It has become an article of faith that the Bitcoin price is volatile.
And when Bitcoin burst into the public consciousness back in 2013, it was true. Bitcoin prices soared 8,500% in 2013 only to fall 85% by January of this year.
Throughout it all, fans of the digital currency have made sky-high Bitcoin price predictions - $1,000, $10,000, and higher. And when the Bitcoin price was bottoming in December and January, critics declared it dead.
But after January, the price of Bitcoin did something neither the enthusiasts or the critics saw coming.
The Bitcoin price stabilized.
Not that the Bitcoin price hasn't had some ups and downs. But for the past eight months, it hasn't moved as far and as fast as it had been.
For example, in mid-January, the Bitcoin price dropped 33% in two days. But since early February, it's taken seven days to get moves as big as 15% to 20%.
And then there's this: Six months ago, the Bitcoin price was $244.36. Yesterday (Thursday), the CoinDesk Bitcoin Price Index was trading right around...$244. That's right. Over the past six months, the Bitcoin price is dead flat.
The main thing this tells us is that Bitcoin is here to stay and not destined to fade into oblivion, as many predicted at the end of 2014. If Bitcoin were going to disappear, the price would have just kept on dropping.
Yet that still leaves a lot of questions about where the Bitcoin price might go next.
How long will it stay in the $200-$300 range, where it's traded since early February? And in the years ahead, how will the financial world's fascination with the blockchain - the technology that underpins Bitcoin - affect the Bitcoin price?
Here's why the Bitcoin price has a lot of long-term upside...
Why We're Optimistic About the Bitcoin Price
The amount of investment in Bitcoin, both from big Wall Street banks and venture capitalists, would seem to suggest that the price of Bitcoin must rise.
But that's not necessarily the case. For the most part, the fintech startups and big banks are far more interested in the many uses of the blockchain than they are in Bitcoin as a currency (or a commodity, as the Commodity Futures Trading Commission has declared).
While the growing interest in the blockchain augers well for the Bitcoin technology, it's less clear what it means for Bitcoin as a form of money. And that will determine just how much it affects the Bitcoin price.
Blythe Masters, the former JPMorgan Chase & Co. (NYSE: JPM) executive who now heads Bitcoin startup Digital Asset Holdings, seems singularly interested in the blockchain.
"I never became particularly enamored with cryptocurrency," Masters said at the Bloomberg Markets Most Influential Summit in New York on Tuesday.
Other financial experts agree. In a July survey of Wall Street legal and compliance professionals by marketing intelligence firm Greenwich Associates, 73% said they believed "the blockchain can thrive without Bitcoin."
This could happen if banks create their own blockchain and maintain it with their own computers.
If it turns out blockchain adoption somehow leaves Bitcoin behind, the Bitcoin price will struggle to go higher. Enough interest would remain to keep Bitcoin alive. But without the strong demand that would come with its association with the blockchain, the Bitcoin price won't be able to reach the lofty levels of $10,000, $100,000, or even $1 million that some have predicted.
But while Wall Street would love to co-opt the blockchain technology and ignore Bitcoin, that might not be so easy.
The Banks Will Come Back to Bitcoin
In the Greenwich survey, the dissenters in the sample were "those with backgrounds in Bitcoin and the blockchain," a minority in the sample mostly investing professionals.
Consider this. The reason the Bitcoin blockchain is trusted is because every transaction is public and verified over the global Bitcoin network of nodes and miners. Would you trust a blockchain owned and run by the world's big banks?
Barry Silbert, founder of the Digital Currency Group and the brains behind the Bitcoin Investment Trust (OTCMKTS: GBTC), recently told CoinDesk that he found Wall Street's fascination with the blockchain surprising.
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"A private federated blockchain doesn't solve any major problems and ultimately I don't have a high level of optimism it's going to succeed. I'm surprised they haven't figured that out yet and I'm surprised they are doing that first," Silbert said. He thinks what Wall Street is doing is a dead end.
"What will likely happen is there will be a lot of interest, a lot of discussion, and I think you'll see some money get deployed, but they will capitulate and shift their attention back to the Bitcoin blockchain or some decentralized blockchain solution," Silbert said.
In other words, the primary catalyst for driving the Bitcoin price higher is back in play. It just might take a while longer.
In the near term - with the blockchain getting all the attention - the Bitcoin price will continue to struggle to break out above $300.
Beyond that, a Bitcoin price prediction is very difficult. But I will leave you with a group predictions courtesy of the Hedgeable website.
Using the "wisdom of crowds," Hedgeable shows a one-year consensus Bitcoin price of $400, a two-year Bitcoin price of $750, and a three-year Bitcoin price of $1,500.
What do you think?
Follow me on Twitter @DavidGZeiler.
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Related Articles:
- CoinDesk: Barry Silbert: Private Blockchains Will 'Capitulate' to Bitcoin
- Bloomberg: Blythe Masters Says Forget Bitcoin, Embrace the Blockchain
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.