At the end of 2017, I am pretty sure you haven’t missed all the discussions around Bitcoin, the
dilemma on its valuation and whether Bitcoin is worth investing in or not?
All this deluge of communications makes me wonder whether or not I should invest in it, this is why
I have run my own investigation and here is what I found.
The past decade has been outstanding for the bitcoin – the cryptocurrency has been rising from a
point of ignorance to the current valuation, exceeding even that of gold. Bitcoin was estimated
around $1K at the beginning of the year versus over $10K in November 2017 (Bloomberg. Data to 29
November 2017) despite the fact that Bitcoin has had two important splits, with the birth of Bitcoin
Cash in August, and China’s crackdown announcement on digital currencies in August. The total
value of all the bitcoins has so far surpassed $167bn.
It seems to me, that is a perfect resource to buy and hold long-term. However, other factors must be taken into account before investing in it:
– It is a highly volatile currency that could fluctuate a lot. In other words, it is a bubble that can burst anytime.
– A restricted quantity of bitcoin is available
– Only a few companies currently accept bitcoins because of some law-forbidden actions involving the currency.
– Finally, it is worth considering that we are at a peak point hence it is rather the right
moment to sell the currency than to purchase Bitcoin to avoid replicating the downfall in
Experts do not agree on the issue; some of them feel the asset still has far to soar, and others see the
speculative bubble about to burst.
“How Bitcoin can be accurately estimated?”
It is challenging to evaluate the price of the cryptocurrency. In fact, unlike stock market equities,
these are not linked to income levels.
Some analysts have suggested new methods worth considering in order to set the price range that
could reach the first digital currency. These include the Bitcoin adoption rate, the valuation spreads
with other asset classes, and the disparity between Demand & Supply.
David Drake, founder of LDJ Capital, predicted in an interview with The Motley Fool, that
Bitcoin would reach $20,000 by 2018. This estimate is based primarily on Bitcoin’s limited supply.
Indeed, a known-limited number of Bitcoins are released each year, and it is not possible to emit
more units than what was planned by Satoshi Nakamoto (Bitcoin inventor whose identity has never
been revealed), nine years ago.
“There is a limited supply for Bitcoin, but at the same time the demand for digital currency is
increasing,” said Drake. “When such a phenomenon occurs, the price increases.” The total number
of Bitcoins available is limited to 21 million (16.74 million have already been issued). Moreover, the
last Bitcoin should be released in 2140.
A solution has arisen
One of the answers might come from “When Bitcoin encounters information in an online forum:
Using text mining to analyse user opinions and predict value fluctuation”; a study made by a South
Korean engineer’s team that released their abstract in May 12, 2017.
The aim of the study is to analytically predict the price and fluctuation of the currency and anticipate
the price fluctuation of Bitcoin based on comments posted in the Bitcoin online forum. The research is
not only limited to simple sentiment analysis but focuses scoring the users’ comments.
Key takeaways from this study are:
1. With the accessible online data, the methodology of the study predicted the Bitcoin price
fluctuation with an accuracy rate of over 80%. It also shed light on some facet of Bitcoin-related
user comments impacting their decisions to buy/sell the cryptocurrency.
2. With the rise of the Bitcoin exchange rate, the study has demonstrated evidence in topics
often mentioned by Bitcoin users and the link to their meanings to Bitcoin transactions.
So where do we go from here (to 2020)?
Experts predict that Bitcoin will become more and more popular as more and more nations will
figure out regulations for Bitcoin, thereby formalizing Bitcoin’s acceptance in the legal structure,
even if they do not outright recognize it as a legal currency (as Japan has done). Indeed, organic user
adoption will continue to grow on its own. We can expect that institutional investors will make their
entry and will buy Bitcoin. Popular services will add Bitcoin integration, making it easier and easier
for anyone to invest in Bitcoin.
Hopefully, by 2019, Bitcoin will have a robust scaling solution in place that will allow it to be
regularly used at a mass scale as a payment platform. And by 2020, Bitcoin will progress on to mass
adoption and will become a mainstream way to pay for things on the internet.
In conclusion, Bitcoin prices are highly volatile, and it is clear by now that no one can estimate the
exact growth in the price. However, there are several factors which affect Bitcoin prices such as
government Regulation, media Influence, Bitcoin Demand & Supply, stability of the Bitcoin Network,
wider mainstream acceptance, market manipulation and technological changes and innovations.
And despite the multiple factors affecting Bitcoin’s price, it seems that in the long run, the average
price is on the rise.
Personally, I have make up my mind. What about you, are you ready to invest?