Cryptocurrency took the world by storm over the last few years. Hailed as a new and exciting way to store capital, the likes of Bitcoin promised to stick it to the banks with almost fee free transfers.
The blockchain storage structure used to house cryptocurrencies is as secure as any investor would demand.
As Bitcoin became more mainstream its price rose from nothing in mid-2013 up to a few hundred dollars over the following three years. Many thought that would be a glass ceiling if the cryptocurrency craze didn’t die out.
Glass Ceiling
In March 2017 Bitcoin rose to more than $1,000, leaving the crypto fans wondering just what was possible. While the market watchers were waiting to see if this might be a good time to cash out their investment the price just exploded over the remainder of the year.
On December 17 2017 Bitcoin was valued at an eye-watering $19,447. A record that still stands today. Just imagine if you had jumped in at the ground floor your investment would be worth around twenty times more.
By February 2018 the value of Bitcoin plummeted to $6,841. By the end of the year its value dropped even more to $3,185.
At the very least we can see that cryptocurrencies are volatile enough to trade. The price movements are severe enough that investors should always be able to spot a profitable entry point into the market.
What for the Future?
The price of Bitcoin was worth slightly less than $5,000 when the COVID-19 pandemic really kicked in in March 2020. As economic turmoil spread around the world, commodities such as gold increased in value, as did Bitcoin. So much in fact that Bitcoin came within $200 of breaking the record price set in 2017.
The question potential investors need to be asking right now is will the price plummet once again, as it did in 2018.
Anthony Pompliano, a cofounder of Morgan Creek Digital, spoke to American news outlet CNBC last week and said:
“I think the key piece that people coming from Wall Street have to understand is that most Bitcoiners are not going to sell their Bitcoin. 63% or more of the Bitcoin hasn’t moved in the last 12 months. So what you’re really seeing is just an increase in demand, a lack of supply or low supply and that’s driving the price higher and I think that will kind of continue going into 2021 and the price will appreciate pretty aggressively from here.”
Even the greenest investors know that supply and demand is the real driving force behind economies.
Update
As we go to press Bitcoin has broken through it’s record and looks set to smash the $20,000 barrier for the first time in its history.
Pompliano’s opinion is that a single Bitcoin could be worth more than $100,000 by the end of the year.
"And if we continue to get bigger and bigger buyers ... if this kind of tips over and all of the sudden it becomes kind of a consensus trade, it wouldn't surprise me to see something even higher than $100,000."
Investors looking for the downside of investing in Bitcoin in 2020 would do well to follow Pompliano. He is brutally honest with his opinions.
"The first thing's a self-inflicted wound, right, if there's a bug introduced into the code or something like that. The second thing would be some sort of geopolitical risk where we saw a really aggressive coordinated kind of action by multiple nation-states.”
Neither of these are currently probable. In the long-term nobody knows how the world will change in the coming decade but the short-term outlook for Bitcoin looks just fine. The question will always be how long do you hold your investment for if you decide to go ahead.
