Arguably, there hasn’t been a hotter investment opportunity in 2017 than cryptocurrencies, which, as an aggregate, have seen their market caps grow by more than 800% at one point this year.
But no cryptocurrency is more popular than Bitcoin, which comprises nearly half of the digital currency market cap, despite there being over 1,000 other cryptocurrencies for consumers to choose from.
Bitcoin, the grandfather of all cryptocurrencies, if you will, is notorious for its volatility.
In late 2013, its value jumped from around $100 to $1,000, a huge percentage increase. But today, it’s worth more than four times that amount.
It began this year below $970 a coin and is now nearing the $5,000 mark.
But it’s important to remember that extreme volatility is a dangerous gamble. Massive gains over a short period of time can just as quickly turn into massive and devastating losses.
Rough Few Months = Possible Bubble Burst?
Bitcoin’s gains could prove to be short-lived. In the first 12 days of September, Bitcoin lost almost $900, or close to 18% of its value.
In terms of market cap, we’re talking about nearly $15 billion erased in nearly two weeks’ time.
Bitcoin took another big hit later in the month and is now trying hard to reach the $4,500 mark again after falling below $3,000 due to the regulatory campaign by China against all cryptocurrencies.
The Chinese government has prohibited conducting initial coin offerings (ICO), claiming that nascent fundraising mechanisms like ICOs are illegal under the country’s domestic laws.
This proclamation damagingly halted the adoption of cryptocurrencies, especially Bitcoin, across the globe.
Similarly, the South Korean financial regulator Financial Services Commission (FSC) has also ordered the prohibition of all forms of ICOs “regardless of technical terminology,” as well as the margin rating of digital currencies.
As of just last week, on October 3rd, the value of most cryptocurrencies in the market declined, with Bitcoin and Ethereum prices dropping by more than 3%.
To be exact, the price of Bitcoin fell from over $4,430 to $4,280 within a 24-hour period.
But Bitcoin’s price is still struggling to recover beyond its all-time high of $5,000, which it had obtained prior to the Chinese government’s ban on all cryptocurrency exchanges.
Some cryptocurrency experts are even predicting that another hard fork may be necessary if the price of Bitcoin continues to struggle. This, in turn, is causing investors to speculate and lose confidence in the Bitcoin market.
Could this mean the Bitcoin bubble is finally bursting?
If the uncertainty around ICOs and hard forks continues to affect the cryptocurrency market, it would be difficult for Bitcoin and Ethereum to sustain upward momentum in order to reach new highs.
But considering the vibrant developer activity surrounding the two popular cryptocurrencies, it is possible that Bitcoin and Ethereum could rise in value in the next few days.
Bitcoin Remains King
Why is Bitcoin, despite all the fear-mongering, still the hottest investment ever in 2017?
Well, for one, weakness in the U.S. dollar is a big contributor to Bitcoin’s ever-increasing success.
A weaker dollar is great for U.S. exports, but it’s not such great news for investors or consumers who are witnessing their purchasing power deteriorate before their very eyes.
Investors usually seek the safety of gold when the dollar sinks. However, cryptocurrencies like Bitcoin have been just as popular — if not more so — given that protocols within Bitcoin limit the number of coins that can be mined to 21 million.
In effect, Bitcoin is a finite resource, too, making it a perceived store of value as the dollar falls.
Momentum has also been a contributory driving force for the favored cryptocurrency.
Bitcoin has more than tripled year to date, a huge feat.
Other cryptocurrencies have performed even better: Ethereum has risen well over 3,000% so far.
Gains like this can draw in inexperienced and emotional investors, who, in turn, push prices even higher.
May See Prices Climb Even Higher
Bitcoin could very well rally nearly 40%, after months of deterioration, to hit the record-breaking $6,000 mark before the end of the year.
It was trading around $4,333 last Tuesday. This third quarter has been one of the most eventful in Bitcoin’s history.
It is up over 74% in the September quarter, with a shifting landscape in regulation and developments in the underlying technology taking place in the last three months.
But investors should still brace themselves for more volatility, industry experts say. Thomas Glucksmann, head of APAC business development at Gatecoin, a cryptocurrency exchange, told CNBC that a new Bitcoin record is very probable in the near future: “Throughout the year we’ve been predicting the bitcoin price will surpass $5,000 and creep closer to $6,000 by year’s end. That prediction is looking more in line with market sentiment these days.”
But Glucksmann also warns investors to be prepared for more volatility in November due to talks about another hard fork.
Charles Hayter, CEO of industry website CryptoCompare, said Bitcoin could hit $5,000 by the end of the year, not quite reaching the $6,000 mark.
Still, things are looking up.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today