Bitcoin 2018: Tailwinds Should Trump Headwinds, Say Top Analysts

Following a feverish 2017, Bitcoin (BTC) should continue to rise in 2018 according to Canaccord Genuity’s top analysts Michael Graham and Robert Young. “While we find it easier to identify a greater number of potential headwinds for BTC value in 2018 (which should lead to event-driven volatility), we think the tailwinds will generally prove more powerful,” say the analysts. However, the complex currents at play should also result in volatility and event-driven opportunity for investors happy to up their risk profile.

“At a high level, we expect continued tension between 1) the idea that BTC is likely still very early in its lifecycle and therefore should appreciate considerably over the long term; and 2) the reality that it is very difficult to identify transactionally-driven demand sources for BTC at present.”

Bitcoin is not a fraud

JP Morgan CEO Jamie Dimon now says ‘the blockchain is real’

We now enter 2018 with Bitcoin the world’s fifth largest currency and a market cap of $229 billion. As a result, the currency is now a widely recognized legitimate economic force only nine years after it was first launched.

Even JP Morgan CEO Jamie Dimon now says he regrets calling bitcoin a ‘fraud’ back in September. And while it is true that various countries have not been receptive to the digital currency, Bitcoin is still very much a ‘global’ phenomenon. At this point the US only accounts for about 38% of bitcoin’s overall volume, followed by Japan and South Korea.

However, in contrast to the diverse geographical spread, bitcoin ownership is actually extremely concentrated. Recent reports suggest that about 40 percent of bitcoin is held by only around 1,000 users- known as bitcoin whales. These ‘whales’ can cause serious volatility for the currency by selling even a small portion of their holdings.

But is the value justified?

Bitcoin experienced a whopping 1370% increase in value last year. But for skeptics who are worried that Bitcoin is a bubble waiting to burst, the analysts suggest that BTC’s current valuation can be supported. However, “it requires capturing ~4% of primary payments use cases and ~20% of the gold market by 2025.” Notably the analysts conclude: “This seems ambitious without significant scaling progress (faster & cheaper transactions).” Plus it is very difficult to establish any kind of ‘valuation floor.’ In fact, it will be interesting to see how the bitcoin community tries to solve important scaling solutions in 2018 and beyond. This is crucial for BTC to become a more viable payments solution.