A comprehensive guide to the factors that could influence Bitcoin’s value in the short, medium and long term.
As the world’s best-known and most widely traded cryptocurrency, Bitcoin (BTC) is known for its phenomenal growth. Now, as awareness of cryptocurrencies continues to spread, all eyes are on forecasts of where Bitcoin’s price is headed in the weeks, months and years ahead.
However, there are myriad factors that can influence the price of Bitcoin, so let’s take a closer look at what those factors are and what they could mean for Bitcoin’s value in the future.
|Launch date||9 January 2009|
Bitcoin price prediction
You’re probably well aware that cryptocurrencies are highly volatile, and Bitcoin is no exception. Influenced by a variety of factors, the price of Bitcoin can rise or fall sharply in a short period of time. You’ll need to carefully consider all the issues that could potentially lead to growth or decline in the currency’s value.
If you’re thinking of buying Bitcoin, make sure you consider the following:
What could drive Bitcoin’s growth?
- Limited supply. The total supply of Bitcoin is limited to 21 million, and there are around 18 million BTC already in circulation. This is an important factor to consider when determining the supply/demand equation and the influence it could have on the price.
- Prestige and credibility. Mention the word “cryptocurrency” and the first word that comes to many minds will be Bitcoin. Launched in 2009, Bitcoin has been around a long time (in crypto terms) and is the most widely recognized digital currency.
- Media hype. If Bitcoin goes on another price surge like it did in 2017, expect it to be extensively covered in the media. Positive media coverage can potentially lead to increased demand for a particular currency.
- Ease of access. As the most popular cryptocurrency (in trading volume) in the world, Bitcoin can be traded on cryptocurrency exchanges all over the world. This makes it easy to access and also increases its credibility.
- Increasing acceptance. If the number of businesses and service providers that accept Bitcoin as payment increases, this could increase demand for the currency. Increased interest from institutional investors, as hedge funds and other financial services providers start offering Bitcoin trading options, could also drive up demand.
- Upcoming tech developments. There is a range of upcoming tech upgrades and proposals designed to overcome Bitcoin’s scalability issues. For example, the introduction of SegWit, designed to improve transaction times and lower fees, and the rollout of the Lightning Network, a relay network that aims to further reduce fees and speed up transaction times. If successful, this could vastly improve Bitcoin’s functionality.
What could hold Bitcoin back?
- Scalability problems. Bitcoin has been criticized for its slow transaction times and high transaction fees, and there are concerns over whether Bitcoin will be competitive even with the Lightning Network.
- Mining concerns. As Bitcoin mining becomes increasingly difficult and expensive, this could narrow the field of miners able to compete and in turn centralize the process.
- Market competition. The cryptocurrency market is becoming increasingly crowded as a wide variety of altcoins compete for market share. While many of those coins aren’t necessarily direct competitors for Bitcoin, they could still detract from Bitcoin’s overall market dominance.
- Threat of increased regulation. Cryptocurrency is still in its infancy and there are regular media reports of governments around the world introducing tighter legislation targeting digital currencies. These announcements can have an impact on the price of Bitcoin – for example, Bitcoin’s value dropped almost 20% in January 2018 amidst rumours of a Chinese government crackdown on cryptocurrencies.
- Negative news. While positive media stories can potentially drive values up, negative media stories, such as those reporting Bitcoin bubbles, can also have an effect on prices.
- Lack of cryptocurrency adoption. Cryptocurrencies are yet to achieve widespread adoption. While there are plenty of projects working on bringing cryptos to the mainstream, a lack of acceptance of digital currencies across the board could potentially affect values.
- Community disagreements. The governance of Bitcoin can also influence its price. For example, disagreements about changes or upgrades to Bitcoin’s underlying technology can cause infighting, potentially leading to hard forks like the one that created Bitcoin Cash (BCH) in August 2017.
