Nick Colas, the first Wall Street analyst covering cryptocurrencies and the co-founder of DataTrek research, recently argued that bitcoin is potentially in for a wild ride in 2018, as he sees the cryptocurrency fluctuate between $6,500 and $22,000.
According to CNBC, the analyst, who’s been following bitcoin for at least four years now, doesn’t see bitcoin’s volatility going anywhere in 2018, as “bitcoin and cryptocurrency are hard to value and their economic utility relies on use cases that are not yet built.” To Colas, a midpoint range of $14,035 is a reasonable price point for the flagship cryptocurrency next year.
He stated:
“BOTTOM LINE: BITCOIN CAN RALLY TO $22,000 AND STILL BE REASONABLY PRICED, OR PLUMMET TO $6,500 AND ALSO BE CORRECTLY VALUED. WE EXPECT TO SEE BITCOIN TRADE FOR BOTH PRICES IN 2018.”
At press time, bitcoin is trading at $14,850, according to CCN’s price index, as the cryptocurrency keeps swinging after Christmas. It’s down from a $19,200 all-time high, after starting the year at about $900.
Along with the price swings, Colas sees bitcoin’s market share go down throughout the year, as altcoins are set to further reduce its dominance. This year, bitcoin’s market share went down from about 87% to 44.2% at press time. Although bitcoin’s market cap is currently above $256 billion, there are now 34 cryptocurrencies with a market cap above $1 billion, with Komodo (KMD) currently at $999 million.
Moreover, he sees “at least four crashes” of 40% or more occur throughout 2017 – presumably similar to those we’ve seen this year, with the last one hitting bitcoiners last week. To reach his conclusions, Colas compared the amount of bitcoins to the amount of $100 bills in circulation.
He said:
“BITCOIN’S PRIMARY ‘REAL’ USE CASE RIGHT NOW IS PERSONAL ASSET PROTECTION. YES, THAT INCLUDES MONEY LAUNDERING AND TAX EVASION. BUT IT ALSO INCORPORATES THE LEGITIMATE DESIRE OF HONEST PEOPLE LIVING IN COUNTRIES WITH LESS-THAN-EXEMPLARY RULES OF LAW TO SHIELD SOME OF THEIR ASSETS. AT THE MOMENT, THE PRIMARY INSTRUMENT USED GLOBALLY FOR THESE PURPOSES IS THE $100 BILL.”
Following his line of thought, if bitcoin’s value came to 10% of the total $100 bills in circulation, its price would be of about $6,500. If we up it to 33%, then we hit the $22,000 mark. Given that the average between the high and the low equals $14,035, a number not too far off the cryptocurrency’s current trading price, Colas is confident his valuation is on the right track.
To the analyst, the only way the cryptocurrency could go substantially higher than his prediction is if a large-scale bitcoin business is created. Until then, he’ll stick to his current method.