The Bitcoin forecast for 2015 includes major strides toward the promise we've heard about for more than a year.
"The Bitcoin industry is moving faster than any one person can fully comprehend," said Money Morning Defense & Tech Specialist Michael Robinson. "I believe 2015 will mark a turning point in the brief history of this fast-growing virtual currency."
Look at how far Bitcoin has come in just five years. Created in 2009, only a handful of techies were aware of it for the first two years it existed.
In 2014, the amount of venture capital that poured into Bitcoin startups reached $311.23 million. That's more than triple the $93.84 million invested in 2013.
CoinDesk says the number of merchants that take Bitcoin will have more than doubled to 90,000 by the end of 2014 from less than 40,000 at the end of 2013.
Many household names joined the list this year, including Overstock.com, Inc. (Nasdaq: OSTK), Dell Inc., DISH Network Corp. (Nasdaq: DISH), and Expedia Inc. (Nasdaq: EXPE). And in just the past few weeks, Microsoft Corp. (Nasdaq: MSFT) and Time Inc. (NYSE: TIME) jumped on board.
The number of Bitcoin wallets, which people use to send and receive bitcoins, is expected to rise from just over 3 million at the end of 2013 to about 8 million by the end of 2014.
This is just the start for Bitcoin's growth as a phenomenon. Just as the Internet gradually became a vital part of our lives over a period of years, the world won't fully realize Bitcoin's true impact for a long time - as in a decade or more.
Of course, there will be some hiccups along the way...
The implosion of what was the world's biggest Bitcoin exchange, Mt. Gox, gave Bitcoin a black eye this year from which it still hasn't fully recovered.
And the Bitcoin price fell from a high of about $950 in January to below $350.
But the power of the idea - a decentralized, digital currency that includes ownership data and can move money around the world in an instant - just keeps gaining traction.
The best part of the 2015 Bitcoin forecast is that next year will bring a new stage in Bitcoin's development. For sure, mass adoption will continue. But next year we'll see a lot more activity on Wall Street as well as a lot more innovation from Bitcoin startups.
Here are the four most important and profitable factors that will make 2015 a pivotal year for Bitcoin...
Bitcoin Forecast 2015: Wall Street Embraces a New Toy
Bitcoin landed on Wall Street's radar this year, and began to lay the groundwork for a much bigger role.
We'll see the fruits of that in 2015.
One of the biggest events will be the arrival of the first Bitcoin ETF, the Winklevoss Bitcoin Trust (Nasdaq: COIN). This Bitcoin ETF has been slowly winding its way through the U.S. Securities and Exchange Commission (SEC) approval process for more than a year.
The process should be nearly complete by now. Functioning like a gold ETF, the Winklevoss Bitcoin ETF will allow for direct investment in Bitcoin.
Similarly, SecondMarket's Bitcoin Investment Trust is also awaiting approval. A hedge fund open only to accredited investors now, it is seeking to lower the requirements so anyone can buy in.
SecondMarket Chief Executive Officer Barry Silbert says we are now in phase four of Bitcoin, the "Wall Street phase." (Phase three was venture capital.) He sees it lasting from now through 2015.
"Firms are going to start trading it and investing in it and then that will eventually lead to phase five, which is mass consumer adoption," Silbert told CNBC in June.
Wall Street has already begun to infiltrate the Bitcoin world.
In October Arthur Levitt, who served as chairman of the SEC as well as the American Stock Exchange, joined the advisory boards of two Bitcoin companies, BitPay and Mirror. And this month, Paul Camp, who had been Global Head of Transaction Services at JP Morgan Chase & Co. (NYSE: JPM), became CFO of Circle Internet Financial.
More Wall Street involvement won't make Bitcoin's libertarian purists happy, but it comes with several benefits.
The first is that Wall Street's stamp of approval will do more to legitimize Bitcoin than any other development.
And the second is that once Wall Street gets involved in Bitcoin, the threat from regulators shrinks considerably. With something to lose, Wall Street will use its hefty lobbying power in Washington to keep the digital currency out of regulatory hot water.
Bitcoin Forecast 2015: The Bitcoin Price Bounces Back
Bitcoin couldn't do much worse than it did in 2014. According to Quartz, Bitcoin was one of the worsts investments of the year - worse than crude oil, Greek stocks, and yes, even the tormented Russian ruble.
On the other hand, the Bitcoin price has become less volatile of late. That stability will encourage adoption heading into 2015.
