Are you following Bitcoin? In early December, the cryptocurrency's price rose to $19,000, leaving early investors with portfolios worth thousands, not to mention millions, of dollars.
Of course the question on everyone else's mind is: is it too late to invest in Bitcoin?
The price of a Bitcoin has reached almost $20,000, which means that buying a single coin is almost out of reach for most of us. But that doesn't mean you can't buy a smaller amount. But you should consider the following:
Bitcoin: Limited supply
The Bitcoins that are reportedly available on the market are around 21 million coins. Of these 21 million coins, around four million are already considered lost (have been intentionally destroyed, or are stored on encrypted disks with lost passwords, etc.).
Bitcoin's creator, Satoshi Nakamoto, is said to have mined around 1 million Bitcoins before he made the blockchain public. There are also a number of people who are known to own fortunes in Bitcoin, and there are certainly some governments that have significant holdings.
According to investor Ronnie Moas, there are probably “around 3-5 million Bitcoins” in actual circulation. This number is gradually increasing as miners “produce” more Bitcoins. But that’s around 12.5 coins per block, with the vast majority sitting in mining pools.
Bitcoin is rare. Another factor to consider is the number of users. Between Q3 2014 and Q3 2017, the number of Blockchain users increased from 1.9 million people to 14.7 million.
Given the huge jump seen in December, we can probably say that the total number of Bitcoin users will increase further.
This means that more and more users are trying to acquire fewer and fewer Bitcoins – and we all know what that means for the price of the cryptocurrency.
More investors
The number of people investing in Bitcoin is constantly growing. However, it is extremely difficult to have accurate numbers. Some estimates link the number of users to the number of wallets. Using the website bitinfocharts, we can see the distribution of Bitcoins by wallet address.
See the table below.
We can see that there are about 13.7 million wallets holding less than 0.001 BTC and two holding between 100,000 and 1,000,000. Apart from these the table shows that there are about 25 million active wallets.
A more recent study by the University of Cambridge [PDF] estimates that there are between 2.9 million and 5.8 million active users using Bitcoin. The study also estimates that there are between 5.8 million and 11.5 million active wallets.
The biggest change, however, is Wall Street’s recent introduction to Bitcoin trading. The Chicago Board Options Exchange (CBOE) added Bitcoin to its trading options on Sunday, December 10. The cryptocurrency’s price immediately jumped more than 25%, causing a temporary trading halt.
The Bitcoin and Wall Street collaboration will bring a significant number of people into cryptocurrencies.
Bitcoin SMS
But it's not just Wall Street that's jumped on the Bitcoin bandwagon. There are several services that offer banking facilities with credit opportunities to those who can't get financing. Several startups are trying to sell and trade Bitcoin via SMS. Why SMS? Of course, because not everyone has access to the internet, while SMS is ubiquitous in every country.
Bitcoin SMS services target the African continent as it is an untapped market. This way, even residents of countries with repressive governments or social unrest gain opportunities in Bitcoin.
Stability
Bitcoin is incredibly volatile with uptrends. However, Wall Street's involvement will likely have a calming effect on overall Bitcoin price volatility.
Forecasts
What will the price of Bitcoin be in a year? $20,000? $50,000? More? Less? Much less? Here are five predictions for the price of Bitcoin:
Saxo Bank: $60,000 in 2018, before falling to $1,000 before 2019
John McAfee: $1,000,000 by 2020
James Altucher: $1,000,000 by 2020
The Winklevoss twins : $152,000, no date
Masterluc: from $40,000 to $110,000 by 2019
Forecasts suggest that Bitcoin will continue to rise for at least another year, maybe two. But who can be sure?
As it stands, Bitcoin is already a global currency, with a current market capitalization of over $250 billion. It is expected to surpass $1 trillion before 2020.
Let's do the math:
Bitcoin is generating huge interest and has a huge market cap, but its global adoption rates are still below 1% of the population. The Cambridge University study we saw earlier shows a maximum estimate of 11 million active wallets, but that only amounts to 0.14 percent of the global population.
We are in a period of global awareness about Bitcoin. The increase in media coverage of Bitcoin is raising public awareness, greed, and illusion. The price of Bitcoin looks set to continue to rise until something happens and it starts to fall.
Can I invest?
I am not an economist and so I cannot give investment advice.
However, you can do your research. Don't believe everything you read and don't invest money you can't afford to lose.
