by Alisa Tciriulnikova, Coin Telegraph:
What else could someone holding Bitcoins wish for in the New Year? After a stretch in which the price of Bitcoin held relatively stable, the world’s first and most famous cryptocurrency has been skyrocketing! Bitcoin saw an annual gain of nearly 54 percent this year, outperforming all fiat currencies, most of which stumbled in 2016.
So what’s behind the recent surge? Cointelegraph reached out to some of the world’s thought leaders in the industry to get their opinion and predictions for the upcoming year.
World economy troubles – Bitcoin prospers
Bitcoin’s outstanding performance this year has been driven by various factors including, experts acknowledging the “halvening,” the troubling world economy represented by fiat chaos in India and Venezuela, as well as a slowing Chinese economy and a depreciating yuan.
Nicolas Cary, co-founder of Blockchain, says:
“The price performance of Bitcoin has closely tracked some macroeconomic trends including the dramatic fall in the value of the British Pound, Argentine Peso and Venezuelan Bolivar. At Blockchain, we have seen very strong growth the past quarter across our entire platform but especially on the wallet side. The company expects to hit 11 mln wallets by Dec. 31.”
According to Gavin Smith, CEO at First Global Credit, 2016 was indeed the year when the Bitcoin capital market really started to establish itself and provide holders of the cryptocurrency with various ways to generate a return on their assets – much more than the other cryptocurrencies.
“Because of this development, holders of Bitcoin and miners have been less inclined to dump their coins on the market and have instead started to use these assets to generate additional returns – often higher returns than can be achieved with conventional currencies.”
According to Smith, this improvement in the ecosystem has coincided with a loss of confidence in currencies from many smaller developing countries – a development that has seen people move some of their assets into Bitcoin to protect themselves from any potential devaluation. As a result, the combination of this reduced supply with increased demand has facilitated this year’s growth. Smith believes that this trend will continue throughout 2017 and onward.
A chance for Bitcoin to step in and create trust
On another note, increasing political instability could also serve as an impetus for Bitcoin’s rising success.
Erik Vollstädt from Bitnation says:
“We are seeing more and more political crisis in the world. Take, for example, Brexit, Trump’s election, the refugee crisis in Europe and the associated fear of Islamism as well as right-wing terrorism. Every government failure is an opportunity for Bitcoin to step in and create trust instead.”
A safe haven?
Bitcoin is often considered as a safe asset. When the Dow Jones, Nasdaq and the major European indices stumble, Bitcoin steps in as an attractive diversifier, as it does not correlate with the stock market and is not tied to any single country’s policy decisions. That is indeed a great advantage in times of political and economic uncertainty.
Nicolas Cary says:
“Bitcoin is a convenient hedge for people who want to de-risk from traditional currencies. However, being safe from the whims of banks and governments, Bitcoin is still not totally immune from volatility.”
Speaking of it as a store of value, Bitcoin is measurably safer than it was 12 or even six months ago, however, the Bitcoin capital market is still in the early phase of development and, therefore, volatility remains a very real possibility.
Gavin Smith says:
“In terms of cryptocurrency alternatives, we believe that Bitcoin is by far the gold standard. The capital market ecosystem is the most well developed and the investment options available to Bitcoin holders are greater than any other crypto asset class.”
In terms of global assets, Bitcoin certainly has its place but this should be as part of a mixed portfolio – it’s much easier to sustain the inevitable drawdowns in the value of Bitcoin if you are also invested in other assets that may be generating positive returns.
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