All of us wish we had known a few years ago how popular Bitcoin would become. Pocket change invested in Bitcoin in 2012 would now be worth tens of thousands of dollars. Some experts say that the time to get on the crypto-bandwagon has been and gone, while others say that Bitcoin and blockchain technology is still in its infancy.
So where are we on this scale? At the end of a big rise of a new technology? Or still at the beginning of a historic change in the way our financial system operates, underpinned by Bitcoin? Figuring that out can help us understand where we are now and where Bitcoin is heading in the future. Let’s take a look at some of the trends and market indicators to find out what the next steps for Bitcoin might look like, and if you should sell or buy Bitcoin.
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So what’s happening right now?
It’s been said many times that the cryptocurrency world has truly been on a rollercoaster ride over the last few months. Even veteran Bitcoin traders and enthusiasts are struggling to understand the current market conditions. Record highs in December of $19,800 were followed by crashes of over 40%.
This might seem scary if you’re new to Bitcoin trading, but anyone with a few years of experience will tell you it is very normal. Experts are even saying that these crashes, called “corrections”, are healthy. Corrections happen in all types of markets and they are important for investors to get an understanding of the real value of an asset such as Bitcoin. Many investors sell off their assets at this point to cash-in on the high price. The new, lower price, is a better indicator of the true price.
So what does this mean for the future?
Bitcoin had an epic year in 2017, but will the exponential rise continue? After all, Bitcoin won’t pay you any dividends or even earn you interest as you hold it. The main reason investors are buying Bitcoin is the expectation that the price will rise even further in the future.
High levels of speculation like this are dangerous in any market and lead to bubbles that can collapse. While some people are using Bitcoin as a medium of exchange, most are not. The price is mainly driven by people buying the cryptocurrency hoping to make a profit. Many experts say for this reason we’ll see a big crash in the near future.
The factor that is really going to drive up the price of Bitcoin long-term is the growing adoption of blockchain technology in general, and Bitcoin finding new ways to be useful or keeping its role of ‘digital gold’. This will require some progress in the key areas.
The sustainable rise of Bitcoin relies on its underlying usefulness. For it to become truly useful (let’s be honest, it isn’t yet), the infrastructure needs to be in place for a large-scale use. This includes things such as reliable and efficient Bitcoin exchanges, companies creating products that make it easier to use Bitcoin, and a healthy ecosystem of other cryptocurrencies and blockchain applications.
The most important, however, is the technological infrastructure needed to make cryptocurrency payments possible on a global scale. At the moment, only a handful of Bitcoin transactions can happen per second, and the cost of those transactions is rising at a worrying pace. Because of this, it’s actually becoming more difficult for companies to accept Bitcoin as payment when it should be the reverse.
Some possible solutions to this include changing the Bitcoin protocol to allow for a higher transaction volume or another “off-chain” solution such as the Lightning Network. Whatever the eventual solution is, it needs to come soon. Bitcoin transaction fees are soaring along with the Bitcoin price, and this is unsustainable and damaging for Bitcoin.
Another kind of infrastructure needed is the financial tools for investors to get into the market and generate enough volume to stabilize the price. Nasdaq inc., the second largest stock exchange in the world, has announced that they plan to offer Bitcoin futures trading in 2018. This allows investors to get involved with the Bitcoin market without actually having to buy any physical Bitcoins themselves.
Bitcoin is becoming a hot trend nowadays. Online businesses have already started adjusting to market changes and integrating cryptocurrency options. This not only attracts new customers to their products, but also raises public knowledge and awareness about Bitcoin.
Such acceptance of Bitcoin, cryptocurrencies, and blockchain technology in general will underpin the value of Bitcoin in the long run. But with the infrastructure we’ve talked about in place, businesses and the public will still need to trust the Bitcoin community and technology enough to embrace it beyond just speculative investment.
Regulation might be a dirty word for some Bitcoin fundamentalists but, whether you like it or not, acknowledgment from governing bodies has a huge impact on Bitcoin. Regulation can put negative pressure on the price of Bitcoin, as we’ve seen recently with South Korea considering shutting down exchanges. Or, depending on the details, regulation can often have a positive impact on Bitcoin in general. Well-thought-out rules can make it easier to do business and help newcomers trust the idea more. Now that Bitcoin has truly entered the global markets, governing bodies will have to make moves to regulate it.
Just about the only thing you can be certain about with Bitcoin is that it will be unpredictable. The massive price rises and subsequent crashes are likely to continue. Many people have already lost money in the cryptocurrency market. Be very careful and only invest what you can afford to lose.
Anyway, blockchain is an amazing and important new technology that is already transforming the way we trust and do business with each other in a connected world. Bitcoin is the centerpiece of this movement, and if the regulation, infrastructure, and adoption levels can be reached, the future is still looking very bright for Bitcoin.