2018 started off bearish for Bitcoin, dropping from its high at $17,000 in early January till approximately $10,000 now. Will this trend continue? Or is it just temporary?
There are a few things that are happening this year that I feel will boost the total market capitalization of cryptocurrencies.
Bitcoin will probably implement its lightning network this year, and this allows for transactions to be taken off the blockchain and through it, decreases transaction cost to almost nothing whilst increasing its speed at the same time. This will also allow the system to finally scale up to huge volumes of transactions. With the lightning network implemented, we could potentially see Bitcoin back up to its previous high at $20,000 from around $10,000 right now as I’m writing this article.
Ethereum as of right now also faces some issues in term of scaling. But they are testing out a new idea known as the blockchain SHARDING. They are intending to split the entire state of the network into different bunches of partitions which will be known as shards. Shards will contain their own independent piece of state and transaction history. This will allow the throughput of transactions processed to be way higher than what a single shard can do, as the main blockchain currently does at the moment. Similarly, once Ethereum is able to solve this problem, it can also easily break its ATH from $1,300 to reach $1,800 or even $2,000.
Countries like China and India have more or less taken their anti cryptocurrency stances as seen from the actions of the government. However, that is expected since many people within those countries do not like holding their domestic currency as it depreciates over time, governments thus dislike the fact that cryptocurrencies allow them to switch over to other more stable currencies like USD or SGD or YEN – because the outflow of capital could be bad for their economy.
Countries are regulating cryptocurrencies because of tax reasons as well. This is understandable because most countries run on the revenue they get from the people through tax. Without taxation, a country might not have enough financial resources to provide infrastructures necessary for people such as street lights, hospital, and schools etc.But that being said, many people believe that regulations hurt markets and I feel that is a very short-sighted and narrow perspective. In order for cryptocurrencies to stay in this space, we need that legal framework to ensure stability. That stability would eventually lead to an influx of investments and increased adoption from even more people.
3. Inflow of capital from Institutions
After watching the SEC meeting with US Senate, it can be concluded that this year might potentially be the year where the Bitcoin ETFs will be released. However, that is with the assumption that Bitcoin prices will stabilize as predicted by the chairman of the SEC in one of his statements.
With Bitcoin ETFs released in the market, it will also mean that more institutional investors, mutual funds, hedge funds, unit trust can enter the market of cryptocurrencies because they FINALLY have proper access to the cryptocurrency market. Without ETFs being released, it would be hard for traditional funds to get their hands on cryptocurrency because of the rules and regulations imposed on their fund managing agreements. ETFs will open up a whole new wave of influx of capital into cryptocurrencies.
Thus, in conclusion, I strongly believe that 2018 would be a fairly good year for cryptocurrencies and I expect Bitcoin to break $20,000 easily this year. It might take several bullish events to happen but I think it definitely well. Do remember to join my Telegram channel for regular market signals and constant updates.