End of Downtrend
After a devastating two year downtrend (actually, a little over one year, but psychologically I would argue two years, and only now starting to release its grip), the price of Bitcoin, and thus cryptocurrencies in general, have been supressed immensely. We've hit "rock bottom" so to speak.
Moment of Truth
So now, when we're finally seeing upwards momentum again, how high could we see Bitcoin go before the next correction?
To use some historical figures, it is natural to go back to 2012, when Bitcoin hit a devastating low of 2.22 USD (BitStamp Figures). Following the development through the halvening, the Cyprus crisis in April 2013, and the China Bubble autumn 2013, Bitcoin reached its all-time high of 1163 USD. That is an increase of a whopping 524 times.
With reward halving right around the corner, and Bitcoin recovering from a low of 152.4 USD January last year, we have to wonder, are finally in for yet another extreme bull run?
Past, Present and Future
Now, everyone knows that you can't predict the future based on the past, and I'm not here to argue that. It is of course highly uncertain if we can expect the same development this time around. But I do believe that now that we are still psychologically tied up in the seemingly never-ending downtrend of the past two years, ignoring the past and not open our eyes to the events that are about to unfold, may just be a more likely mistake that we're prone to make. It therefore an interesting exercise to take a look at the numbers and play with some interesting speculative scenarios.
Speculations
Now, IF history was to repeat itself, Bitcoin would within a year's time hit an all-time high of the previous low multiplied by 524, which would yield around 80k USD.
Alternatively, one could argue that it makes more sense to look at the market cap of Bitcoin rather than its price (rough numbers from Blockchain.info charts). That route will lead us to a low in 2012 of around 17m USD. the High in 2013 reached around 14b USD, which means an increase of 823 times. Following the same logic, we can look at the low of 2.4b USD from January last year, that will take Bitcoin to an all-time-high of around 2 trillion usd next time around. Assuming we get there in 2018, the Bitcoin supply will be at 16,4 million, which yields a Bitcoin price at the time of around 120k usd.
Problems
Of course, there are loads of problems with these kind of predictions, which is why I purposely call them speculations. That is what they are.
One problem is, of course, that we can not expect to see the same growth as we have until now. The thing here, however, is that this goes both ways. The growth could be way smaller, but it could also be way larger. It is impossible to know, and history is our only guide.
Another, perhaps even bigger issue, is that while Bitcoin was largely alone during its 2013 bull run, this time around the cryptocurrency space is teaming with competitors, a few of which are becoming really big. Ethereum is the elephant in the room, currencty enjoying a market cap comfortably above 10% of Bitcoin's own market cap. Others, like the Graphene-based chains that we all love so much, may take a significant bite of that pie as well.
The Cryptoeconomy
The vast amount of competition in the cryptocurrency space could, of course, mean that we should look at the combined cryptoeconomy market cap instead of Bitcoin's. Those numbers are to a certain extent more difficult to come by, and they may not even be that important.
As Bitcoin is currently so dominating, for simplicity's sake, we can assume that the calculated Bitcoin's future market cap of 2 trillion is actually the shared market cap of the whole cryptoeconomy.
Using history and knowledge of network effects as a guide, it is not outrageous to assume that the cryptoeconomy could continue to follow the power distribution we see today, where the largest actor, Bitcoin, has ballpark 80% of the total market cap, the remaining 20% being shared by the rest.
Another point to make is, does it even matter? If Ethereum, or BitShares, were to take over as the leading cryptocurrency, our goal of monetary liberty would still be reached, and the implications to humanity would be largely the same. Financial freedom for everyone, end of crony capitalism and statist suppression, no more financing wars using devaluation. Liquid, efficient flow of value, and incentivization of value creation.
Implications
With a price of Bitcoin (or equivalent cryptocurrency) of around 80-120k USD or a combined market cap of 2 trillion USD in a couple of years, attention is undeniably drawn to the meme we all know so well, with Morpheus telling Neo that when he’s ready, he won’t have to denominate Bitcoin’s value in dollars. And it is really appropriate now to ask ourselves those questions:
It is final this time? Will Bitcoin simply keep going until there is no longer any point denominating the currency in dollars or other FIAT? Could Bitcoin become the new gold standard, against which all other currencies and assets are measured?
Whatever the answer, one thing is for certain. We’re about to enter into one of the most exciting times of known human history. Economic liberation of a scale never seen before. Is this the time when we will conquer the moon? Mars?