Where to buy Bitcoin
What’s coming up in Bitcoin’s roadmap
Bitcoin is an open-source project and, as such, doesn’t have an official roadmap. However, there are a few key challenges and developments coming up for Bitcoin in the future.
One of the best-known is the Lightning Network. Currently in the testing stage, the Lightning Network is designed to solve Bitcoin’s problems of slow transaction speeds and high fees. A payment network layered on top of the Bitcoin blockchain, the Lightning Network could potentially have a big influence on the usability of Bitcoin – but the exact effects it will have remain to be seen.
The cryptocurrency sphere is crowded and becoming increasingly competitive all the time. If you’re thinking of buying Bitcoin, it’s important to be aware of the influences (both positive and negative) that the actions of competitors could have on the price of Bitcoin. Some of the main competitors to consider include:
- Ethereum (ETH). Launched in 2014, Ethereum is a decentralized platform where developers can build and deploy applications. Ether is used to pay transaction fees and services, and at the time of writing (February 2018) was the second largest cryptocurrency by market capitalization.
- Ripple (XRP). Ripple offers both a payment network (RippleNet) and a cryptocurrency (XRP), and it aims to allow banks and payment providers to send fast and secure transactions around the world. It’s one of the top five cryptocurrencies in terms of market capitalization, and you can find out more about how it stacks up in our Bitcoin vs Ripple comparison.
- Bitcoin Cash (BCH). Created in August 2017 following a hard fork of Bitcoin, BCH is designed to offer faster and cheaper transactions than Bitcoin. It has since cemented its place as one of the top 10 currencies by market capitalization.
- Dash (DASH). Built with a focus on fast and anonymous transactions, Dash is widely traded on a variety of cryptocurrency exchanges.
- Litecoin (LTC). Commonly referred to as “the silver to Bitcoin’s gold”, Litecoin was founded in 2011 and was designed to provide faster transactions than Bitcoin. It’s also one of the top 10 cryptocurrencies by market capitalization.
Beyond 2019: What does the future hold for Bitcoin?
Cryptocurrencies are highly speculative, so any predictions of Bitcoin’s future value should always be taken with a very large grain of salt. That said, traders and crypto enthusiasts all around the world will be watching what happens to Bitcoin with a high level of interest.
As the best-known and most popular (in terms of trading volume) of all cryptocurrencies, Bitcoin has the enviable position of being the digital currency with the most credibility and widespread recognition. If cryptocurrencies can continue their push into the mainstream, Bitcoin is well placed to take advantage of any increased consumer demand.
However, it does face a few key threats. The biggest of those currently is the problem of scalability, which is one key area where some competing cryptocurrencies are well ahead of Bitcoin. While the Lightning Network is often held up as the key to solving this problem, there are concerns over whether the complications associated with the Lightning Network mean Bitcoin will still be functionally inferior to its faster competitors, even with it.
The threat of increased regulation of cryptocurrency markets by governments around the world should also not be underestimated, as regulatory changes could have a significant impact on Bitcoin’s value.
Happenings in the cryptocurrency industry itself can also impact prices, and has many times before. Exchange closures, new partnerships and the growing or shrinking acceptance of Bitcoin as a payment system can all affect prices.
The next 12 months promise to be a fascinating period as Bitcoin – and the cryptocurrency market as a whole – continues to mature.
If you’re considering buying Bitcoin (BTC), the most important points to remember are to do your research and familiarize yourself with all the risks involved. Though this digital currency has delivered substantial returns to its early adopters, that’s no guarantee of future growth.
If cryptocurrencies can continue their push into the mainstream and achieve widespread acceptance, not only among consumers but also from governments around the world, this could mean good things for Bitcoin. And if the scalability issues facing the Bitcoin blockchain can be successfully overcome, there seems to be potential for future growth.
However, don’t forget that the cryptocurrency sphere is increasingly crowded, and Bitcoin is sure to face plenty of threats to its title as the world’s number-one cryptocurrency from a host of well-organized and professionally backed competitors. Watch this space to see how it all unfolds.