All-Time High for Bitcoin

Bitcoin seems to be an on again off again thing in terms of promise as a means of investment, but just recently it has seen a surge unlike any that have come before. While the numbers are staggering, the percentages have been seen before. Most notably in 2013, Bitcoin prices rose precipitously only to experience a drop out of relatively nowhere.

People who are currently holding Bitcoin, or using it as a form of payment are certainly hoping not to see any significant percentage drop as the cryptocurrency has almost doubled in value compared to the end of 2016. Furthermore, the numbers plummeted temporarily in January down to the mid-700’s (as compared to U.S. dollars) which was down about 25% from the end of last year. Just in the last two months, though, gains of well over 200% have pushed the currency to the highest price ever. Bitcoin stands in excess of $2,000 U.S. dollars for one as of the time of this writing.

Leading the overall charge in the last twelve months has been the recognition of Bitcoin as an officially accepted currency in both Japan and Russia. The effect has been an increased perception of legitimacy for the currency which has been followed it by wider acceptance at retailers, even including those in countries who do not yet recognize it as an official currency.

Another development has been that of Bitcoin ATM’s which have become popular in North America with the U.S. and Canada as numbers #1 and #2 in that regard, respectively.

Perhaps not on the level with major countries such as Japan and Russia, but it is expected that other nationalities will recognize Bitcoin as an official currency in the near future. This will lend further perceptions of legitimacy to the currency and also serve to increase prices.

Bitcoin is also widely used in, ‘Sin,’ industries, which include online casinos (some which operate almost exclusively in Bitcoin) as well as other casinos who accept it as a form of payment but not exclusively. Further, given that Bitcoin cannot be traced back easily to the original owner by Government agencies, especially in those countries where it is not recognized as an official alternative currency, it is also a popular form of payment on the black market.

However, with its increasing usage and the official recognition of the currency by major countries, it has also gained acceptance by several traditional retailers. This acceptance self-perpetuates the price increase because it causes actual Bitcoin to be in greater demand by consumers.

The additional demand is also paired with the fact that Bitcoin is produced, “Mined,” at a much slower rate than when it first hit the market. The result is that the demand is currently growing faster than the supply, which was inherent in the design at the time that the currency was dreamt up.

While Bitcoin is, by far, the market leader, other cryptocurrencies have emerged and are also gaining legitimacy and consideration as official alternate currencies. When it comes down to it, though, these do increase the overall supply of cryptocurrencies, in general, which could have a negative effect on Bitcoin.

For the time being, though, Bitcoin has significantly exceeded all expectations even coming off of the highs of last year. Early this year, most Bitcoin prediction markets expected that Bitcoin could possibly finish the year at the $2,000 mark, not already be there before half of the year was even behind us. Again, we don’t know that those prices will hold or continue to increase, but the prospects look great for the time being.

The 16.3 million Bitcoins in existence have resulted in a current market cap of 33.6 billion United States dollars for the currency, but at the same time, that valuation would have been under the fifteen billion mark just four short months ago.

The only true constant with Bitcoin seems to be an almost constant major fluctuation, which might make some people curious about it a little hesitant to jump into the market. Furthermore, the costs associated with mining new Bitcoin, especially as there are fewer remaining to be mined (and continually decreasing) makes the notion of getting into that somewhat cost prohibitive. The groups that largely undertake the mining either have significant technological resources at their disposal or alternatively, several people working in concert to get them mined.

The number of new Bitcoin produced is finite, and every available Bitcoin is expected to be mined at some point between 2136-2140, depending on who you ask. That’s longer than anyone reading this will be alive, barring any serious developments in the medical profession...such as a pill that grants immortality, (and the cure for cancer would be good) but even the number mined in a few decades within the same time period will be negligible as compared to now.

However, as part of the self-perpetuation we mentioned earlier, the increased valuation of the currency makes the cost of the time and resources that go into mining new Bitcoin worth it, at least for the time being.

