Introduction:
It’s been a year of ups and downs in the world of cryptocurrency and blockchain, but one thing remains clear – bitcoin has had an impressive 2017.
According to research from the digital currency news site CoinDesk, Bitcoin reached an all-time high of $17,000 in December, making it nearly five times more valuable than it was at the beginning of the year ($1,000). So what caused this massive spike in value? Let’s take a look at some factors that may have contributed to Bitcoin’s rising price in 2017.
China bans ICOs, likely leading to a drop in prices
This news didn’t exactly come as a surprise, but that didn’t stop it from having an effect on Bitcoin prices. In September 2017, China announced that they would be banning ICOs due to how easy they are to use for scams and money laundering (which is kind of true).
Speculators began anticipating something like China’s ban would happen after Facebook announced it was banning all ads pertaining to cryptocurrency. Because so many companies were investing in coins/tokens without actually understanding them, Facebook had no choice but to crack down on such advertisements.
US Securities and Exchange Commission (SEC) denies Winklevoss twins their ETF proposal
This February, The US Securities and Exchange Commission (SEC) rejected a proposal by Cameron and Tyler Winklevoss, founders of the crypto exchange Gemini, to create an exchange-traded fund (ETF) tied to Bitcoin. The SEC argued that more time was needed to examine new public comments received on its ruling on Bats BZX Exchange’s proposed rule change.
In March, however, SEC Commissioner Hester Peirce broke ranks with her fellow commissioners by openly disagreeing with their decision. This move caused all hell to break loose and it led many people to question what was going on within the SEC. It seems like they are finally prepared for cryptocurrency ETFs now after they gave CBOE permission to list bitcoin futures earlier in December 2017.
South Korea halts trading temporarily
This month, South Korea’s government took a few steps that hit cryptocurrency hard. The country banned initial coin offerings (ICOs), stating they amounted to illegal fundraising and ordered that existing projects return funds to investors.
Then, in early December, Seoul announced it was testing tools to monitor capital outflows for digital currency transactions. While neither move has outright stopped people from trading bitcoin (it’s not like Seoul is blocking access to exchanges or anything), some investors say these moves have made things a bit more challenging.
China government confirms crackdown on exchanges
While China's government didn't specify which exchanges it would be targeting, some of China's largest Bitcoin exchanges have already announced plans to halt trading. BTCC, a major Chinese exchange, said it would stop trading by September 30; rival platform Huobi said it would end trading by September 15. While more information will likely emerge in the coming days and weeks, these moves could be significant for Bitcoin;
China is one of its largest markets, where demand from investors has been a key factor propping up its price. This news comes at a time when India—another nation where cryptocurrency has gained popularity—is also moving to regulate Bitcoin more closely.
Jamie Dimon calls bitcoin a fraud
On September 12, JPMorgan Chase CEO Jamie Dimon called bitcoin a fraud and said he would fire any trader who was trading it. It didn't seem to matter; bitcoin prices kept marching upward for most of 2017.
This is because, as an analyst at Capital Economics noted, there are good reasons to believe that much of bitcoin's appeal isn't from actual transactions but rather from people looking to trade it or hold it for speculative purposes—in other words, investors. That could very well be what happened here—and if so, Dimon helped make them a lot richer.
Japan places cryptocurrencies under regulatory oversight
This news sent a shockwave through crypto enthusiasts, many of whom had seen Japan as a potentially huge market for Bitcoin and other cryptocurrencies. While increased regulation does put a damper on currency speculation, it also brings legitimacy to cryptocurrencies.
When your hard-earned money could be used by criminals, even just using bitcoin feels sketchy; if big companies and governments are starting to accept cryptocurrency as payment for goods and services, it makes sense that individuals would do so too. It’s important to note that more regulation doesn’t mean less volatility—in fact, many people argue that increased regulation is necessary to help decrease it. Regardless of where you stand on the matter, bitcoin will remain volatile until cryptocurrency is better understood by governments around the world.
India's central bank threatens cryptocurrency ban
Less than two weeks ago, India’s central bank issued a warning to citizens about cryptocurrencies like Bitcoin. On Wednesday, it went a step further and banned banks from working with cryptocurrency exchanges—effectively prohibiting their use entirely.
The ban came as a surprise to some, but not all of India’s crypto community was shocked; Pramod Ananth Kumar, an analyst at Tradebulls, says that trading activity has been on a downtrend since late September. The recent bitcoin price fall is linked to Chinese regulation which also resulted in panic selling across exchanges globally, he explains.
Bitcoin makes a surprise rise from $5,000 to $7,400 within days
What happened? Well, there is nothing that can predict cryptocurrencies' prices but one thing's for sure - bitcoin had a good year. It started 2017 at $1,000 and was expected to rise about twenty times before its all-time high. However, it didn't stop there. Bitcoin reached $6,400 on September 1st and then fell to around $5,000.
This summer has been somewhat different for cryptocurrencies; even though Ethereum hasn't reached its all-time high of over $400 again since June of 2017 it still managed to hit an all-time high of more than $300 in September when bitcoin also hit an all-time high near $7,400.
Naeem Aslam states bitcoin at $20,000 end of 2018 could be possible due to demand from countries such as Venezuela.
Aslam makes mention of recent situations in Venezuela which have caused their currency to lose nearly all value. On December 2, 2017, a single USD could purchase 2 million bolivars. On February 20, 2018, one US dollar could purchase 2 million bolivars.
The bitcoin price has been steadily increasing throughout these periods as more people turn to it for value preservation and as a hedge against economic uncertainty and financial crisis. Aslam is basing his prediction on past trends in relation to these kinds of situations when stating that if things continue as they are it may be possible for bitcoin to reach $20,000 at some point in 2018.
Conclusion
The key behind Bitcoin’s all-time high is simply its long-term outlook. Yes, there have been ups and downs since its introduction to Wall Street. But looking at it from a historical perspective, you see that its price has never decreased over a one-year period.
Sure, it took six years for Bitcoin to reach $1,000 and another three years to reach $2,000, but we’re already halfway to reaching our latest milestone of $10,000 per coin by next year. The fact that Bitcoin has managed to come back up so many times proves that it’s not just a fad or flash in the pan phenomenon - people will be using it for decades to come.