Bitcoin’s spectacular ascent to the fore of the financial markets and media in 2017 means that it is undeniably something to keep a close eye on this year.
Indeed, J.P. Morgan boss Jamie Dimon publicly stating that he ‘regretted’ calling it a fraud in September is an apt epitome of how the cryptocurrency (and indeed, the cryptosphere in general) is being accepted by an increasing amount of people.
One cannot understate just how much Bitcoin has increased in value since early 2017. Bitcoin has seen an approximate twenty-fold rise since January last year, and reached a high of just under $20,000 before experiencing a minor crash – nothing new in the cryptosphere. Its current price stands at around $14,000, with a market cap of $238bn.
What to Expect
There are several reasons to be bullish about Bitcoin in the coming year. Foremost, an increasing number of major companies have decided to accept the currency as an official form of payment – accounting firm PwC, tech giant Microsoft and online retailer Overstock have set a likely precedent for other major companies to follow by accepting the digital currency.
Further, the decision late last year to begin issuing Bitcoin futures on the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) demonstrates market confidence that Bitcoin will be here for the long-term. The plans of Goldman Sachs to introduce a designated trading desk for Bitcoin is also symbolic of the fact that an increasing number of major institutions are willing to accept cryptocurrencies – and adapt to them.
In the words of Dimon: ‘the blockchain is real’.
As more companies begin to accept Bitcoin as a form of payment and its utilisation continues to grow, taking a bearish stance on the cryptocurrency going into 2018 may seem amiss – however, it is understandable. South Korea’s recent decision to tighten rules on Bitcoin – by seeking to limit how conventional banks interact with it – adds to the list of several countries that have sought to curtail the influence of the currency.
Indeed, in a development related to South Korea’s aforementioned action, Bitcoin’s price crashed after global pricing index CoinMarketCap removed Korean exchanges from their calculations.
China’s decision to crack down on Bitcoin mining operations – aiming to completely ban them by the end of 2018 – is further evidence of some countries’ dissatisfaction with the cryptocurrency.
There seems to be a trend of countries in Asia being wary of cryptocurrencies in general. Indonesia has plans to outlaw cryptocurrency transactions from early 2018 onwards, with the goal of protecting its local currency. Similarly, Vietnam also plans to implement a ban on payments that use cryptocurrencies in 2018.
Merrill Lynch’s decision last week to impose a ban that will stop clients from investing in a Bitcoin fund is also a sign that institutions remain wary of the cryptocurrency; the “suitability and eligibility standards of this product” were cited as part of the reasoning for the ban. The restrictions on the trading, usage and investment in Bitcoin from countries worldwide thus provides sound reasoning to be bearish about the cryptocurrency.
Bitcoin’s opposition may not only come from worldwide governments; other cryptocurrencies, and their increasing popularity, could potentially impact the future usage of Bitcoin. Particularly worth mentioning is Ripple, the distributed open source protocol and consensus ledger. Its own currency, XRP (known as ripples) has increased by a staggering amount – from roughly $0.006 at the beginning of 2017 to just over $2 at the time of writing (it had reached $3 before a recent depreciation of the price).
Its ultra-fast transaction times (3.6 seconds, as opposed to 4 hours on Bitcoin), low transaction fees and widespread backing from financial institutions and banks (the company has recently partnered with American Express) will likely make it a worthy rival to Bitcoin in the future.
Ethereum, IOTA and Litecoin should also be looked out for, as they could challenge the world’s most valuable cryptocurrency going into 2018. The price of Ethereum, an open-source distributed computing platform which is also based on the blockchain, has increased by 300% in the past three months. Similarly, IOTA – which interestingly does not use the traditional blockchain, but rather its own ‘Tangle’ – has tripled in value in just over a month. Litecoin, which processes transactions four times as quickly as Bitcoin and has four times as many coins, has also seen impressive growth – its value has increased by 150% since early December.
Bitcoin’s significant rise throughout 2017 means that it will continue to be at the centre of financial news in the coming months, and most likely years. Its challenges for the next 12 months include potential regulation and restrictions from national governments and withstanding competition from other cryptocurrencies.
However, its increasingly widespread adoption and usage across the globe, as well as it remaining the official ‘king’ of cryptocurrencies, might make an investor confident in its sustained growth. Whether they would be right remains to be seen.
