August 18, 2016
On 23rd December 2015 I published this post forecasting a very good year for the price of Bitcoin. At the time, I quoted 1 BTC = 401.93 (Bid) and 402.87 (Ask) euros on Kraken. The current price on the exchange Kraken is 509.45 (Bid) and 509.50 (Ask) euros, which is a gain of 26.5%.
In this world of ZIRP and NIRP, where else are you making 26% in seven months…?
This price increase is despite some massive volatility, which is a feature of Bitcoin and it’s price development. At times since December the price has been more 100 euros per BTC higher than it is now. While the picture has changed a little, there are many well informed observers that are also predicting further Bitcoin price increases.
What is evident is that the pace of change in the crypto currency world has been accelerating. As someone that is very interested in the topic, it is almost impossible to keep up with developments. What ought to be clear, to legislators and law enforcement, is that any rules being written currently will almost certainly be out of date by the time they are published.
Interestingly, the number two currency, Ethereum, recently faced something of an existential crisis, when an offshoot DAO was hacked and lost a substantial amount of coin. The crisis was dealt with quickly and a new chain created to segregate the stolen currency from the rest of the ecosystem.
Bitcoin has had it’s own recent hack, of an exchange called Bitfinex, where some $60m was stolen. However, in contrast, the Bitcoin protocol is in urgent need of change that will enable further scaling. Various camps have disagreed on how to proceed, creating a stagnation where new innovation is subdued.
The fact that Ethereum’s founders were able to come to and implement a solution, even an imperfect one, quickly shows the slower moving Bitcoin in a bad light.
This means that one of two outcomes seems likely for the long-term. Either the current price is cheap-as-chips and a solution will soon emerge, meaning that this is a great buying opportunity before the next bull run. Or, the malaise continues, more focus falls onto smaller, competing alt coins that are able to innovate more quickly and Bitcoins position at the top of the pile is threatened.
Personally, I’m betting that an innovative solution will emerge soon enough. To the group of users and evangelists that Bitcoin has attracted, a hold up of even a few weeks seems like a massive problem. They might be correct, but in the short lifespan of the space, this hold up probably will not be fatal. In which case, I am still a buyer and have hopes that the supply and demand crunch provided by this year’s halving will kick in soon enough.
Given the risks that are becoming ever clearer to the global economy (things like Italian banks, German banks, a Chinese devaluation, Brexit and on and on) all Bitcoin really needs to do is not get anything stupidly obviously wrong and things should progress very well. The current stand-off might be things going stupidly obviously wrong, but time will tell…financialguy