You only have to take a quick scroll through the ‘Bitcoin in 2015: Your Predictions’ reddit thread to gauge the differences in opinion surrounding the world’s first cryptocurrency. From less than $50 to over $2000, the anticipated price by year-end appears to be anyone’s guess.
Back at the beginning of 2014, one redditor predicted that bitcoin would end the year at the $14,000 mark. This may seem laughable with hindsight (the price was steadily hovering around $330 in the run-up to Christmas, after a drop of more than 50% from the start of 2014), but suggestions of such growth shouldn’t necessarily be scoffed at. Created in 2009 and pretty much unheard of outside the tech sector for the first two years, few predicted that last year $311.23 million of venture capital would have reached its way into bitcoin start-ups.
Anonymous reddit commenters may not be the most reliable source, but frustratingly, it seems that expert commentators are also torn. Gavin Andresen, chief scientist at the Bitcoin Foundation, was recently quoted in the Financial Times claiming that ‘Bitcoin is a wild and crazy investment that I’m diversifying out of all the time’. Speaking as a ‘core maintainer’ with exclusive access to the bitcoin source code, you could be tempted to follow his lead. However, Andresen holds thousands of bitcoins and went on to say ‘If bitcoin is wildly successful, I’m still holding on to a good chunk of bitcoin’. It can be hard to keep up.
In truth, there’s no straightforward answer as to whether 2015 will be a good year for bitcoin, but here are some key points to consider when making up your own mind:
Virtual currencies are here to stay
Where bitcoin is leading the way, other cryptocurrencies aren’t far behind. At the time of writing ripple has a market cap of over $575 million, litecoin comes close to $62 million, and paycoin is edging towards $60 million. Figures are expected to show 8 million bitcoin wallets were in use last year, with increasing numbers set to adopt the currency in 2015.
…but have some way to go towards the mainstream
Although ‘bitcoin believers’ are quick to cite that major brands including Microsoft, Dell, PayPal and Expedia are now accepting payments, in reality most companies direct transactions through partners such as Coinbase or BitPay, who convert bitcoins into cash. While big business doesn’t want to miss out on revenue generated by bitcoin users, it isn’t prepared to fully trust in the revolutionary technology just yet.
Security and perceived complexity are still barriers
The first major bitcoin headline of 2015 was the hack on Bitstamp, Europe’s leading bitcoin exchange, with losses estimated at $5 million. This follows Japan’s Mt. Gox exchange filing for bankruptcy last year after losing $450 million of bitcoin in a cyber-attack.
While these stories may say more about the security of the exchanges than the currency itself, the public continue to be wary and most don’t feel technically proficient enough to store their own bitcoins. In his Financial Times interview, Andresen likened the situation to the early days of the internet – it took a long time for consumers to feel confident handing over their credit card details.
There’s no such thing as bad press
It may be hard to escape the negative coverage and doubters, but the intense interest in bitcoin speaks volumes. Bloomberg labelled bitcoin the worst currency of 2014 which, conversely, means it enters 2015 as a recognised player in online forex trading, rather than as a commodity. Besides, using a CFD position you could always short the market if Bloomberg are right.
Whether the year ahead proves good or bad, it’s fair to say it will certainly be a big one for bitcoin.
The early internet comparisons suggest cryptocurrencies will eventually fit seamlessly into everyday life. But whether that’s the bitcoin we know today, or an evolution of the technology, is hard to tell. In fact, the behind-the-scenes technology may be more worthy of investor attention than the currency. Like the internet, bitcoin’s payment protocol and the blockchain transaction database have potential to transform a huge range of industries.
If you’re still not convinced bitcoin will play a significant role in 2015, it’s worth noting that the IRS, the US government tax agency, recently issued guidance on how to treat bitcoin and other virtual currencies for federal income tax purposes. Now there’s a level of social acceptance you can’t avoid.
