Opinion: Despite Recent Woes, Bitcoin Could Hit $30,000 This Year
After a tumultuous start to the year, bitcoin is set for a dramatic surge in value by the end of 2018, according to David Drake, the crypto commentator and founder of investment firm LDJ Capital. Drake is betting big on bitcoin after last week’s Group of 20 ministerial meeting failed to establish an overarching framework for regulating cryptocurrency.
Drake’s Bold Prediction
In an interview with Bloomberg last week, Drake predicted bitcoin would reach $30,000 by year’s end. Although he didn’t go into detail about his estimate, it’s more or less in line with several other forecasts calling for a price-per-coin of $25,000 or above.
Bitcoin experienced “a cold winter” in the first quarter, according to Drake, with prices failing to set even a single record high. The digital currency was last seen trading at $8,435, having declined by nearly half since the beginning of the year. Prices recently traded as high as $11,600 before succumbing to bear market pressure.
In Drake’s view, bitcoin remains the undisputed king of cryptocurrency, proclaiming that some of the lesser known coins are “fraudulent” and “strange.” When capital returns to the market, it will likely flow into bitcoin first.
Assessing Drake’s Forecast
Although nobody would have questioned Drake’s prediction three months ago, investor sentiment has radically shifted recently. Regulatory uncertainty, a fear-mongering mainstream media and perhaps weaker demand at the institutional level have all weighed on markets.
Bitcoin fell below $6,000 in early February as part of a protracted slump in the cryptocurrency market. A parade of central bankers and supranationals masquerading as cryptocurrency experts contributed to the declines by calling bitcoin a “threat to financial stability” and warning that “policy intervention,” even “preemptively,” would be needed.
While FUD-induced volatility is nothing new for bitcoin, the agenda has shifted significantly over the past three or four years. When the author began covering bitcoin back in 2013, cryptocurrency was synonymous with dark web criminal overlords, hackers and other clandestine activities. Those elements still exist, but very few credible voices believe they are the only actors benefiting from bitcoin.
Fast forward to today and the conversation is all about bitcoin’s threat to financial stability and the pending regulatory witch hunt. In the process, traditional media has flat-out lied about the direction of these and other developments (see: Mainstream Media Is Misinterpreting Bitcoin Regulation Again).
Given bitcoin’s previous rally to $20,000, Drake’s forecast is very reasonable – even in such a narrow time frame. To understand why, consider the following:
- Massive price swings are not uncommon for bitcoin. Whereas stock market can take years to gain 20%, bitcoin can do it in a few days.
- Bitcoin’s fundamentals haven’t changed very much from when prices were valued near $20,000. If anything, the outlook is much brighter thanks to ongoing efforts around scalability and privacy (for example, bulletproofs are considered a major crypto breakthrough).
- There’s lots of evidence that demand for cryptocurrency is rising. Some of the more notable examples of this trend are the rapid growth of online exchanges, institutional efforts to bring bitcoin and other cryptos to traditional investment circles and continued growth of ICOs.
However, in Drake’s view, bitcoin’s growth will be based on something more fundamental than all the above:
“The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin. This would happen over the next decade, but it could go faster,” he said.
Although the jury is still out on Drake’s single currency hypothesis, investors are slowly returning to bitcoin after dabbling in in the more obscure altcoin market. Bitcoin’s share of the market is much higher today than it was in early January when the crypto universe crossed $800 billion in value. At last check, bitcoin controlled roughly 44% of the global cryptocurrency market, with roughly 39% of all trades being made in BTC.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.