What next for Bitcoin (and other cryptocurrencies that were caught in the recent fall)? As Ray Dalio says, "Almost everything is just another one of those" Here is the chart for SHCOMP (thank you tntsunrise): It covers a similar 'parabolic' rise to that of Bitcoin in 2017, and shows how the market stabilized after its correction. It is perhaps an indication of what we might expect from Bitcoin for the next few months.
Things to keep in mind (my two cents): Bitcoin has no intrinsic value. I am not 'downing' on Bitcoin. As a 'commodity', a single Bitcoin has been worth everything from half a cent to nearly $20,000 during the past nine years. Nobody has any idea, even roughly, of what it is worth. We know a new iPhone is worth more than $10 because they cost $225 to make; we know one is not worth $10,000 because that's just ridiculous, even Apple sell that $225 phone for no more than $650. When it comes to Bitcoin the market has no such obvious and reasonable price range, so the market must settle on one. Given the events of the past nine years, Bitcoin, at least for now, has developed some kind of associated price range, but it is wide: $0.005 to $20,000. After traversing that huge range of extremes, the price peaked and its amplitude began narrowing, and will likely continue narrowing, tighter and tighter. The price stability of a tight trading range would make it easier to use Bitcoin as a regular currency, but...
Bitcoin is highly subject to supply and demand. Last year proved this: as demand increased, the price shot up. That increase in demand could happen again and the effect would have to be the same: price rise. If there is a dramatic increase in the demand for iPhones, Apple can probably meet the demand by making more iPhones (given some time), and the retail price would not change (it may even go down). The creation of more Bitcoins is slow and predictable (though the creation of new types of cryptocoins can cater to some increased demand if people are not fussy which coin they buy), so increased demand is met with increased price.
Demand can also decrease. A lot of new investors will have been stung by the recent price falls, panic sold, and got out. Publicity will likely now revolve more around how much money you can lose investing in cryptocurrencies. Both these things will change the dynamics of the market. A decrease in demand must result in a decrease in price.
Personally, I'm keeping an eye on the larger picture and riding the smaller amplitude waves within it. Unless there is a big shift in publicity, public opinion, or imposed regulation, I mostly expect the amplitude wave to get narrower and narrower. But, it's the World of Cyrptocurrency, I am ready to be wrong.
In the desert you would give your entire gold and stock of Iphones for a cup of water. If anyone is willing to pay for your product and doesn't see aggregated value, sorry, no one will care for how much resource you moved and say: Oh this is worth $100. So Iphone isn't valued based in his cost to make, even if it is involved in the price calculation due to math reasons. Neither gold (10% of it have real application) has intrinsec value. People just know that isn't possible to make more gold like is with Dollar or Euro.
olivernash
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@NomeSobrenome, The husband of someone I know sold a photograph of a potato for $1,000,000. There will always be situations where the value of something is way beyond what might generally be considered by the market to be 'reasonable'. The value of a Bitcoin is what someone is willing to pay for it at that time. I agree what someone is willing to pay for an iPhone (or a cup of water) is not based on the how much it costs to produce, but in retailed products that production cost forms a base line lower limit to how far the value can go down. If a product costs $100 to make, but everyone is only willing to pay a maximum of $10 for it, then the product ceases to exist. I can value that product at no more than $10, but it is hypothetical since I cannot buy one. Bitcoin (beyond mining, which must have a cost) lacks a definitive production cost, so, other than its initial value nine years ago, no real base line lower limit has been revealed that the market can ascribe to it. Even that cup of water in the desert may have no upper value to someone dying from thirst, but you can bet it has a lower value, especially in the desert. My iPhone analogies are simply attempting to illustrate that Bitcoin lacks an established value range and, that since its supply is relatively limited, its market value is determined almost entirely by supply and demand.
NomeSobrenome
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@olivernash, miners expend even more eletricity and expensive equipments because it take much more computing power, so unless it comes from solar system, it is already a cost to produce and transact. Like you said, the sale of the photograph was overvalued by one individual. We aren't trading with few, but a whole community that is increasing around the World.
olivernash
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@NomeSobrenome, Very true, and because of the supply nature of cryptocurrency, the more that trading community expands, the more people want to own coins, the higher the price must go.
philipjterry
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Thank you for the insightful contribution. I think the prevailing question that I ask is how many people don't know anything about crypto and it seems to still be 90%+ especially here in UK. Even banks I've asked don't know what it is... At most they've heard of the name "bitcoin" that's as far as it goes. The stories of people making big money may fizzle out for a while, and stories of people losing money may increase which would spread faster I imagine - damaging the reputation - that is a concern. Based alone on the overwhelming majority still not being involved I still think we have some decent growth left, they just need to make exchanges more easily accessible and user friendly to open the floodgates....
olivernash
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@philipjterry, I think you are absolutely right. There is certainly enough room left in the population for more influxes of fresh investors in Bitcoin, and, if and when they appear, the demand they bring must raise the price. There is no reason 2017 could not repeat itself (even multiple times), but if it does, likely we will see a similar correction to the current one. I also agree with you about the exchanges, I think if someone brings out a drastically simplified app of some kind, attached to an exchange that can handle volume, then who knows how much demand that would inject...