Let’s start with this bold prediction: Bitcoin will hit $8,000. This would be just under a 50% increase from where it stands today (approximately $5,500). It also means that the market capitalization (total of all Bitcoins in circulation) would be approximately $140 billion. Depending on how you choose to measure that, it could put Bitcoin within the top 50 global circulating currencies worldwide.
And, depending on who you ask, that’s either an absolute certainty, or an impossibly overhyped bubble that is bound to burst either way.
I don’t know the answer to that question long-term, but I can say that I think Bitcoin will hit $8,000 in price and I think that will happen before the end of 2017. Let’s look at why.
BTC Dominance is a metric tracked within the cryptocurrency space that refers to the % of Bitcoin’s market cap as part of the entire industry. For the entire second half of 2017 so far, it’s been between 45% and 55% (currently around 54%). The entire crypto market started 2017 with a market cap of $78 billion and sits now around $170 billion-a 2.5x increase.
With positive news coming out about currency adoption, the entire market is expected to expand, which would bump the largest and most regarded currency (Bitcoin) along with it. More importantly, BTC dominance dipped to its lowest point of 39% as Ethereum (the #2 coin) increased in value in June-but has bounced back in terms of dominance and re-settled in near 50%.
But, okay, that just tells us a relational aspect. The point is that as this article explores positive boons for cryptocurrency, we should see the relational aspect with Bitcoin, especially as the entry point for the majority of consumers to the markets.
Bitcoin is the first and foremost use of blockchain technology, but its success has launched a thousand versions of the original Satoshi code. As these spin-offs find adoption, it provides positive underlying for the exploration of blockchain penetration in our lives-and when that use is in enterprise, it means some serious capital is setting out to validate this technology.
That’s the case with IBM’s (IBM) Tuesday announcement of using blockchain startup Stellar to power its cross-border payment activity. As this article states, the move is a big step in backing blockchain as it moves from behind-the-curtain cryptocurrency empowerer, to enterprise solution.
Ethereum, the second hand to Bitcoin, is having its own moment in the limelight with its biggest U.S. conference for the Enterprise Ethereum Alliance-a group of big names coming together to explore its own blockchain and smart contract technology.
In other (smaller) news, the Gates Foundation announced it will use Ripple (high visibility cryptocurrency) technology for its mobile payment funding.
What does this mean for Bitcoin? It means more institutions will consider blockchain to be the stalwart and absolute security protocol that it was designed to be. Flaws seen in the technology of Bitcoin will dissipate as more blockchain solutions become part of our lives-and monetary ownership fits into that paradigm shift.
Forks & Rebounds
Okay, but what about the trading price of Bitcoin. How does that reflect blockchain confidence?
The answer to this lies back in July and August of this year. This summer, it was announced that Bitcoin would undergo a sort of “vote” by its mining community (who validate the network) on implemented upgrades to its underlying technology. The vote was set for August 1st, with one group advocating to “fork” Bitcoin into, essentially, two different coins.
This happened, and Bitcoin Cash was born (itself now worth over $6 billion by the sum of all coins). The entire saga showed that investment money was concerned as to how Bitcoin would handle an “upgrade” or really a change to its existence. Fear brought the price crashing down over 30% in the first two weeks of July. The price dropped below $2000 for the first time since May.
But by mid-July, a consensus solution was confirmed and trust was restored that Bitcoin would weather the storm of an upgrade and a fork. What happened? The price rebounded to an all-time high in the first week of August, right after the upgrade was implemented without issue.
Well, guess what? Another upgrade is coming our way in November. The technology is seen by many as an upgrade, but to others as a risk. Similar story.
I expect the same play here. Word will come out soon about the issues and cause some panic in investors and I think the price will flatline or drop through the end of October. After implementation of the new upgrade (SegWit2x), we’ll see a quick and swift rise in price as calm settles back in. Not to mention, the November move ends about a three-year debate within the community, and brings Bitcoin much needed scaling technology.
So, we have a pattern coming and I’m guessing new investors and old ones looking to repile will bring the price up 10-20% after the November fork.
China, China, China
The rest of the way to $8,000 will be paved by China. Yes, the same China that announced a shut-down of Bitcoin exchanges in September that caused the only other “crash” in Bitcoin pricing this half of 2017.
Rumors are already swirling that China is looking for ways to restore its trading (rumors themselves which may have sparked a new all-time high for Bitcoin). This is important for two reasons: the first is that China, before the lockdown, was, at various times in 2017, somewhere in the top three nations and currencies trading Bitcoin. And while some of this action has floated into Japanese exchanges, some Chinese still hold Bitcoin or sold off their shares before the shutdown and wait to get in again, once legalized (and likely legalized with regulation and confidence).
In fact, investors continue to trade in China with enormous premiums, another bode of confidence even in a nation with uncertainty as far as its government’s relation with the coin (potentially a use case in and of itself).
The second important reason however is that China did not ban or shut down Bitcoin mining operations. For the uninitiated, people (or large-scale companies) mine Bitcoin and earn the currency as a reward for doing so. It has this “work” as a built in incentive system within its own ecosystem. It’s sort of the unlock to keep a full decentralized industry floating.
Estimates are hard to come by, but many peg the percentage of worldwide Bitcoin mining in China to be around 50%. This was the effect of early “pooling” efforts, but mostly the cheap electricity available in the nation. Either way, what it means is that some very technically adept people are sitting in China with a lot of Bitcoin.
And while some might see that as a sign for “selling” if and as China de-bans its exchanges, I see it as an invested group that will keep empowering Bitcoin’s technology, and evangelize its use on exchanges. Put in other words, the people mining Bitcoin do not have a sole interest of turning that into “fiat” or regular currency-most plan to hold their Bitcoin as it continues on in value (or, until a bubble should pop).
I think China comes back late in November with rules and regulations on its Bitcoin exchanges, but they’ll be up and running. We’ll see volume shoot up rapidly from China. The price will rise on newfound confidence in the tech and regulatory outlook. Chinese miners will sell off loads they’ve been holding (or selling at a discount) and the price stabilizes into mid-December.
And then we see holiday investments come just in time to see Bitcoin climb up to $8,000 before year’s end, on the back of this news.
Disclosure: I am/we are long BITCOIN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.