Bitcoin’s 2017 Year in Review

https://charts.bitcoin.com/chart/price

Before this year, being involved in cryptocurrencies was reserved for nerds. Although this space is still filled with plenty of these so-called “nerds”, 2017 shifted people’s opinion of these digital assets and suddenly made them cool. This year people flooded their money into these assets expecting to quickly turn a profit as Bitcoin, Ethereum, Litecoin, and several other alt-coins experienced exponential growth in 2017. Constant reminders of how rich you would be if you had put away just $100 in Bitcoin in 2008 gave many investors FOMO and pushed them to search for the next big thing. This desperate search lead to millions over dollars being poured into ICOs and other emerging alt-coins in hopes of a similar story as Bitcoin’s early adopters. Some of these companies didn’t even have business plans, but that didn’t stop them receiving millions in equity. It is truly the modern day Wild West in terms of how unregulated the whole process is. Regardless, 2017 will go down as the year that cryptocurrencies and the blockchain went mainstream, and the daily fluctuations were given more interest than the S&P 500 and Dow Jones’ movement.

Bitcoin (BTC) began January of 2017 as an afterthought for most, highly speculative and vastly overpriced. Exchange collapses in the past, the Silk Road, and the belief that the asset would never be widely accepted only heightened people’s worries about Bitcoin. At the start of the year, Bitcoin was trading at around $950. Since, we have seen the digital currency rise in value over 1,400% due to increased awareness, global adoption and acceptance, and Wall Street involvement. What began 2017 as an overlooked idea has ended the year as the most talked about asset in the world.

A great deal of Bitcoin’s rise can be attributed to the Virtual Currency Act being passed in Japan in April. This law defined BTC as well as other digital currencies as a form of payment. This opened the door for acceptance in Japan, and the rest of the world took notice. Bitcoin’s upward push began as a result of the VCA being passed, and the momentum carried over into the summer. From the beginning of April to the end of August, BTC appreciated in value from $1,076.92 to 4,895.10.

August brought the first of likely many hard forks to come in the future of Bitcoin. The hard fork resulted over differences in opinion from developers over whether the digital asset should be used primarily as a medium of exchange or store of value. The creation of Bitcoin Cash (BCH) increased block size from 2MB to 8MB in hopes to speed up average transaction time.

Hard forks in general are good for owners of those that hold the initial coin prior to the fork. Because a hard fork signals a system software update, those that own a stake in the coin before the hard fork then are entitled to an equal number of coins of the newly issued coin. Anticipation of a hard fork usually drives the price of the original coin down because some of the value from the original asset is transferred to the new one. The price of BTC briefly dropped in July after the announcement of the hard fork, but demand for the original asset drove higher quickly afterwards as investors piled in to own both Bitcoin and Bitcoin Cash prior to the split. In the month following the hard fork, the price of BTC rose from $2,755.24 to $4,895.10. BTC hard forked again in late October to Bitcoin Gold (BCG) with similar results to its price.

Another major spike in price came in November after the announcement of Bitcoin futures contracts being offered in December by CBOE and CME. This announcement sent shockwaves to the entire crypto world as it signaled that Wall Street and institutional investors would soon be influencers in the market. This was viewed with different opinions in the cryptocurrency community. Many believed that allowing institutional involvement undermined the entire foundation of the blockchain by bringing back in the institutions that people wished to abandon in favor of Bitcoin and other digital currencies. On the other hand, the inflow of capital through futures contracts brought in more regulation to this previously unregulated marketplace and validated that Bitcoin and other cryptocurrencies were here to stay.

The last month of the year saw Bitcoin go crazy. Shortly after the introduction of futures contracts, the price of BTC ballooned to a high of $19,202.80 before correcting. At the time of writing, the asset has found stabilization in the $14,000 range. The biggest roadblock for Bitcoin in the future remains to be its struggle for global adoption and usage as a means of payment. There are still several countries that place restrictions on digital currencies and others that ban it completely. Regardless, 2017 will go down as a milestone year for Bitcoin and all digital currencies. 12 months ago, Bitcoin was an asset reserved for idealists; a better alternative to fiat but too volatile for most. Today, the asset is globally recognized and people have vastly increased their acceptance of it.

https://coinmarketcap.com/charts/#dominance-percentage

I expect 2018 to bring more excitement to the crypto community. Although I do not expect to see the same exponential growth that Bitcoin has experienced this year, I do expect to see continual growth in the overall market cap of crpytocurrencies. Bitcoin has been the unquestioned market cap leader since its creation, but we have seen that dominance diminish in recent months. We have seen other cryptocurrencies such as Ethereum (ETH), Ripple (XRP), and Bitcoin (LTC) eat into Bitcoin’s market share, and Bitcoin controls under 40% of market share to begin 2018. I expect BTC’s overall market share to continue to subside as other coins with competitive advantages over Bitcoin continue to surge. I also expect hard forks to become more frequent not only for Bitcoin, but also for other digital assets as developers begin to have different visions for their coins’ futures. Lastly, I predict that regulators will become more involved in the crypto world. The introduction of futures contracts brought some transparency for regulators, however, the majority of transactions within this space still largely are unregulated. This has allowed for tax evasion, theft, and other foul play to preside. I expect regulation to play a larger part in 2018 as more investors continue to pile into crpytocurrencies.