Cryptocurrencies are either going to be the biggest investment opportunity of the 21st century or represent the biggest financial fraud in history depending on who you ask. Almost everything you read about cryptocurrencies is focused on one particular coin; Bitcoin. Currently trading at around US$6600, is the price set to plummet or could it reach reach $50,000 or even $100,000?
It was only a few short weeks ago that the cryptocurrency works celebrated Pizza Day. On May 22 2001, programmer named Laszlo Hanyecz exchanged 10,000 BTC for two Papa John’s pizzas. On today’s values, that’s about $35m per pizza. And if that isn’t eye-watering, let’s not forget that when the piece of Bitcoin peaked in January, each of those pizzas were valued at almost $100m.
Speaking to CNBC, Arthur Hayes, the co-founder and CEO of the Bitcoin Mercantile Exchange, said he thinks Bitcoin will reach US$50,000 by the end of the year. And venture capitalist Tim Draper told Bloomberg he thought Bitcoin would top $100,000 by year’s end and $250,000 by 2022. He also said it could dip to $3,000 before then.
Of course, these guys are heavily invested so they have an interest in making pumping up the price.
While the mathematical and statistical models used to derive these predictions can be questioned, there is one thing changing in cryptocurrency markets that is likely to make a long-term difference to the value of Bitcoin and the other coins that survive the current land grab that seems something like 3,000 different coins and tokens being traded. Like it or not, cryptocurrency markets are coming under regulator scrutiny.
In Australia, AUSTRAC has put obligations on cryptocurrency exchanges to ensure they aren’t being used for criminal activity. And, in the US, the Securities and Exchange Commission (SEC) is looking at market regulation for similar reasons.
In a recent report, PwC said cryptocurrency sales hit $13.7b so far this year – that’s a doubling on last year. But they also note that ICO’s when new coins are launched, fail 70% of the time.
As regulators move in and make the market safer that will bring institutional investors. As they look to buy more Bitcoin and other coins that are founded on platforms that bring value somewhere, they could drive the price upwards. For example, Ripple (XRP) is doing deals with banks to acts as an alternative to the US dollar as tool for foreign exchange. If they get enough support then XRP could increase in value. Or it could all fall into a heap and be worth nothing.
So, how high can Bitcoin go? Most market analysts, both from more conservative source like PwC and so-called “cryptocurrency uber bulls” say the value will increase. To what level is hard to say but almost everyone is with Yazz, singing “The Only Way Is Up”.
Disclosure: At the time of writing, the author holds BTC as well as a few other cryptocurrencies.