2017 has undoubtedly been Bitcoin’s year, with the world’s best-known virtual currency generating more press coverage and controversy — and consuming more fiat value — than ever before. The wild ride saw both an unprecedented 20-fold price increase from the start of 2017, but also an ideological split. All the attention resulted in many newcomers (and former naysayers) joining the crypto industry. But where does it all go from here?
Crypto watchers predict BTC’s price to keep fluctuating in 2018. Throughout the world, the cryptocurrency industry has broadened way beyond just bitcoin as well, due to exponentially high returns on investment.
Some cryptocurrency-friendly investment analysts have predicted the BTC price in 2018 will reach somewhere between $25,000 to $40,000 USD. However, wilder proponents have valued the currency to soar as high as $1,000,000. Crypto influencer John McAfee envisions BTC price to reach between $500,000 and $2 million by 2020. Or else.
Last time virtual currency saw such a price surge was in 2013 when BTC grew 85-fold. However, the following year its market collapsed. It was only in 2017 that it stepped back into the limelight, with big financial players supporting bitcoin and its entry into the mainstream.
2017 was also a good year for crypto exchanges around the world. According to CoinMarketCap, the overall crypto market cap has surpassed half a trillion dollars. But despite its 20x price gain, BTC actually finishes the year with only a 38 percent share of total crypto market value — its lowest level ever.
The coming months will definitely be crucial for cryptocurrency and its advocates. Bitcoin’s entry into traditional markets like Cboe and CME with Bitcoin Futures is a plus point.
However, at the same time, the U.S. Securities and Exchange Commission – that regulates the securities industry, warned investors of “substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”
Future prosperity depends on several factors, of which the key is the regulatory environment around the world. Moreover, the G20 summit in April 2018 will also play an important role in sketching the roadmap.
Governments have long been concerned about bitcoin’s role in tax evasion, money laundering and organized crime. Expect further KYC identification requirements and greater interest into users’ everyday financial affairs as a result.
Another factor that could decide bitcoin’s fate is its transaction fee, which has gone up in much the same style as the BTC price. The price oscillation also has caused many investors to stop trading in BTC — and many merchants to stop accepting it.
To avoid the regular accusations of excess power consumption, many bitcoin miners are moving towards green energy that serves the purpose — an environment-friendly crypto ecosystem. The recent move by Japanese Internet leader GMO, that plans to use available renewable energy to run its mining operation, could be the start of a wider trend.
There are many things that have to go in the right direction for the growth of the crypto industry. One of them is security. Every new hack or massive exchange theft, from Mt. Gox in 2014 to Bitfinex in 2016, erodes confidence and invites mainstream media mockery.
Security is the concern that haunts the crypto industry. Bitcoin’s underpinning blockchain technology itself is (so far) “un-tamperable” and secure. However, exchanges and wallets are not, and are a favorite target of cybercriminals.
Bitcoin is definitely at crossroads, with top mainstream financial leaders and institutions divided into three parts; one that advocates Bitcoin, the second that opposes the controversial cryptocurrency, and a third representing the grey area that’s still unsure of the future.
Bitcoin evangelist Abigail Johnson, who is also CEO of Fidelity, said she is a believer and stands in support of virtual currencies. At the 2017 Consensus conference she said: “I’m one of the few standing before you today from a large financial services company that has not given up on digital currencies.” Fidelity, one of the world’s biggest asset management firms, also mines bitcoin and ethereum.
On the other hand, Jamie Dimon, CEO of JPMorgan Chase, spent most of his year insulting bitcoiners, including his own daughter. Surprisingly though, Dimon is not entirely against virtual currencies and blockchain technology — on several occasions, he has promoted Ethereum — leading some to predict 2018 will be the year of ETH instead of BTC.
Or Ripple. The blockchain-like asset exchange network, whose original concept actually pre-dates Bitcoin, made a surprise run in the last month of 2017, its native XRP token going from 24 cents to over $2 in December alone. Ripple has long been more popular in Asia than elsewhere, and that’s where most of the action is these days — so we wouldn’t be surprised if that continued.