Cryptos Rally Slightly
Following one of the worst crypto crashes since 2015, cryptocurrencies posted moderate recoveries.
Editor’s Remarks: Bitcoin dipped into four-figure territory at the nadir of the short-lived crash that many touted as the “end of cryptocurrencies”. However, most major currencies were up yesterday as they commenced a recovery. Ripple, which fell as low as $0.90, was up to $1.40 by midday, while NEO resumed its upward trend. Bitcoin’s recovery has been notably weaker than its smaller cousins, some of whom are up 60% in the last 24 hours against bitcoin. Ethereum gained back some of the ground it lost too and is settling in once more above the $1,000 mark.
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Crypto Carnage: Blood on the Dance Floor
It is said that ‘Blue Monday’, typically the third Monday of January, is the most depressing day of the year. This has, undoubtedly, been the case for cryptocurrency owners worldwide; from Monday onwards, almost all of the world’s major cryptocurrencies have seen a drastic slump in their prices.
Having reached the $14,000 mark last week, Monday onwards marked a severe fall in Bitcoin’s value. On Wednesday, the dubbed ‘king of cryptocurrencies’ dropped to below $10,000 for the first time since the end of November, before making a small recovery on Thursday. It stands at $11,500 at the time of writing, but the day is still young.
And Bitcoin has only been leading the way. At this point last week, the price of Ethereum, the second most valuable cryptocurrency, was approximately $1,200; a slump on Monday saw it fall to a low of $800 on Wednesday before pushing through the $1,000 threshold again, and reaching $1,030 a day later.
Ripple’s XRP also followed suit; the cryptocurrency has almost halved in value over the past week – from around the $2 mark to a low of $1.20 on Tuesday. Since then, it has marginally recovered in price, to $1.48 at the time of writing.
Monero, IOTA and Cardano were also impacted – since Monday, they have declined in price by 35%, 22% and 21%, respectively. Litecoin now sits at $195, down from $240 at the beginning of the week.
The crash occurred at a time of optimism and hope for cryptocurrency owners. Just earlier this week, US money transfer company MoneyGram announced a partnership with Ripple in the aim of streamlining money transfers. Yesterday also marked the expiration of the first Bitcoin futures contract that had been listed by the CBOE.
Still, China’s offensive rhetoric against Bitcoin and other cryptocurrencies in the last seven days is likely to have stoked fears amongst investors, causing a major sell-off. The country confirmed earlier this week that it was seeking to further clamp down on its restrictions against virtual currencies by eliminating cryptocurrency trading.
It has also recently announced plans to further restrict Bitcoin mining within the country. Recent statements coming from Chinese governmental circles could go as far as to suggest that China wants to eliminate cryptocurrencies outright: the People’s Bank of China (PBoC) vice governor, Pan Gongsheng, purportedly encouraged the state to introduce a total ban on cryptocurrencies.
China is by no means the only country to have espoused hostility toward cryptocurrencies. Russia also partially echoed China’s scepticism – President Vladimir Putin noted this week that “in broad terms, legislative regulation will be definitely required in future”.
South Korea’s unreceptive stance toward digital coins – it was reported earlier this week that its finance minister, Kim Dong-yeon, had stated that the government would be introducing measures to clamp down on the “irrational” cryptocurrency investment rage – may have also played a part in driving prices down.
Still, for every bear, there seems to be a bull. Time shall tell whether increasing restrictions on cryptocurrencies from different governments will further impinge on their price, or if they will find a way to adapt to the new obstacles and prove all those championing them (and making millions in the process) right.
UK Banks Shun Bitcoin
No UK banks have partnered with cryptocurrency exchanges.
Editor’s Remarks: The lack of any relationships between UK banks and cryptocurrency exchanges means that UK investors currently have to move their money through a series of foreign exchange transactions and services before they can cash out their profits. As a result, they incur high fees and often the suspicion of their banks. This is contrary to many European banks, which have partnered with such exchanges. To an extent, this is because the UK retail banking sector is highly concentrated, whereas in Europe and the US the consumer has more options. The UK government is also due to release guidance on how cryptocurrency gains are to be taxed in the next few days.
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