To say Bitcoin got a run for its money in 2017 would be an understatement. The virtual token, which started its year at just under $1000, leapt in value by more than 1,300% to just over $15k by the end of December. This astronomical climb was what got the attention of Wall Street and retail investors across the world.
But not everything was smooth sailing for Bitcoin; 2017 was marred by the coin’s extreme volatility, the fork of Bitcoin Cash in its network, and groups who criticized Bitcoin’s ability to be used as a valid tender.
2018 Bitcoin & Cryptocurrency Outlook
In spite of these complications, it’s apparent that Bitcoin will continue to mature as an established asset class on Wall Street, which is thanks to the launch of Bitcoin Futures. Wall St has already jumped at the opportunity to bet against and hedge the price of the digital asset and ride on its upswings, all without holding a single coin. As for this year, some analysts have predicted Bitcoin could be worth more than $20,000 in 2018.
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Before speculating on the performance of Bitcoin this year, let’s have a look back at 2017 to see the foundation laid for the coin to prosper.
Bitcoin’s Performance in 2017: A Timeline
Due to the uncertainties of China’s move to ban initial coin offerings (ICOs) and even domestic exchanges, Bitcoin got off to a bad start of the year. The value of Bitcoin plummeted under allegations of market manipulation by exchanges located in Shanghai as well as Beijing. Other reported crimes included money laundering and unauthorized financing.
The closure of these exchanges came after the People’s Bank of China warned to exercise caution when buying cryptocurrencies. In January of 2017, over 90% of the trades for Bitcoin took place in Chinese Yuan, which caused the currency to drop down to $786 from a record high of nearly $1,300 USD.
The Securities and Exchange Commission (SEC) blocked a bid for Bitcoin futures. By this point in March, Bitcoin had regained the value it lost in the fallout over China. This positive movement was cut off when the SEC blocked a bid by Tyler and Cameron Winklevoss to set up an exchange-traded fund. Here, the SEC ruled that Bitcoin means it is traded on unregulated markets, thus removing the council’s ability to prevent fraud or market manipulation. In March, the price of Bitcoin dived from its peak of around $1,300 to a low of $925.
Japan declared Bitcoin as legal tender. The coin’s performance gains to date were only 19% in April. But that would take a turn for the best when Japan began to recognize the coin’s potential. As of 2018, Japan is one of the most popular markets for Bitcoin. More than 40% of Bitcoin trades between the period of October and November were made in Japanese Yen.
The Bitcoin Cash hard fork. Besides the split of the crypto to Bitcoin Cash in August, it had an unremarkable run between April and early July. All that changed when investors began to worry about Bitcoin’s underlying network capacity. The split happened after it reached a high of $3,000 per coin in July 11th, and received an adjustment on July 18th, taking it to a low of $1,900. The divide was a result in a difference of vision and implementation for how the blocks on the Bitcoin network should be managed.
The fork was designed to help the network process information better and assist with its scaling potential. On August the 1st the network split was finalized, which resulted in Bitcoin Cash (BCH). This split didn’t seem to phase investors; the price of Bitcoin surged close to $5,000 per coin.
China finalizes its ban on initial coin offerings (ICO) that led to a crash in the coin’s value. ICOs are an innovative twist on initial public offerings and has helped some firms raise more than $4bn through the sale of tokens. These tokens function the same way as shares in the stock market do, with a suggestion that they will rise in value over time.
In September, Bitcoin crashed to $3,000 from $5,000 per coin. But after that, the coin surged to over $7,500 per coin. This price increase was in spite of China’s crackdown on ICOs, as well as JPMorgan calling Bitcoin a “fraud”.
The CTFC approved Bitcoin futures in December. This would allow investors to speculate on the future price of Bitcoin without investing in the coin. This new service has drawn many key players from the investment world, with firms like TD Ameritrade and E*Trade joining the fray. It was around this time that Bitcoin’s value increased exponentially to a total of $10,000 per coin to a record high of $20,000.
So, to summarize 2017, Bitcoin made its way from obscurity to being one of the hottest debated topics in the mainstream consciousness. Yet the digital token was marred by its unpredictable price trajectory, scandal, and fantastical promises. At the end of 2017, the Bitcoin Futures program had started trading at all the major exchanges, including CBOE, which led to governments around the world to consider regulating cryptocurrencies.
