The rapid growth of the cryptocurrency market in 2017 peaked at the end: if in December 2016 for 1 Bitcoin was given about $ 800 USD, then a year later the BTC rate soared above $ 20,000 for a short time. This is more than a million rubles at the Central Bank rate. That is, the growth rate of Bitcoin surpassed the wildest expectations of experts and analysts. If you go back to the old forecasts, you can find analytics, where for 2018 growth was predicted to $ 12,000. But the behavior of market participants has made its own adjustments. When, on the third wave, a huge mass of amateur traders connected to a cryptocurrency trend without any experience, the bitcoin rate did not simply grow, but rushed vertically upwards. In these “golden days” of peak prices, quick-witted investors sold their cryptocurrency reserves, in a flash they became dollar millionaires and billionaires.
Bitcoin chart for 2017. Red marked a sharp take-off zone // SOURCE: RBCBut all good things end sooner or later. Upon reaching transcendental prices, buyers almost disappeared. In parallel with this, a sea of negative information appeared on the prospects for regulating this market, and even information on the complete prohibition of cryptocurrency. Bitcoin holders got nervous and wanted to take profits. As a result, the exchange rate sharply collapsed, and panic began among investors. First, Bitcoin dropped to $ 13,000, then to $ 11,000, $ 8,000. The “bottom” of the course from mid-November is $ 6,900. Numerous publications about the death of cryptocurrency have appeared in the media. But Bitcoin has withstood this test.
In February-March 2018, its rate ranges from $ 7,000 to $ 12,000. Two local lows of $ 6,900 and $ 7,800 indicate that the market felt a double bottom. For investors with large capital, this is a great time to enter the market with confidence. Having repulsed from the long-term support line, Bitcoin gradually finds an equilibrium point between supply and demand. Financial markets are markets for expectations, so corrections are considered a good thing. Cryptocurrencies flow from those who are weak and panicked, to those who have stronger nerves and who believe in the future of Bitcoin.
The flow of favorable news attracts new members. The
emergence of futures is especially important. By analogy with the commodity markets, futures will balance long-term demand and supply in the cryptocurrency market. And this, in turn, will allow to attract long money with an investment horizon of over 1 year. Ultimately, this will help to cope with the high volatility of the course, when insecure, emotionally weak investors try to sell Bitcoin at lows, derailing the rate of this cryptocurrency even more.
Visual illustration of the stabilization of the course // SOURCE: RBCWhen to wait for good weather
The periods of the growth phase and the phase of the fall of financial assets are 4-5 to 1. For example, a financial asset grows 10-12 months, followed by a correction of 2 to 3 months. With regard to Bitcoin, the growth is obtained in the period from October 2016 to December 2017. This was followed by the first correction, then an attempt to return to previous positions and again a powerful series of corrections. Correctional volatility lasted for about 3 months, after which Bitcoin lost over 60% of the December maximum.
In the middle of March a second local minimum of $ 7,800 was formed. It is $ 900 higher than the first one at $ 6,900. According to a technical analysis that works well for the cryptocurrency market, a local bottom appeared. The course pushed off from the lows - long-term investors came to the market with strong nerves and a lot of patience. Now is the time for range trading: selling at local maxima, buying at the minimum. For long-term investors, periodic drawdowns provide an opportunity to enter the market with minimal risk.
Bitcoin course chart for 5 years. The red line indicates the level of support // SOURCE: RBCWhen the level of $ 12,000 is broken through, the road to $ 18,000 opens with all the ensuing consequences in the form of a mass attraction of new participants. One moment is also important. According to experts, the total cost of miners to get one BTC coin exceeds $ 8,000. The average price for the last month was above $ 10,000.
Given the high demand for cryptocurrencies at a low rate, many of those who missed the profitable entry points in 2017 (the first half of the year) tend to catch up. For this purpose, bitcoin drawdowns are suitable for strong support levels, as a moment for opening long positions. The history often repeats itself, in which we will be able to make sure in the second half of this year, when we will see the next Bitcoin rally.