"I believe there's a healthy reason for Bitcoin's new stability," Robinson said. "With the rise of venture-funded companies, the industry is becoming more professional - and predictable."
Of course, those who invested in Bitcoin anywhere near its peak want to know if the digital currency will ever get back over $1,000.
The impetus from rising adoption should start to nudge the Bitcoin price higher next year. How high is almost impossible to predict. You can find Bitcoin forecasts as realistic as $600 and as crazy as $100,000.
Our Bitcoin forecast is for a gradual rise in the Bitcoin price in the first half of the year. But major positive events, such as the launch of the Winklevoss Bitcoin ETF, will cause big spikes.
Ultimately, how high the price goes in 2015 will depend on how far the Bitcoin ecosystem advances. A flurry of developments could drive the Bitcoin price past its all-time highs of $1,200.
But it's very unlikely that the Bitcoin price will end 2015 lower. At minimum, it should end 2015 above $500.
And yes, further down the road - five to 10 years from now - the Bitcoin price could reach $5,000, or $10,000 or even $100,000. A lot of the folks pumping millions of dollars in venture capital into Bitcoin startups think prices that high are attainable.
And here's a big reason why...
Bitcoin Forecast 2015: The Rise of the Blockchain
Understandably, the world has focused on the Bitcoin price and its uses as a digital currency. But the true value of Bitcoin lies in the technology it's built upon - the blockchain.
The blockchain is the digital public ledger that records and verifies every Bitcoin transaction. But its potential goes far beyond keeping track of Bitcoin.
Venture capital firm Ledra Capital asked Twitter users in May for ideas on how to use the blockchain. Among the many suggestions were decentralized stock exchanges where securities could be traded peer to peer, mortgages, "smart" contracts that could fulfill their function without outside intervention, voting, trademarks, proof of authorship, and more.
"Whether we [use Bitcoin to] pay for coffee - totally uninteresting question," Adam Ludwin, CEO of Bitcoin startup Chain, said at a November Bitcoin conference. "What really matters in Bitcoin is 'What can we do that we couldn't do before?' And there's a whole long list. And those are the market opportunities."
Until recently, most Bitcoin startups have stuck to financial themes, such as payment processing, Bitcoin exchanges, or Bitcoin wallets. In 2015 we'll see more Bitcoin startups test out non-financial uses of the blockchain.
Ludwin's company, Chain, will be at the forefront of this evolution. Chain does all the complicated "back office" work necessary for other startups to adapt the blockchain for alternative uses. Chain already has more than 1,000 developers on board.
And then there's the Microsoft factor.
While developing its partnership with BitPay to accept Bitcoin as payment for digital goods, Microsoft expressed interest in the blockchain.
"They obviously already have what they think they can use it for," BitPay Chief Commercial Officer Sonny Singh told CoinDesk, "and they realize with our tech they can figure out what's possible in the next year or two."
Having a tech titan like Microsoft enter the space would greatly speed the development of blockchain technologies. Think about this: In its fiscal 2014, Microsoft spent $11.38 billion on research and development.
Bitcoin Forecast 2015: Global Opportunities
One area especially ripe for Bitcoin disruption in 2015 is remittances. That's the money that immigrant workers send back to their native countries.
It's an enormous market. Global remittances totaled $542 billion in 2013, according to World Bank data. The average fee for sending money is a pricey 8%, but varies widely. In some cases it can cost 15%, or even 20%.
But because Bitcoin transfers take place outside the banking system, it incurs almost no fees.
This represents a huge savings. So far, Bitcoin remittance services have sprung up in places like Kenya and the Philippines.
And success with remittances would only be the start. The world's 2.5 billion adults who have no access to banking services could also benefit from Bitcoin-based solutions.
All in all, the Bitcoin forecast for 2015 is mostly sunny.
"This will be the year that Bitcoin moves beyond its realm as the world's leading virtual currency to become a major global force," Robinson said.
Outlook for Tech Stocks in 2015: Recently Michael Robinson sat down with Money Morning Executive Editor William Patalon III to talk about what he sees as the biggest trends in tech investing next year. Robinson says four trends in particular will hit their stride in 2015...
Follow me on Twitter @DavidGZeiler.
Related Articles:
- Bloomberg: Bitcoin as a Technology: Bloomberg Panel
- CoinDesk: BitPay: Microsoft Has Aggressive Global Vision for Bitcoin
- CNBC: Wall Street Welcomes Bitcoin in 2014: SecondMarket CEO
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.