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March 7, 2018

The Future of Bitcoin: What to expect

An overview of what could be on the horizon for Bitcoin in 2018

At the beginning of 2017 the top two cryptocurrencies bitcoin (BTC) and Ethereum (ETH) were valued at $963.06 and $8.26 respectively. Throughout 2017 bitcoin gained in value, ultimately reaching an all time high of approximately $19,500 on the 18th of December 2017. Ethereum reached an all time high of approximately $1,400 on the 14th of January 2018. This meant that the early adopters of cryptocurrencies had a good year with incredible returns on their initial investment.

By the time the majority of the globe caught onto cryptocurrencies, the prices had grown exponentially. However, soon after the peak of bitcoin in mid-December the price started dropping. Many who invested late in December have been making losses on their initial investment, with some selling their bitcoin at a loss, and some opting for the HODL strategy in case the markets turn. We’re going to try tackle some of the bitcoin questions that are on everyone’s mind.

Is it too late to invest in Bitcoin?

Many people are wondering if it’s too late to invest in bitcoin. You’ve probably heard more than a few people tell you “If only I had invested earlier, I could have been millionaire by now.” Right now the price of bitcoin is $6,803.19 and the price of Ethereum is $658.89, a significant decline from the late 2017 peaks. This week, all of the cryptocurrency coin value graphs have been showing large, red declines which has caused panic-stricken investors to ask whether the bitcoin was all it was promised to be. If you had bought bitcoin in December, your investment would have decreased in value from $19,500 to $6,800 in less than 2 months. A scary thought. But such is the nature of cryptocurrencies, they are unstable in nature and only mainstream usage and greater understanding from the public will stabilize its price.

Before we get alarmed and make assumptions, let us look to history to make educated guesses about the direction of the price of bitcoin and other cryptocurrencies. In the past 3 years, the bitcoin price has peaked at the end of the year, followed by a correction in the following January to February period. Historically, this is then followed by strong resurgence in price. Although the price of bitcoin and most altcoins is volatile, with large upward and downward shifts, the general trend is an upward trend throughout the year. Take a look at the bitcoin graphs from the past 3 years below:

bitcoin value 2015

Bitcoin price graph for the year 2015

bitcoin value rise 2016

Bitcoin price graph for 2016

bitcoin price 2017 bubble?

Bitcoin price graph for 2017 (source: 99bitcoins.com)

 

Bitcoin prices looking at the January and February periods for the past 3 years:

beginning 2015 bitcoin prices

Early 2015 bitcoin prices

early 2016 bitcoin prices

Early 2016 bitcoin prices

bitcoin price beginning of 2017

Early 2017 bitcoin prices (source: 99bitcoins.com)

 

If you look at those January dips, they were significant at the time but when you look at the annual view, the price of bitcoin always has an upward trend.

What influences cryptocurrency prices?

Cryptocurrency prices are heavily influenced by news and speculation. People’s fear of an uncertain market can cause volatility in cryptocurrencies prices, especially when mass selling occurs. In January alone there have been many major news events and regulation crack downs from governments, especially in Asia (South Korea & China) which have resulted in what many call a price correction.  Subpoenas issued to major digital currency Tether (USDT) and its linked exchange Bitfinex have not helped increase people’s distrust in digital currencies. Cryptocurrency ponzi schemes which have led to people losing their money have also not helped garner trust in cryptocurrencies but such predatory schemes are bound to pop up in every new industry. Additionally, due to “volatility and risk involved” some major banks around the world have either banned or increased the transaction costs of purchasing cryptocurrencies using credit cards. Even Facebook is regulating the use of cryptocurrency ads, albeit just the ones that are not reputable.

There is currently a tug of war going on between supporters of cryptocurrency and those who are against it. One minute Warren Buffett comes out with a statement against investing in cryptocurrency, the next minute Mark Zuckerberg announces that Facebook is considering launching their own cryptocurrency. There is plenty of information out there and it all has an effect on whether certain people decide to buy or sell. If authoritative figures such as governments, banks and prominent business people are all against cryptocurrency, then the public has cause for concern about the future of its value.

But it’s not all bad news. Soon after people started selling their digital currencies in South Korea in anticipation of the government banning cryptocurrency trading, the South Korean government announced that it would be tightening regulations instead of banning trading completely. Making it so only real name bank accounts could be used for trading to limit the potential for money laundering and other crimes.

In China, Alibaba, a major Chinese tech company has launched a cryptocurrency mining platform despite Chinese government cryptocurrency regulation concerns. Earlier in January, prominent cryptocurrency entrepreneur Bobby Lee, CEO and co-founder of YourBitcoinCompany (BTCC) said in an interview with CNBC that it was only a matter of time before China lifts crypto exchange bans.

The Australian government decided to end the double taxation of cryptocurrencies following pressure from technology advocates. When the bill is passed as of 1 July 2018, cryptocurrencies shall be treated as foreign currency.

The tightening of restrictions is driven by traditional financial institutions who may be threatened by a rise in popularity of a decentralised payment system. Governments are currently in the process of figuring out how best to regulate and classify cryptocurrencies to prevent crime and how to tax cryptocurrency earnings. This a good time for people to learn about cryptocurrencies and the underlying blockchain technology before investing in order to avoid overreacting to every piece of negative press about digital currencies.

When should you consider buying and selling bitcoin and other cryptocurrencies?

Just as in forex trading, the logic would be to buy when the markets are down because the price of the coins is much lower and then sell when the price is high in order to make a profit. Using patterns from the past few years, historically bitcoin prices are down during the Jan-Feb period and have gone on to rise to reach peak values by December. If you’re looking to buy coins, February may be the time to do so.

We have no idea whether the increase in 2018 will surpass the previous peak of around $19,500, but some industry experts are predicting that the price of bitcoin could reach as high as $100,000 this year. We can only hope that governments find ways to embrace blockchain technology, while still protecting their citizens from crime.

Disclaimer: This article should not be taken as financial advice. Never invest what you can’t afford to lose as the cryptocurrency market is extremely volatile. Always research as much as possible before buying any coin.