is drafted and contains the terms of the transactions and the conditions that must be met by all the parties involved. Then, alongside leading industry partners, ZEDRA, acting as escrow agent, oversee the transaction for the sale and purchase of Bitcoin.
Proof of fiat funds and verification of the Bitcoin take place and once the terms of the escrow agreement are met, the Bitcoin is then transferred to the buyer and the funds are transferred to the seller. Bitcoin can either be sent via internet connected hot wallets, or it can be transferred using a cold storage custody platform”.