In October 2015, the exchange rate of bitcoin stood at approximately 230 to 270 USD, but in November the rate increased sharply to 350 dollars, in December — 450 USD. The most serious price breakthrough came in June 2016: in may, the rate was at the level of $ 430-440 USD, and just over a month, the cryptocurrency has gained more than 60%, reaching a peak of 724 USD on 12th of June. Now bitcoin is quoted at $ 660, however, analysts are making bold predictions: optimistic prospects of bitcoin to the end of the year, breakthrough of level 1100 USD and above. Recall that its maximum bitcoin peaked in November 2013 at the level of 1200 USD.
In classic stock trading investors consider “safe haven” of gold, translating into precious metal money out of the stock and currency markets. However, if for the first 5 months of 2016 gold showed an increase of 15% and is now at a mark of 1350 USD per ounce, bitcoin (so the only successful cryptocurrency) showed an increase of over 60%. Isn’t that a very profitable investment? Investors are cautiously watching the cryptocurrency, remembering the collapse of 1200 to 100 dollars, but many factors suggests that bitcoin still has the potential growth, and its causes we will discuss, along the way explaining why cryptocurrency in June has sharply gone up.
The prospects of bitcoin: should you invest?
After the results of the referendum in the UK on 24th of June, the cryptocurrency rose by 7% to 655 USD. From this point on, virtually nothing has changed: the rate reaches this level showing low volatility. Experts say that those who invested in euros and sterling invest in bitcoin, as bitcoin does not fall under the control of regulators (banks). Although bitcoin is really a little older on the outcome of the referendum, the main reason for the sharp rise of cryptocurrency is absolutely not the case.
Introduced in 2009, in 2015, has been the most intense year for the whole period of its existence:
- the growth of investment in bitcoin. The total value of all bitcoins in circulation was up last may jump about 8 billion USD. Relatively loyal attitude of the authorities of developed and developing countries contributed to the fact that the cryptocurrency began to accept not only large but also medium level companies;
- after a series of bankruptcies of crypto-exchanges again major players appeared. The introduction of margin trading, the appearance only in the United States of organizations such as Coinbase and Gemini attracted investors;
- the drop in China’s stock market and the depreciation of the yuan. China accounts for about 80% of trade of bitcoins (according to other sources almost 95%). The Chinese market is closed, and withdrawal of money from the country without the knowledge of the regulator is very difficult. The cryptocurrency also allows you to simply, quickly and anonymously transfer money from China, and not to fall under the control of the controller;
- the closure of Silk Road, the underground web site where they sold for bitcoins more than 70% of prohibited items. The arrest of its founder in 2013 year triggered the first drop in cryptocurrency 66% and then increase by 87%;
- the launch of the new Ethereum platform, designed to create decentralized online services on the basis of the blockchain;
- The European court declared the bitcoin currency, relieving it from VAT (in most countries, bitcoin is considered an asset, rather than money, and falls under the relevant taxation). At the end of April in Luxembourg has granted a license to conduct trading operations with bitcoin exchange Bitstamp. In one of the cantons of Switzerland (Zug) has allowed bitcoin to pay for public services.
All these conditions became the basis for the 2016 year, investors are again interested in cryptocurrency. For almost a year, bitcoins were stable, but in November-December of 2015, thanks to Sergey Mavrodi and his pyramid of social networks among young people in China the rate has soared to the level of 450 USD and since then never dropped below 380 USD.
According to analysts, there are no fundamental reasons for the growth of bitcoin, since investors prefer more tangible gold, but it is only a temporary phenomenon. Experts predict that in 5-7 years a cryptocurrency will become an equal asset on a par with precious metals, where investors will invest at relatively the same risks.
Among the reasons for the sharp rise of bitcoin in may 2016, analysts call the following:
- The main reason is of a technical nature — the reduction of the remuneration for the production of coins twice in July 2016, that increases the rarity of virtual coins and accordingly raises its cost.
The essence of production (computer issue) of bitcoin is the joining of blocks of transactions to the chain of transactions, and perform complex mathematical operations. The system of emission of bitcoin is laid down that after the accession of 210 thousand units reward “miners” falls two times, that is, with the same amount of resources expended miners will get rewarded in 2 times less. The prospects of bitcoin at the same time growing as cryptocurrency becomes more valuable. This happens on average every 4 years and should occur around July 2016.
- The withdrawal of money from China with the help of cryptocurrency. However, stock markets tumbled in January, but peak growth occurred in May, so the reason is not the main one.
- The growing popularity of cryptocurrencies due to the improved technology and the increase in the number of companies that accept bitcoin as payment.
The prospects of bitcoin in the period of 2016-2017 years are more than optimistic. Cryptocurrency is already interested in such companies as Microsoft and NASDAQ, Europe is progressively recognizing the bitcoin as a method of payment, and investor confidence in bitcoin is growing every day. The process of emission of the cryptocurrency is becoming increasingly clear that transfers bitcoin from the category of something strange in one of the many online payment methods.
We recommend that you consider bitcoin as an alternative investment on a par with gold in the medium and long term. Despite the forecasts of analysts 2000-2500 USD by the end of 2017, the year, our forecast is more restrained: after July, the rate can go up to 800-1100 USD. And only in the case that technology companies will continue to support the cryptocurrency, developing new software (which is likely), the course can overstep the mark of 1100-1200 USD. Other cryptocurrencies are unlikely to be interesting for investment, because they do not have any technical and legislative support.