The Bitcoin fork that we saw has actually improved the speed of transactions, however, it’s the speed of adoption that’s a big driver for Bitcoin prices. However, there’s still the unfamiliar world of unregulated exchanges and cryptocurrency wallets. If, and when, Bitcoin financial products start trading on regulated exchanges, which opens the door for many new investors – including institutional investors. I’d also expect to see the first Bitcoin ETF sometime in 2018.
The CFTC has already granted authorization for clearing services for digital currency swaps. Options on Bitcoin will hit the market this fall. The CBOE is also launching cash-settled bitcoin futures. Both of which will bring billions of dollars to the Bitcoin market via institutional investors.
That’s a huge underrated catalyst for Bitcoin moving higher.
Then there’s the potential for a Bitcoin ETF – finally. With Bitcoin derivatives hitting the market on regulated exchanges the SEC won’t have a choice but to reconsider a Bitcoin ETF. The SEC’s biggest issue is a lack of regulation in the Bitcoin market, but that’s changing. The SEC wants to see a functional derivative ecosystem that’s regulated in order to approve an Bitcoin ETF – and we’re getting that. VanEck has filed for a new ETF, called the VanEck Vectors Bitcoin Strategy ETF. And we could see the Winklevoss Bitcoin ETF make a comeback. After all, the Winklevoss twins run the digital asset exchange Gemini which is collaborating with the CBOE to launch Bitcoin futures.
A new ETF likely pushes Bitcoin closer to $10,000, and it looks like it could happen before 2019. Granted, it doesn’t have any intrinsic value, but nothing does, with fiat currency having plenty of distrust, backed by the good faith of governments. Gold is in a similar boat, as its value is based only on supply and demand. The only value is in the trust that buyers have for gold. The journey of adoption from gold paper money was long and hard as well. For much of the rest of the world, beyond the U.S., the benefit for Bitcoin users is you don’t need a bank account and the trust of government. Bitcoin offers alternatives that banks can’t.
And after the Bitcoin fork, it’s much easier to build services on top of the Bitcoin network. Scaling is a potential catalyst as well, which makes the fork much easier. It’s now a viable base layer that other services can be built atop.
The couple ‘big’ issues could lead to a minor reset in the Bitcoin price. First is another software update planned for November and could double the network capacity. That could lead to another Bitcoin fork. Then there’s the wave of Initial Coin Offerings, where investors are buying Bitcoin to invest in these ICOs, and eventually they’ll need to cash in. But, again just near-term headwinds that don’t play into the long-term viability.
The cryptocurrency guidance remains much like Wences Casares – put 1% or less of your net worth in Bitcoin and don’t do anything with it for five years.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.