Being an outsider for long, Bitcoin has become a part of the mainstream conversion nowadays. It is because of its volatility, scandals, and promise. Bitcoin futures have been trading at Chicago Mercantile Exchange and Chicago Board Options Exchange since the end of 2017. CBOE and CME, both are the prominent exchanges. Many governments around the world are considering regulating Bitcoin and/or cryptocurrencies.
Bitcoin admirers, traders, enthusiasts, and believers are of the opinion that for the cryptocurrency, 2018 will be a star performing year. Experts and analysts have cited the prices of Bitcoin, but they are predictions only and cannot be taken at their face value.
Bitcoin or other cryptocurrencies are not fiat currency. Economics of supply and demand, government rules and regulations, and technological innovations play an important role in determining the price movements.
With these conditions and limitations in mind, here are two factors that will influence Bitcoin price this year.
Activating and adopting SegWit (Segregated Witness)
During 2017 because of high transaction fee, came up as an offset to Bitcoins’ growth story. The Segregated Witness (or SegWit as it is called) hard fork, increased the size of blocks on the blockchain. It was to lower the fees and speed up the number of transactions. But sadly it did not happen.
Of the 156 companies that signed up for activating SegWit, only 17 companies implemented it. Only 10 percent of all Bitcoin transaction is constituted using SegWit. The reason stated was that it is complex set. They had difficulty in implementing technology upgrades and security matters of the hard fork. The companies also felt that SegWit is comparatively untested with bitcoin’s interacting systems. In the meantime fees on Bitcoin blockchain continued to increase and there were a lot of transaction backlogs.
This made bitcoin’s core development team sit up and take notice. They are set to launch a new wallet which will interface with SegWit by May 2018. Even Coinbase will be compliant with SegWit during 2018. Coinbase is the biggest wallet provider of cryptocurrency and its largest exchange, which is based in US. Transaction fee will reduce if the numbers of transactions increase. This, in turn, will attract more users towards cryptocurrencies and Bitcoin in specific.
A focus on store of value
Rising transaction fee of Bitcoin has made it an impractical and inconvenient medium of exchange. High transaction fee was the reason for Bitcoin identity crises in 2017. Like gold, the crypto currency was behaving as a “store of value”. This attracted the attention of retail and institutional investors alike. Future technological innovations will try to reduce the transaction fee and its effect will be limited on Bitcoin in 2018.
Price moments of cryptocurrency in 2018 will be more dependent on “store of value”. The price is less regulated or influenced by its functions in the daily transaction and more by government rules and regulations, media disclosure, and hype. Even institutional money has a strong effect on Bitcoin price.
According to CNBC, 2018 may see the first IPO of the crypto company dealing completely with major cryptocurrencies existing presently.