So, you bought into Bitcoin (or other cryptocurrency) and over the last few months you’ve been asking yourself…
— “What’s going on?”
And more importantly, “When is Bitcoin going to go back up?”
I’d like to offer a perspective to shed light onto this situation. Of course these views are my own and by no means to be construed as financial advice — however if you are looking for some rhyme or reason for the recent dip in BTC price and the forecast for 2018 — hear me out.
Starting with the events which have taken place over the last 6 months having the greatest impact on the cryptocurrency marketplace:
In the last 6 months (here’s what happened):
- Multiple sovereign nations have either threatened to ban or otherwise legislate cryptocurrency in one way or another (China, South Korea, USA, India).
- New amendments to the US Tax Act now treat Cryptocurrency as property and cryptocurrency many types of crypto transactions as taxable events.
- Visa/Mastercard Network shutdown all Crypto based Debit Cards.
- Multiple Sovereign Nations are increasing their regulations relating to ICO’s (USA, China, South Korea).
- Many Sovereign Nations have increased rules and regulations regarding KYO standards for exchanges within their borders.
What’s important to note is each of these variables has reduced the flow through between the traditional financial (FIAT) monetary system and cryptocurrency markets.
Restricting Access to FIAT:
Cryptocurrency (and it’s ability to grow) is directly related to the ability of money to flow freely between the existing financial markets (FIAT) and the digital currency market.
And right now the channels used for the free flow of money into and out of cryptocurrency markets are constricted.
Its more difficult for money to FLOW INTO cryptocurrency. Many ICO’s no longer accept US citizens and exchanges in many countries are being asked to increase their KYC requirements.
Its more difficult for money to FLOW OUT OF cryptocurrency. The Visa/MasterCard network (having over 38 million merchants worldwide) made cryptocurrency Debit Cards an easy way for individuals to spend their cryptocurrency — Until the network pulled support for all cryptocurrency debit card services.
It’s more difficult to Trade Cryptocurrency. The US is the first country to treat cryptocurrency as property and subject to tax on each transaction causing a significant drop in cryptocurrency trading by US citizens.
And with the growing uncertainty over Tether (USDT) many investors have one of two choices — hold their funds in an uncertain, not audited US pegged cryptocurrency or simple exit the market. Many investors chose to exit.
So…When will Bitcoin go back Up?
Over the long-term it can be said that Organic Growth of bitcoin is still strong as awareness about the cryptocurrency grows. And the media attention in 2017 certainly helped that. However, Organic growth won’t take us quickly to the heights that were seen just a few months ago.
For Bitcoin and the cryptocurrency markets to increase in price as it did back in November and December the same factors which lead to its fall would need to be corrected — greater throughput between crypto and fiat will need to happen. Here is the good news — mechanisms are already in place to make this happen. And it’s happening by way of ICO’s.
On the Horizon…
There are some amazing new ICO’s being developed in areas that will increase the throughput between the existing financial markets.
Asset Backed Cryptocurrencies: This new breed of cryptocurrencies will bring with it potentially hundreds of millions of dollars of (real) assets into the marketplace.
Decentralized Exchanges (DEX): Since these exchanges don’t physically reside anywhere, they will likely avoid jurisdictional regulations.
P2P Exchange Networks: Increasingly Bitcoin ATM’s, and new ICO’s offering Peer-to-Peer exchange networks, offering more opportunities for buyers and sellers or cryptocurrency worldwide.
In 2017, Bitcoin & Cryptocurrency were introduced to the public at large. Not a bad year considering all. However, tighter government regulation and the restricting the flow in and out of the cryptocurrency market has caused the market to contract considerably.
Bitcoin price and the cryptocurrency market at large is in a state of transformation and many new ICO’s will be entering the market providing solutions to the biggest problems. It’s foreseeable the rise in Bitcoin and market capitalization will start to increase when many of these new projects go live — mid to late 2018. With a view to what’s in the pipeline, mid to late 2018 is looking to be another stellar year.