Wall Street Forecast
An interesting forecast was prepared by Tom Lee (Wall Street financial strategist and head of Fundstrat Global Advisors). According
to the expert , the decline of the digital currency market is over. Now, Bitcoin, as the main and most capitalized cryptocurrency with the highest level of trust, represents an excellent opportunity for investors with a high propensity to risk to diversify their portfolios. According to Tom Lee, this year the Bitcoin rate will break through the 2017 highs. Then he will rush up to the region of $ 50,000-100,000 by 2020. To do this, all you need is for Bitcoin to take no more than 5-10% of the global gold market. With such prices, bitcoin cloud mining cryptocurrency will become a super profitable business, when the cost of production will be an order of magnitude lower than the price at which bitcoin can be sold. Again, analogies with the era of the gold rush. While pessimists doubt forecasts, the brave and confident today are preparing shovels and sticking plots.
The confidence of the strategist is based on a thorough analysis of the behavior of the millennials. This generation has grown among electronic gadgets, believes the capabilities of digital technology, can not imagine their lives without the Internet. Unlike their parents, who trusted gold and made money in stock markets, millenials will invest in digital currencies. In this regard, Bitcoin will be most fortunate as a real replacement for traditional financial instruments. If you pay attention to those who make pessimistic statements in the media, these are people who cannot understand and accept Bitcoin due to their old age, financial mentality or classical education.
An optimistic forecast for the future of Bitcoin is not just a mere statement. Tom Lee actually understands cryptocurrency. In 2017, he accurately predicted the growth of Bitcoin over $ 10,000. Of particular interest is his forecast that Bitcoin circulation will be regulated as a commodity. It begs analogues with monetary gold and securities for this asset. That is, Bitcoin will still occupy a special position among cryptocurrencies. This means a high level of trust with a real opportunity to receive the status of a backup cryptocurrency: like the US dollar, the Japanese yen or the Swiss franc.
What you need for stable growth of Bitcoin
- Regulatory control of the cryptocurrency market by financial regulators.
- Legislative and regulatory framework that will help Bitcoin to establish itself among other financial assets.
- Exclusion of fraudulent and speculative schemes using cryptocurrency.
- The solution of technical problems with the purchase, possession and sale of bitcoin.
Conclusion
In the cryptocurrency markets ended a wave of sales. Volatility bounced back, investors took a breath. Bitcoin confirmed its need as a means of payment. He proved to be useful as a risky and at the same time highly profitable investment. Now for many Bitcoin is positioned as a digital analogue of monetary gold. He has excellent investment opportunities, accessibility for wide sections of the population, prospects for an ideal payment instrument for solid real estate transactions.
At the end of 2017 and the beginning of 2018, positive news reappeared. Financial regulators of the world's leading countries recognized bitcoin as a financial instrument. Russia and China have announced plans to issue their own cryptocurrency. In Germany, bitcoin was equated to means of payment. South Korea leads among other countries in the total volume of Bitcoin trade. Canada has become one of the world's mining centers. The Central Bank of Canada has a positive attitude to the use of cryptocurrency in the financial system. Saudi Arabia, Turkey and South Africa are going to regulate their own cryptocurrency market. In the US, futures trading has been
launched on the Chicago exchange. Japan recognized cryptocurrency as legal tender.
This development is encouraging. After all, the future regulation of the field of cryptocurrency will benefit all participants in this financial segment. Investors will get confidence and assurance. Market makers will be able to legally serve the infrastructure of the cryptocurrency market. Miners will consistently earn on their own farms, controlling the current costs of mining and making a profit due to the growth of the market value of cryptocurrency. Cloud mining will help beginners to try out their capabilities and earn the first bitcoin.
Those who doubt the future of Bitcoin should remember that the love for the dollar rests entirely on faith in this currency. But unlike the dollar, which is currently being emitted in exorbitant volumes of the Fed, the number of bitcoins is limited to 21,000,000 units. Therefore, the leading cryptocurrency has every chance in some time to become an international currency for conducting confidential transactions independent of the state, a personal tool for diversifying savings, digital gold for long-term investments and a safe haven before the next crisis.