Fundamentals Suggest Bullish Bitcoin Price Trends for 2018

Increased adoption, technology improvements likely to support crypto price growth

by Ivan Penkov
01 March • 3.5 min reading time
In Analysis

Nothing in Bitcoin and in some of the other major cryptocurrencies has changed fundamentally so far. In fact, the fundamentals in the crypto space have never been more positive. That is a reason to believe that the recent price decline of all cryptocurrencies in 2018 has been caused by other factors such as lack of liquidity or regulatory issues. Also, the publication of FUD articles by some major media outlets have some causality but not so big.

The year of 2018 started with a sharp price drop across the whole crypto market, although, compared to a year ago Bitcoin is up hundreds percent. Traders love volatility and the recent shortages of cash on the crypto market put more downward pressure on the price because no new participants are entering the market and weak hands are selling out. One thing is certain with such price dumps, and that was the increase of price volatility in the first quarter of 2018.

Tom Lee from Fundstrat Global, a market strategy and research firm, states that he expects Bitcoin to reach USD 20 000 by June 2018 and then USD 25 000 by the end of the year. In general, Lee is very positive about the price trend of Bitcoin and other cryptocurrencies. He expects the whole market to recover based on the fundamentals and historical price data and helped by news announcements. For example, Japanese messaging giant Line said it plans to launch an exchange for digital currencies, while Facebook’s founder Mark Zuckerberg hinted in January that the social media giant would look into cryptocurrencies soon.

In the past six years, Bitcoin’s low for a given year was usually in the first quarter of that year. As of April 3, 2018, Bitcoin is trading at around USD 7300, which is 14% growth since the beginning of the month, but it is still 45% down since the beginning of 2018. Bitcoin dropped from its all-time high of USD 19 666 (hit on Bitstamp) on December 17, 2017, to touch a low of USD 5920.72 (again on Bitstamp) on February 6, 2018, which was its lowest point since November 13, 2017.

Some of the wildest predictions for Bitcoin’s price in 2018 claim that the whole cryptocurrency market could hit USD 1 trillion, with Bitcoin peaking at USD 50 000. Jamie Burke, CEO at Outlier Ventures believes that the market would go into a bull-run way greater than the one from 2017. Thomas Glucksmann from the Gatecoin cryptocurrency exchange believes that the main driver for the price going to USD 50 000 would be the technological advancements in the crypto space.

Technologically, things have never been more bullish for Bitcoin. In 2017, Bitcoin had its best year since its birth in 2009. It started last year below USD 1000 and went up to almost USD 20 000 by the end of the year. Increased adoption was one of the driving forces for that climb. However, 2018 marks some extremely exciting technologies coming up to fruition for Bitcoin and it seems that it might be one of the best years so far. Such technologies include Schnorr signatures, Sidechains, TumbleBit, ZeroLink, the Lightning Network, Segregated Witness and the new address format.

An important note to make is the correlation between the price of Bitcoin and that of stocks, which is well documented in the Bitmex research “Bitcoin price correlation: Record high against the S&P 500”. It concludes that as the market expands, the thesis of the cryptocurrency industry being non-correlated with traditional markets might not have as much merit as before. This might not offer a downside protection against a financial crisis as originally expected.