Bitcoin seems unlikely to cross $ 10,000 this year again

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The month of July was a solid month for cryptocurrencies, with the price of Bitcoin reversing the steady decline recorded in the previous two months to fluctuate around $ 8,200 towards the end of the month. This marked a strong recovery from the low of $ 5,755 seen at the end of June, but it was still well below the historical high of almost $ 20,000 last December, and also a good 18% lower than the ~ $ 10,000 measured less than three months ago.

In particular, there was a recovery in the level of activity on the Bitcoin network in July, with the average number of unambiguous addresses and the average volume of transactions for a single user, an improvement compared to the lows recorded in June. However, with both of these key parameters falling lower in the first two weeks of August, the price of Bitcoin dropped below $ 6,500. Given the current weakness of Bitcoin's trading activity, we have reduced our forecasts for the number of unique users and for the volumes of transactions in our interactive Bitcoin price evaluator. We now expect the price of Bitcoin to settle at around $ 9,500 by the end of the year for our base scenario, down from our previous estimate of $ 10,500. The chart below captures our base case forecasts for the average monthly price of Bitcoin this year based on our estimates for transaction volume and number of Bitcoin users, and also shows a possible price range for cryptocurrency taking into account of an uptrend and bearish trend for the rest of the year.

Understanding what has driven price fluctuations in recent months

The global cryptocurrency industry has seen a number of new developments since December. Many of these developments have had a negative impact on the growth prospects of cryptocurrencies, such as bank restrictions on the use of credit cards for the purchase of cryptocurrencies and the demands of financial regulators for everything. the world for caution while investing in digital currencies (with some countries even banning their use). This precipitated cryptocurrencies from the historical highs of mid-December 2017, as evidenced by the collapse of the Bitcoin price from nearly $ 20,000 to below $ 6,000 at the beginning of February.

However, Bitcoin prices recorded a strong recovery compared to April and early May, mainly because the traditional financial sector started to heat up with cryptocurrencies. While Goldman Sachs became the first investment bank to start a cryptocurrency trading desk, IntercontinentalExchange (which owns the NYSE) reported its ongoing work on a new trading platform that will allow institutional investors to buy and hold cryptocurrencies. As this indicates a greater adoption of cryptocurrencies in the short term, the good news has pushed higher Bitcoin prices.

But bitcoin prices have plummeted in late May when Gox has downloaded more than 8,200 Bitcoins on existing exchangesand further in June when two exchanges of South Korean cryptocurrencies have been violated. In addition to having a negative impact on Bitcoin prices, these events have also dragged Bitcoin's trading activities down, as evidenced by a significant reduction in the number of users on the Bitcoin network. The trend reversed in July, however, with renewed institutional interest for cryptocurrencies that pushed the levels of activity. This was determined by the growing optimism around the SEC that potentially approves a Bitcoin ETF.

The approval of the SEC would make Bitcoin a more accessible investment option for investors globally and would certainly present a significant rise for cryptocurrency. However, investor concerns over the security of cryptocurrency trade have been minor in recent months, which we believe will continue to weigh on activity levels in the near future.

What does this mean for the Bitcoin price?

Like the price for anything, the basic price of Bitcoin depends primarily on demand and supply. The demand for Bitcoin is mainly driven by two factors: the number of active users and the number of transactions. On the supply side, the number of Bitcoins available is limited and about 80% of the limited number is already extracted. Therefore, it is reasonable to focus on demand, both in terms of users and transaction volumes. In our Interactive Bitcoin price estimator, we anticipate changes in the number of unique users and transaction volumes for each month in the rest of 2018 to arrive at our estimate of the fundamental value of Bitcoin.

As illustrated above, given the adverse winds of both these parameters in August, we expect them to grow at a modest pace in the coming months. As a result, we believe that Bitcoin will most likely remain below $ 10,000 for the remainder of the year.

This video show how to take advantage of our bitcoin price dashboard. While the dashboard seems simple enough, back-testing – a method to see how much it could have predicted prices in the past – was almost 94% accurate.

