There is a widespread opinion often met in the media that crises taking place across the world increase the demand for bitcoin and other cryptocurrencies. Recently there has been some suggestions that confrontation between the US and Korea fueled interest in cryptocurrencies. Is the cryptocurrency market so sensitive to all sorts of political games, and is it true that it’s just a pyramid and that bitcoin will crash soon, Bitnewstoday figures out.
The talks about influence of political confrontations on the demand for cryptocurrencies are considered by most experts as a PR-fake. In their opinion, journalists and representatives of crypto startups with such positions just give out desirable for valid.
Considering that the total market capitalization of cryptocurrencies is a drop in the ocean compared to the similar index of financial derivatives ($0.2 trillion vs. $30 trillion), they can not influence the demand when some political storms happen. Given the fact that average daily liquidity on crypto exchanges is in the range of $150-$350 million, sale of a large number of assets at a time seems to be more important factor in this sector.
"The main driver of the growth in demand for cryptocurrencies, first of all, is their legalization by the state in various jurisdictions (or vice versa, the ban on ICO - as it happened in China)," says Alexei Pospekhov, head of GR & PR at ICONIC.VC. When China banned ICO, bitcoin price collapsed dramatically as a result of investors' fears of further actions. And when Japan legalized bitcoin, its exchange rate showed a stable growth for a long time".
Some experts say that demand for cryptocurrency is determined by the pursuit of easy money, which is fueled by media reports about the growth of bitcoin’s price and the amount of profit that some cryptocurrency investors has already made.
As Valery Zolotukhin, businessman, founder of the IMPEX investment group, noted: "The main thing that affects the demand for cryptocurrency is human greed... Such growth is disproportionately large, compared to interest, deposits, growth in price of the majority of companies. That is why people who want to increase their fortune by making easy money, invest more and more. This is a kind of fever. And in my opinion, some macro-political events affect this to a much lesser extent".
There are also more categorical opinions that some people who are interested in operations with cryptocurrency see it as a tool for money laundering.
For example, Oleg Bogdanov, chief analyst of Teletrade Group, considers cryptocurrency to be a purely criminal and speculative instrument that is used to withdraw money or, as speculators say, for hype. "Neither global macroeconomic trends nor the geopolitical situation have any influence in this market. Only the influx of new money affects the exchange rate. More local stories, such as bitcoin hardfork lead to the excitement of the cryptocurrency speculative public", the expert added.
It is technically possible to produce 21 million bitcoins and more than 16 million have been in circulation. It turns out that only 5 million remain for the growing demand of "players". Unlike chips, the number of bitcoins can not be increased. Given the fact that today entrepreneurs around the world start to work with payments in cryptocurrencies, and the total number of bitcoins is limited, then the fundamentals of the economy will be crucial in terms of demand.
Evgeni Medvednikov, a representative of Snovio, believes that the demand for cryptocurrency is based, among other things, on institutional players entering the market with large single-time purchases. "They do not buy for speculation, but to keep them for years, to wash out bitcoins and other cryptocurrencies from the market. Because of crises, instability and restrictions imposed by some states, cryptocurrencies are chosen for saving and protecting capital, for diversification”, the expert comments.
Based on the opinions of experts, it can be concluded that the growth in demand for cryptocurrency takes place due to the expansion of the economic space of cryptocurrency technologies and the growing interest in bitcoin and altcoins market not only among ordinary people but also from professional investors who seek to diversify their savings. However, the main role in heating the market still belongs to speculators and it is quite possible that cryptocurrency market will crash in 2018.
Bitcoin price is growing because of uncertainty in conservative markets, experts say. Therefore, the limit of bitcoin growth is conditioned by the expectations of conservative markets. But in view of the fact that cryptocurrency is backed by nothing, bitcoin price collapse seems to be quite realistic.
"Neither bitcoin nor any other cryptocurrency is backed by anything, it means that, sooner or later, the cryptocurrency market is to collapse, making way for further development of truly innovative and worthwhile projects, connected not only with cryptocurrency, but also with implementation of technology blockchain technology", says Steffan Adelaja, MB Barklay Investment Bank.
However, there are other opinions. "It is unlikely that bitcoin will collapse in the foreseeable future. The upcoming hard fork can rattle nerves, but definitely won’t spell an end to the first and most popular cryptocurrency. In the worst case scenario, a noticeable correction may occur after B2X, but most likely after a few weeks, bitcoin will storm new highs", said Mikhail Mashchenko, an analyst of the social network for eToro investors in Russia and the CIS.
Eldiar Muratov, president of the Singapore Castle Family Office, compares crypto market to poker, and believes that “the cost of bitcoin will collapse when the number of poker players begins to decline significantly, which is very unlikely in the foreseeable future until 2020. Bitcoin as a cryptocurrency will completely lose its value only when the second and third friend quit playing. Probably, a new solution will come to replace "poker"".
When bitcoin collapses, according to experts, altcoins will lose its value as well. "Undoubtedly, bitcoin is an indicator of the cryptocurrency market, any of its fluctuations will affect the whole market, and hence, the exchange rates of altcoins. Bitcoin was the first, he has the largest liquidity and capitalization. To some extent, it is the dollar of crypto market - in case of any shocks, investors flee to it as a safe haven", says Alexander Voskoboynikov, Member of the Board of the National Blockchain Association.
Experts’ forecasts who stated that Bitcoin would go down already in 2017 did not come true. Quite contrariwise, the end of last year was marked by the growth of the biggest cryptocoin over 14 thousand dollars (BTC). Throughout the year, the cryptocoin’s price has multiplied almost by 15. The drastic rise of Bitcoin continued during the first days of January and the price was at the level of 17,700 per coin.
An unequivocal answer to whether bitcoin will collapse in 2018, just as with the case of 2017, cannot be given. However, many experts are inclined that interest in cryptocurrency will not fade away in the foreseeable future.