Why Bitcoin Price Predictions for 2016 Range as High as $3,500

With several expert Bitcoin price predictions for 2016 topping out at $3,500, the coming year will prove the worth of the digital currency once and for all.

The optimistic Bitcoin price predictions represent quite a turnaround from the start of 2015, when the price of Bitcoin was bottoming out from the bursting of the late 2013 bubble and the Mt. Gox meltdown.

bitcoinThe Bitcoin price dropped as low as $173.06 on Jan. 14 - an 85% plunge from its all-time high of $1,156.48 reached on Nov. 30, 2013. It spent most of the rest of the year meandering between $200 and $300.

But from mid-September to mid-December, the Bitcoin price doubled from $230 to $465.

According to the Bitcoin price predictions for 2016 we've seen lately, such gains will be the norm over the next year.

"I am forecasting a bull market in 2016," Simon Dixon, founder and CEO of BnkToTheFuture.com and manager of the Bitcoin Capital venture capital fund, told CoinTelegraph. "If the bull market takes us past $600, I see no reason why we should not see new highs breaking through the $1,200 level, but this time sustained support at the new high for several months at the end of 2016 with significantly higher volume."

Some other 2016 Bitcoin price predictions:

  • Erik Voorhees, CEO and co-founder of the ShapeShift cryptocurrency exchange, offered a 2016 Bitcoin price prediction of $1,800.
  • Daniel Masters, co-founder of the Global Advisors Bitcoin Investment Fund (GABI), said the Bitcoin price will test the all-time high in 2016 - and will zoom to $4,400 by the end of 2017.
  • Vishal Gupta, CEO of SearchTrade.com, has a Bitcoin price prediction of $1,500 to $2,000.
  • Bobby Lee, CEO of Chinese Bitcoin exchange BTCC, has made a 2016 Bitcoin price prediction of $3,500.

These Bitcoin price predictions are three to eight times the current Bitcoin value of about $445. Are these guys crazy?

Actually, their reasoning is pretty sound. Here's why the Bitcoin price will take off in 2016...

Why the Lofty Bitcoin Price Predictions 2016 Make Sense

Several powerful catalysts will converge in 2016 to push the price of Bitcoin back to and beyond its previous highs.

One factor is the blockchain, the technology that underpins Bitcoin. Over the past year, the world's major banks have ramped up efforts to study how they use the blockchain to streamline their businesses. As a trusted digital ledger, the blockchain can verify transactions much more rapidly than current systems. Plus, it can embed related data within the transaction.

But so far, the big banks have discussed creating their own blockchains in an attempt to gain more control over the technology. The Bitcoin blockchain is public and has no central authority.

What the bankers are slowly starting to realize is that it is the transparency of the Bitcoin blockchain that makes it trustworthy. There's little reason to trust a private blockchain controlled by big banks, who could manipulate transactions on it to their benefit.

"All these banks are trying to get the best attributes of the Bitcoin blockchain without the Bitcoin, and ultimately, I think they're going to capitulate and revert back to the Bitcoin blockchain," Digital Currency Group founder and CEO Barry Silbert said in a Keiser Report interview Nov. 30.

As the banks refocus on the Bitcoin blockchain rather than their private blockchains, they will need more bitcoins to serve their needs.

This transition will be a major catalyst in 2016 - but not the only one...

Less Supply Plus More Demand Equals a Soaring Bitcoin Price

An event will take place in July 2016 that will abruptly chop the supply of new bitcoins in half. The mining reward - the number of bitcoins awarded to a miner for solving a given block - will drop from 25 to 12.5. Miners use dedicated computers and software to solve a mathematical riddle, with the first to do it earning the Bitcoin reward.

The halving of the reward is set to occur every four years. It happened before in November 2012, when the reward of 50 bitcoins fell to 25. It's part of the cryptocurrency's planned scarcity, designed to prevent inflation and build value.

Back in 2012, the Bitcoin price rose 150% in the preceding seven months. For the most part, trading on the Bitcoin exchanges hasn't taken next year's halving into account.

"If OPEC (Organization of the Petroleum Exporting Countries) came out tomorrow and said, 'in six months' time we're going to halve oil production', the oil price would instantaneously react," GABI's Masters told Reuters. "But the Bitcoin market is still in its infancy, and I don't think that factor is discounted into the price fully."

The drop in supply, combined with rising demand, is why so many Bitcoin price predictions for 2016 are sky-high.

And that demand will come not just from the banking industry. Nations with crippling inflation such as Venezuela (159%) and Ukraine (50%) are turning to Bitcoin.

Capital controls are also driving people towards Bitcoin, particularly in China, where about 90% of Bitcoin trading takes place.

BTCC's Lee thinks that 2016 is when the world will start to wake up to Bitcoin's vast potential - and what the digital currency is truly worth.

"Today the worth of Bitcoin is $1 per capita in the world [population]," Lee said, a reference to the "market cap" of all existing bitcoins, about $6.65 billion. "For such an innovative, decentralized digital asset, I say 'boy, are we undervaluing it'. But it takes a while for people to realize that."

The Bottom Line: The Bitcoin price predictions for 2016 are for monster 300% to 800% gains. And it boils down to basic supply and demand. In July, the supply of new bitcoins will be cut in half while demand from multiple trends accelerates. The Bitcoin price should easily beat its previous all-time high by the end of 2016, landing somewhere between $1,500 and $2,000.

 Follow me on Twitter @DavidGZeiler or like Money Morning on Facebook.

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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.

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