When we look at Bitcoin valuation predictions, there is some notion that people should, “Consider the source.” The entities that have historically been most bullish on Bitcoin are those who have a close association with it, if not direct financial interest in its success. Unless I’m looking to sell it short, if I own Bitcoin, I’m certainly not going to predict any significant reductions in value when asked.

From roughly $1,825 to $1,625, the price in Bitcoin fell by $200 in a two-day period within the last two weeks. Of course, it has since recovered and the value ballooned to the current mark which, as I write this, is in excess of $2,000. Of course, by the time you read this, it could just as easily be as low as $1,500 such are the extreme historical fluctuations. The long-term trend, of course, has been positive...just unpredictable.

Wait, is that a prediction?

For those of you who are in it for the long haul, despite all the doubters, Bitcoin still enjoys a higher valuation than it has previously. If you believe that trend will continue over the next several years, or even the next year, then you might want to get into the market. If you’re looking for a quick score, then I don’t recommend it, because those serious fluctuations often go precisely the other way.

Beyond that, I really don’t know who truly controls the market or how much Bitcoin a few major players account for. People making a few major moves with large amounts in concert can significantly change the price extremely quickly.

If we look at many of the predictions that were made in the first part of this year or at the end of last year, we see that (so far) it appears the expectations were underestimated. Here’s one.

Which predicted that Bitcoin might touch the $2,100 mark by the end of this year, but it has already done that for well over six months to go. Did they foresee this and now expect the market to stabilize? I doubt it. Besides, if I were going to make one prediction, it would be that the market will not indeed stabilize any time in the near future. It will just continue to be huge upswings and downswings.

Seeking Alpha also made an even more recent suggestion, back in March, that the price of the currency might touch $2,000 at year’s end.

As we can see, just two months later, it has achieved the year’s end number that was so recently predicted. Whether or not it stays there or continues to gain is another matter. The only thing for sure is that Seeking Alpha certainly did not prognosticate such a rapid extreme gain in value.

I mentioned this in my article at our Wizard of Vegas site that will soon come out, but one aspect of the Seeking Alpha prediction really bugged me:

There is obviously no correlation between the bitcoin price and the dollar or any other regular asset. Large investors simply don't pull money out of currencies, stocks (NYSEARCA:SPY) or gold in order to buy bitcoins.

As I pointed out over there, if said, ‘Large investors,’ believe that Bitcoin is a profitable position, then that is precisely what they are going to do. It’s difficult to believe that the totality of investors would go out of their way to avoid anything that they expect to make them money. Granted, Bitcoin is not a traditional investment in the sense that stocks and bonds are, but the most successful investors did not get there by never having any new ideas.

There is no reason to expect that large investors will actively avoid Bitcoin, and in fact, they should be paying even closer attention to it given the growing legitimacy and recent price surges. If there is a demand for something, smart investing says you should acquire as much of it as you can and get out before the demand drops. It’s simply a question of timing.

Vinny Langham of CoinDesk seems to be the only guy who truly came anywhere close to, ‘Calling it,’ as he predicted Bitcoin would finish between $2,000-$3,000 this year.

For BTC to break the low end of the target less than halfway through the year seems to point to the likelihood that Langham will end up calling it correctly by the end of the year. In fact, he has been the most bullish on Bitcoin valuation predictions, and thus far, he has also been the most right.

I would admittedly be shocked if the currency finished this year below $2,000 significantly. The one thing that I think has remained somewhat unchanged is the growing demand on the consumer side of the currency for the use at retailers, casinos and perhaps, unfortunately, the black market. At the same time, consumer demand seems to be the only real fundamental in valuations because BTC is not directly tied to any other currency or tangible asset.

The only thing that we can absolutely count on in the meantime is continued fluctuation in the market. In the meantime, I make no claims as to whether I think Bitcoin will be up or down at the end of the year compared to the present number. I would definitely wager that, at any point in the year, it will drop below $2,000 again at some point.