During the Christmas holidays, bitcoin (BTC) went through one of the periodic bouts of depression that it’s prone to.
The price fell from a high of US$20,000 to a low of around US$12,000 in just one week.
Personally, I’m a bit immune to such moves these days, having lived through many such episodes. As are most long-term bitcoin owners.
We’ve learned over the years to ignore the noisy — and mostly ignorant — mainstream press, and concentrate on the technology and the development cycle.
There’s even a site you can go to that lists the number of times bitcoin had ‘died’.
Currently we are at 225 deaths. Check out the site here for a laugh, and any time you need some reassurance.
For many newbies who would have bought in December’s frenzy, this will have been a frightening introduction to the world of crypto.
All I can say to those people though is that this is something you have to learn to live with if you want to invest in cryptocurrencies.
If you can’t handle the volatility, then this is not the place for you.
You have to remember this is a technological and economic revolution. It’s a dynamic process which is disrupting lots of powerful vested interests.
It won’t happen overnight.
Change never comes easy. And to change an entire economic system is probably harder than anything ever attempted.
Which is why we always say this is a 5–10-year investment. And never to invest more than you can afford to lose.
Here’s another thing many don’t realise yet….
You might never need to ‘cash out’ of per se. In the future you will just be able to spend your cryptocurrencies, much the same way as you spend your dollars today.
But what about the forecast in today’s headline, I hear you ask? Now I’ll admit US$100,000 seems a big call. And let me be clear, I could be completely off on this. Some people think the exact opposite, and have zero as their target!
But today let me give you some reasons why this is possible. And not pie-in-the sky-possible, but actually a decent chance…
Big money, big improvements…
So, in amongst all that bad news and declarations that bitcoin was ‘a failed project’, it appears one of the world’s biggest tech investors has been quietly buying up bitcoin.
Bloomberg reported yesterday that Peter Thiel — an early Facebook investor and founder of Paypal — has been buying massive amounts of bitcoin.
He’s not the only one…
BlockTower capital, a prominent crypto hedge fund, put a $1 mln bet on that bitcoin will reach US$50,000 by the end of 2018.
They’ve done this by buying a call option on the LedgerX platform.
If bitcoin doesn’t reach this price by 31 December 2018 then they lose the entire $1 mln.
Aside from this big money confidence, there are also two technical developments due to hit in 2018 that will radically improve bitcoin’s usability.
This is something a lot of critics forget.
Bitcoin is not a static project. It’s a constantly improving technology.
It’s the essence of programmable money. Coupled to an unalterable and limited supply (unlike dollars, which governments print at will), it fulfils both a store of value and medium of exchange functions.
The first upgrade is something called the lightning network…
Betting on technology
You see bitcoin is getting more expensive to transfer on-chain. It used to cost a few cents to send any amount of bitcoin, but now it can cost $30+.
This rules out many micro payment use cases bitcoin was once touted as being useful for.
So how has this happened?
Well, it’s basically a victim of its own success.
As its popularity has grown the number of transactions has bloated the system. In bitcoin parlance, the blocks are full. To ensure a transaction is included in a block, users need to pay higher fees. Otherwise transactions can be left in limbo or severely delayed.
The lightning network solves this problem.
It moves a bunch of payments off chain, with the option to attach to the blockchain if need be (in case of a dispute).
This will allow near instant, almost free transaction capability.
Bitcoin will once more be a decentralised medium of exchange.
The second development that’s coming soon is something called Rootstock. Basically, it upgrades bitcoin to allow smart contract capability. Much like ethereum (ETH) already can.
This will allow a whole new level of development to take place using the highly secure bitcoin blockchain.
These two developments are huge.
And 2018 should see some big strides in their technical progress. The big money knows this and is starting to move in. But they don’t want to show their hand yet.
So, when you hear about how ‘bitcoin is dead’ or is finished, remember that the Peter Thiel’s of the world didn’t get where they are by taking investment advice from mainstream finance journalists. Or faceless clowns on Twitter!
Editor, Money Morning