Two alternative currencies aren’t hiding their desire to replace BTC as spending money. Litecoin has for years promoted itself as “silver to bitcoin’s gold”, or even a backup currency should bitcoin fail. And people are starting to listen.
Another challenge comes from within Bitcoin itself — August 2017’s block size schism created Bitcoin Cash (BCH), a currency with a shared history that functions like bitcoin (from 2009-2017) in nearly every way, except for larger transaction blocks.
Many have staked their reputations and even BTC fortunes on BCH, calling it the “real bitcoin” and “closer to Satoshi Nakamoto’s original vision”. Large companies continue to back it. At the very least, expect more mainstream confusion in 2018 over the “two Bitcoins” and a ramped-up marketing effort to raise BCH’s profile.
Many commentators believe BTC to be equivalent to digital gold, rather than spending money — which could impact the way it’s used and valued.
Venture capitalist Peter Thiel said: “People are… maybe underestimating bitcoin specifically because it is like a reserve form of money, it’s like gold, and it’s just a store of value.”
The reason for its popularity over other virtual currencies is because it is the first cryptocurrency — but that doesn’t mean it’s the easiest to use, or the most practical. Actual spending of bitcoin could even slow in 2018, as holders hoard it and keep it in secure vaults instead.
Bitcoin may also experience a continuous rise in price due to its payout rate, where miners are rewarded for assisting transactions on the network. Bitcoin is limited to 21 million coins maximum, and nothing can spike the price of a famous asset like scarcity.
Bitcoin could yet fail, even some of its advocates believe, if governments decide to outlaw the cryptocurrency. An outright ban seems as unlikely as it is crude at this point, but governments can still barely hide their displeasure at the thought of losing control of the money their citizens use.
Expect central bank figures to continue warning about price volatility and non-official status. Those massive price swings traders love could help convince everyday people that bitcoin is just too risky. Governments will do nothing to discourage this view — and possibly exacerbate the hassle of owning crypto with capital gains taxes, reporting requirements, and excessive scrutiny.
Note that China, long considered the country most likely to “ban bitcoin”, still has not banned bitcoin. However it’s virtually impossible to do anything with bitcoin in China other than mine it or trade it under the table, since most on/off-ramps and merchant processors have been locked out.
As a result, much of China’s bitcoin business talent is busy moving offshore. Expect interesting things to happen as they begin to target the international market with the ideas and techniques they used so effectively in their native land.
Frederic Oudea – SocGen CEO, said the government will clamp down on all BTC trades. He said: “The benefit so far is it provides anonymity to the people who are making the transactions. I can’t see a future of this when I see the attention paid by all governments and regulators on anti-money laundering, on anti-tax evasion, on anti-terrorism financing. The anonymity of the transaction is a problem I think which would put pressure on Bitcoin.”
It’s already hard to use bitcoin anonymously and blockchain forensic techniques get ever-better at unmasking users. And it’s virtually impossible to convert it to/from local fiat currency, unless it’s in alleyways with briefcases full of paper cash. Expect even that to get harder as next year rolls by.
2016 was the year we endured the “not bitcoin, but its underlying blockchain technology” chorus. That phrase made all sorts of airy promises to business, but was silenced by 2017’s price gains. It never quite went away, though, and people will continue to make money simply by selling the dream.
OK, we admit — blockchain technology could actually be a game-changer in the coming year. It will probably start with (surprise) the financial industry. Many major institutions have implemented the nascent technology, especially Japanese and South Korean Banks.
Also, Australia plans to upgrade its stock trading system to use blockchain technology for settlement. We may indeed be part of the blockchain generation.
Overall, with upcoming innovative technologies coming to the crypto market, expect bitcoin to remain a significant part — but merely an asset and not a currency. Its speculative record highs will only make it more distant from being a useful currency for regular use.
Bitcoin may continue to gain in value and popularity and also be replaced as the money of the future. That would be a win-win for bitcoin hodlers and altcoin evangelists alike.
So see you in 2018! We’re looking forward to it.
What are your predictions for the coming year? Please share them in the comments.
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