December 23, 2016
The months have flown past once again, making now the appropriate time to post a second update (here is the first update) about my Bitcoin buy recommendation from 23rd December 2015. (If you are brand new to the subject, this BCG article is a long but very informative primer aimed at company management and organisational decision makers).
Yes, that’s right. While the global economy and political system have gyrated wildly, so has the price of Bitcoin. However, unlike some assets, such as sterling, BTC has moved upwards strongly.
At the time of writing, on the last 23rd of December, 1 BTC was 401.93 (Bid) and 402.87 (Ask) euros on Kraken, an exchange. Now the price stands at 873.99 (Bid) and 874.46 (Ask), meaning that the price has increased by 117%. 🙂 🙂 🙂
At the time I wrote that, “I really would not be surprised if the price doubles through the course of 2016.” Until a few days ago it had not doubled, but increasing demand and constrained supply are forcing the price up very strongly.
Did those insultingly small or negative interest rates compensate you for the risk attached with lending a bank your money in 2016? No, I didn’t think so. That is one reason why bitcoin and blockchain related assets might just be the future of money.
(Disclosure: I owned a little on 23rd December 2015 and bought more each month in 2016. I am not a large holder by any means, my holding is in single figures, but I do own BTC myself).
Bitcoin Price Prediction For 2017
There are both positives and negatives coming in 2017 for the price. Despite this, my best guess is that we will see another year of strong price performance, probably another 100% or more, taking the price to 1500 euros and beyond.
If the US government agrees, the world’s first Bitcoin ETF ought to make it much easier for normal investors to buy, hold and sell.
There are rumours that real futures contracts could be coming. Both an ETF and futures would need to use the actual underlying asset which ought to push demand up, while supply is permanently restricted.
On the other hand, there has been a debate raging within the community for almost two years about the size of data blocks in the system. If that is not resolved and soon, there is a very real chance that Bitcoin could be strangled by it’s own success and inability to deal with the growth that success requires. The very real risk that this poses was shown all to clearly when Circle, a major exchange, recently decided to stop offering Bitcoins to clients.
There is a potential solution in sight, with a form of code called Bitcoin Unlimited being used. Whether this version can secure enough support to force bigger blocks onto the chain, who can say. In the last couple of months this version of code has been gaining ground and followers. If it becomes the network standard, one would presume that the currently perceived risks would reduce substantially and much more investment money would flow in, pushing the price up. Even if it is adopted as required, the process will probably take another six months or more.
There is a well worn annual habit in the crypto community for experts in the space to offer their price predictions. Usually they congregate around a few large numbers ($5,000 and $10,000 are common).
Should Bitcoin survive and thrive, I have no doubt that the price will reach those kind of levels in time. However, from here to there is still a long way to travel. For example, at the end of 2015, to get to the $5k mark – as many predicted – the price per BTC would have needed to rise by around 1100% in one year. To put that another way, the price would have needed to rise in a straight line by roughly 3% per day for the entire year.
Even from where we are, $5,000 seems like a real stretch, but I could easily imagine a price in the range of 1,500 to 1,700 euros in late 2017. If all three of the above mentioned potential positive developments occur, then the price really could rocket upwards. My suggestion of 1,500 – 1,700 euros could be so low that it looks quite silly. Here’s hoping!
Finally, it goes without saying that this is for information and entertainment purposes only. Crypto currencies are high risk and very volatile assets. You should not invest money that you cannot afford to lose. Asset prices rise and fall and your author accepts no responsibility for your financial decisions.
Let’s all have a healthy and prosperous 2017.financialguy