So, if the analysts are to be believed, 2018 could be another fantastic year for Bitcoin, although one shouldn’t take these predictions at face value. These predictions could prove to be wrong as Bitcoin is in a class of its own. In addition to the typical market forces of supply and demand, the innovations and technology and governmental interference also plays a role in determining its price and future.
What to Expect in 2018
The high fees associated with Bitcoin transactions is frequently cited as being a major failure of the currency. To lower the fees on the Bitcoin network, the SegWit hard fork was proposed to increase the amount of blocks on its blockchain, as well as to speed up numbers of transactions.
However, this change is yet to be implemented.
Out of the 200 or so companies that have applied for the SegWit service, only 18 of them have implemented it so far. This means SegWit comprises only 10% of all the Bitcoin transactions in the world. The reasons for why are complex, yet they stem from the difficulty in implementing the security feature as well as technology features. SegWit is also comparatively untested within the market. While this is happening, the massive backlog of transactions on the blockchain continues to climb in astronomic numbers.
But things in 2018 could look good for Bitcoin.
Bitcoin’s core development team is planning to release a new interface that supports SegWit in May of his year. Coinbase, the largest US exchange, will also incorporate the feature into their wallets in 2018. All these efforts were made to help reduce transaction fees and gain more clients to the Bitcoin platform.
State Channels and Sidechains
In addition to the above, it has been proposed SegWit will pave a way towards the Lightning Network. This network has been touted as the answer for Bitcoin’s apparent scaling problems. The network envisions a handful of separate payment channels that connect 2 parties together. This will allow the transactions to be carried out easier and in a shorter amount of time. A related idea is that use of side chains, although they provide reduced security and decentralization.
Nolan Bauerle, who is the research director at CoinDesk, has compared state channels with Bitcoin Plugins. He stated that the channels could draw the attention away from altcoins and back into Bitcoin as the preferred medium of exchange. The lightning network has already completed tests in 2017, yet the timeline for when Bitcoin will usurp the other coins is unknown, predictions for this is somewhere between 6 months to a year.
Change to Store of Value
The transaction fees for Bitcoin has not helped its viability as a means of exchange, and is what has led to its many price corrections throughout 2017. As of right now, the coin is operating like gold as a store of value and has caught the attention of both retail and institutional investors. As a consequence of this, the developments in its technology may have little effect on its cost for 2018.
The coin’s movement in the market could be set as its store of value. In this form, the price of coin may be affected less by its use in daily transactions and more by the coverage it gets in the media and government regulations. These two factors alone could have a strong bearing on its price.
One investor, Spencer Bogart at Blockchain Capital, mentioned that a pricing target of $50K USD would be reasonable for investors in these sectors. He went on to mention a trickle down theory could apply to attract more ordinary investors to put their money into crypto markets, yet he didn’t expect to see the coin’s volatility changing any time soon.
With the idea of more hard forks on the horizon, as well as greater sums of money being poured into the coin, this could lead Bitcoin to being seen by some as a bad investment, especially for investors who are against long-term risk.
The Surge of Altcoins
In any case, 2017 will always be remembered as a time that Bitcoin entered the mainstream. It achieved unbelievable returns with its high of $20K per coin. But the story of this year could be different, thanks to many non-Bitcoin tokens that are known as Altcoins. Some of these coins are considered clones of the original Bitcoin, yet some deliver original innovations that can do what Bitcoin does, but better. Some of these altcoins have a focus on privacy (including Monero), whilst others have an emphasis on faster, protected transactions (like Litecoin).
The other altcoins in the market attempt to completely alter the environment of the cryptocurrency sphere through integration of the Internet of Things, as well as smart contracts. The total capitalization of these altcoins now outweighs the share of Bitcoin that has long since dominated the market. This new emergence has led may investors to become cautious about putting their hard-earned dollars into Bitcoin and reinvested into altcoins.
As there seems to be so many projects that all claim to change the world of cryptocurrencies, which coins then represent a good investment? Fortunately, the market has done most of the hard work for investors by identifying and showcasing the most viable projects. This information can easily be found online at sites including Coinbase and others.