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The month of July was a solid month for cryptocurrencies, with the price of Bitcoin reversing the steady decline recorded in the previous two months to fluctuate around $ 8,200 towards the end of the month. This marked a strong recovery from the low of $ 5,755 seen at the end of June, but it was still well below the historical high of almost $ 20,000 last December, and also a good 18% lower than the ~ $ 10,000 measured less than three months ago.

In particular, there was a recovery in the level of activity on the Bitcoin network in July, with the average number of unambiguous addresses and the average volume of transactions for a single user, an improvement compared to the lows recorded in June. However, with both of these key parameters falling lower in the first two weeks of August, the price of Bitcoin dropped below $ 6,500. Given the current weakness of Bitcoin's trading activity, we have reduced our forecasts for the number of unique users and for the volumes of transactions in our interactive Bitcoin price evaluator. We now expect the price of Bitcoin to settle at around $ 9,500 by the end of the year for our base scenario, down from our previous estimate of $ 10,500. The chart below captures our base case forecasts for the average monthly price of Bitcoin this year based on our estimates for transaction volume and number of Bitcoin users, and also shows a possible price range for cryptocurrency taking into account of an uptrend and bearish trend for the rest of the year.

Understanding what has driven price fluctuations in recent months

The global cryptocurrency industry has seen a number of new developments since December. Many of these developments have had a negative impact on the growth prospects of cryptocurrencies, such as bank restrictions on the use of credit cards for the purchase of cryptocurrencies and the demands of financial regulators for everything. the world for caution while investing in digital currencies (with some countries even banning their use). This precipitated cryptocurrencies from the historical highs of mid-December 2017, as evidenced by the collapse of the Bitcoin price from nearly $ 20,000 to below $ 6,000 at the beginning of February.

However, Bitcoin prices recorded a strong recovery compared to April and early May, mainly because the traditional financial sector started to heat up with cryptocurrencies. While Goldman Sachs became the first investment bank to launch a cryptocurrency trading desk, IntercontinentalExchange (owner of the NYSE) reported its ongoing work on a new trading platform that will allow institutional investors to buy and hold cryptocurrencies . As this indicates a greater adoption of cryptocurrencies in the short term, the good news has pushed higher Bitcoin prices.

But Bitcoin prices plummeted in late May when the Monte. Gox downloaded more than 8,200 bitcoins on existing exchanges and later in June, when two South Korean cryptocurrency exchanges were breached. In addition to having a negative impact on Bitcoin prices, these events have also dragged Bitcoin's trading activities down, as evidenced by a significant reduction in the number of users on the Bitcoin network. The trend reversed in July, however, with renewed institutional interest for cryptocurrencies that pushed the levels of activity. This was determined by the growing optimism around the SEC that potentially approves a Bitcoin ETF.

The approval of the SEC would make Bitcoin a more accessible investment option for investors globally and would certainly present a significant rise for cryptocurrency. However, investor concerns over the security of cryptocurrency trade have been minor in recent months, which we believe will continue to weigh on activity levels in the near future.

What does this mean for the Bitcoin price?

Like the price for anything, the basic price of Bitcoin depends primarily on demand and supply. The demand for Bitcoin is mainly driven by two factors: the number of active users and the number of transactions. On the supply side, the number of Bitcoins available is limited and about 80% of the limited number is already extracted. Therefore, it is reasonable to focus on demand, both in terms of users and transaction volumes. In our Interactive Bitcoin price estimator, we anticipate changes in the number of unique users and transaction volumes for each month in the rest of 2018 to arrive at our estimate of the fundamental value of Bitcoin.

As illustrated above, given the adverse winds of both these parameters in August, we expect them to grow at a modest pace in the coming months. As a result, we believe that Bitcoin will most likely remain below $ 10,000 for the remainder of the year.

This video show how to take advantage of our bitcoin price dashboard. While the dashboard seems simple enough, back-testing – a method to see how much it could have predicted prices in the past – was almost 94% accurate.