This is an attempt to answer a few of the questions I have been exposed to recently, while also highlighting some fundamental thoughts regarding Bitcoin. Lots of these questions and concerns I have seen are highly valid in my opinion. What is sad to see, however, are those people who seem unable to discuss a potential bear market without resorting to insults or empty statements, rather than trying to act rationally.

The last week in the sphere of cryptocurrencies could be described as being stuck in an on-going unpleasant rollercoaster-ride. Even most of those who are not involved, have noticed the turbulent ups and downs. The candles have been redder than blood while newcomers and veterans alike have probably had a few sleepless nights. In many of the communities where I am involved, the same discussion could be found. Is this the end of Bitcoin, and what is going on? Is the Bitcoin bubble, as some people call it, about to burst?

Without any major news affecting the market, one could believe it is because of the Christmas period. Perhaps investment funds wanted to be on the outside of the volatility during holidays, or people suddenly went shopping and needed more cash (even though the Asian markets are not as much concerned). What are opposing these thoughts, is that those almost $200B that disappeared from the total market cap on Dec 22, came back all of a sudden on Dec 23 (see graph 1 below). This has led some of us closer to think that the sudden drop was a market manipulation, in order to create just what has happened, panic. As a side note it is also interesting to see how so much scepticism arise all of a sudden, when nothing has really changed.

(Graph 1, Total Market Capitalization, http://www.coinmarketcap.com)

After seeing the total market cap recuperate, it is time to tackle the next question. Will Bitcoin keep dominating cryptocurrencies and climb back up again? First, we can all take a look at a stock market quote that say “what goes up always comes back down”. After an autumn with a 600% increase in value, we were many who just waited for a correction (another interesting phenomena in the world of cryptocurrencies, are the extremely short market cycles, but let's discuss that some other time). Except waiting for a correction, many also agree that Bitcoin one day will be replaced by quicker and more functional currencies, even though no one can say when. Right now, however, Bitcoin was and still is, the store of value for the ecosystem of cryptocurrencies. As the majority of the currencies are fixed to Bitcoin as of the current trading pairs, it is likely that we will see an increase in value as long as the total market cap increases. Until another currency steps up to take that title, Bitcoin is not going anywhere.

I see three major dangers ahead for the future of Bitcoin. The first danger is the risks of national regulations from the bigger states in the world. This first possible issue is hard to delve deeper into as anything could happen. For example, how would governments act towards Bitcoins ability to move assets fast and decentralized, if a third world war breaks out? No one knows. The other possible danger is easier to guess the outcome of. What will happen if more trading pairs arrive across the largest exchanges? New trading pairs would mean that the fiat currencies streaming in and out from cryptocurrencies, would go through something else. This means that Bitcoin would not be the main gateway filled with fresh money anymore, and the demand for it would likely drop. Bitcoin has not been challenged at that level yet, but we can see the competition growing. Other currencies are as we speak stealing market shares, but this is only natural for any first-mover, regardless of business area. Having competitors diluting worth is unavoidable, but as long as more money is flowing into the market cap, Bitcoin will continue to increase in value (see Bitcoins current and historical market dominance on http://www.coinmarketcap.com). Last but not least, we have the on-going debate regarding the true Bitcoin, is it Bitcoin Core (BTC) or Bitcoin Cash (BCC)? Is Bitcoin going to be used as a store of value with high transaction costs, or as digital cash with high liquidity? Only the future can tell, and the majority decides, which is both amazing and frightening at the same time.

Going back to what we have seen so far, it is once again worth to mention that this is only the beginning, regardless how Bitcoin will move in the future. I am not a believer in the idea that Bitcoin will fully replace fiat currencies, but I find it interesting to discuss the future of it, and what could happen. The road ahead is full of potential dangers and opportunities, if this journey continues in the same way. Some individuals may end up sitting on wealth close to the net worth of banks or even nations, which could lead to more inconveniences. The regulation of Bitcoin is difficult (one of the fundamental ideas of it), and it’s a global phenomenon meaning that it is an open field for manipulation. Perhaps even worse than what we already have experienced. While I don’t want to say that we have not seen manipulation both in our current banking system, the stock market, and in the housing market. This is an issue, regardless of asset.

It is also important to stress the positive outcomes of Bitcoin, creating wealth for many individuals, as well as being a store-of-value for countries with hyper-inflated currencies, even though its high volatility. Bitcoin has introduced us to a new way of viewing money, a way to transfer money in a decentralized and quick way, as well as introduced us to the technology of Blockchain. This in it self, is a technology advancement in terms of sending information, and in my take a necessary development of the banking system, which has not changed much since medieval times. Today, we can only imagine the almost endless possibilities of using Blockchain.

In conclusion, whatever side of Bitcoin you stand at, I do not think that the power of the king of cryptocurrencies and decentralization should be underestimated. So do not judge it as something that will drop in popularity any time soon. I believe that rather the opposite will happen, and that 2018 is going to be an amazing year for cryptocurrencies.

What do you think? Will Bitcoin climb back to its former heights?


Best regards,
LordGaga

Disclaimer : Never invest more than what you can afford to lose. This post is based on my personal thoughts, and of course they are biased of what I think. Do your own research before making any investment decisions. If you make any trades after reading this post, it is completely on your responsibility. I am not responsible for any of your gains or losses.