When people initially invested in bitcoin, it was hard to foretell just how big the cryptocurrency would become. In a little over seven years, this digital asset went from $0.06 per share to more than $17,000. The media has recently focused on bitcoin due to its meteoric rise in 2017, and their reports often wonder "what happens next?" There are a variety of potential outcomes, but these are the some of the most likely bitcoin scenarios and what they mean for investors.
1. The Bitcoin Bubble
The big fear in the cryptocurrency market is that the bitcoin "bubble" will soon burst. Economic bubbles occur when assets are traded for more money than their actual intrinsic value. Eventually, prices tumble due to this overestimation of value.
The chief strategist of Charles Schwab, however, says the bitcoin bubble is unlike any other. He believes that the bubble behavior of the cryptocurrency may not end negatively as it does with other assets. In his mind, bitcoin’s independence from the market could ensure it doesn’t experience a traditional crash.
2. The Bitcoin Fork
A hard fork, which is essentially a split in the bitcoin community, is something that investors should anticipate. This occurs when users of a cryptocurrency begin utilizing different versions of the blockchain software. This can occur due to disagreements in the market.
In August 2017, a fork occurred when the blockchain Bitcoin Cash was created. Another fork, known as SegWit2x, was promised by the end of 2017. This shouldn’t be a huge concern, though, since newer blockchains often go back to the old blockchain due to efficiency and security.
3. Market Reversal
A quick look at the price of bitcoin shows an undeniable upward trend. At some point, though, this trend could cease due to a market reversal. Unlike an economic crash, a market reversal simply means the price of an asset begins going in the opposite direction. This doesn’t necessarily mean, however, that the value will continue to decrease.
What’s worth noting for investors is the fact that some experts believe a drop in bitcoin could result in a spillover. The head of equity strategy at Wells Fargo explained that lower bitcoin prices could affect confidence in other assets. This effect, however, will be minimal on the overall market. It’s also worth noting that bitcoin has positively affected various tech companies’ stock.
4. Potential for Private Blockchains
Some people believe that blockchains will eventually be managed by private enterprises, and this could render bitcoin and other public blockchains irrelevant. This belief is at least partially related to security fears, but other experts say this potentiality is unlikely.
The fact is that the decentralized nature of bitcoin ensures a level of security that enterprises would have difficulty improving upon. In the end, blockchain applications will likely be hosted on a trusted public blockchain, and who’s more trusted in cryptocurrency than bitcoin?
5. Big Drop, Bigger Rises
Dan Morehead, the CEO of Pantera Capital, predicted that bitcoin could see a 50 percent drop in a single week. While this would typically seem like unfortunate news, he went on to explain that the drop would likely be followed by a boom. The fact is that bitcoin is going to see huge rises and falls, but many experts believe the cryptocurrency will be around for decades and experience significant overall increases.
While some may disagree on the direction bitcoin will take, there’s no doubt that the cryptocurrency will be around for a while longer. Even some of the dreariest predictions, such as the potential 50 percent drop, have a silver lining since share values will continue to rise afterward. Also, there have been many big dips in the market followed by strong rebounds. The best bet for rookies in this market is to consistently build their knowledge base while keeping an eye on share prices. There will be ups and downs, but bitcoin has already created unexpected millionaires.