It is the beginning of another year. It is again that time for reflecting on the past year while at the same time figuring out how a variant of issues will turn out in the New Year. And for quite some people around the globe, and probably you included, one of the issues to think about, in this regard, is the Bitcoin price.
Without a doubt, just like in the previous years, the direction the price of Bitcoin takes in 2016 will be determined by many factors. Some of them we can predict here and others we have to accept that they will come as surprises down the road.
An example of the latter possibility is if Satoshi Nakamoto, the inventor of Bitcoin, at some point through the year chooses to sell some or the whole cache of 1m BTC that are linked to the pseudonym.
That will conceivably give the Bitcoin price a beating, but we cannot predict at this time whether or not Satoshi will do exactly that in 2016.
What happened to the Bitcoin price in 2015
But, before we look at what will likely influence the price of Bitcoin in 2016, let’s look at the chart it drew in 2015.
The year started on a low. The free fall from the previous year (2014) had not found its bottom as we crossed over to 2015. As a matter of fact, the lowest floor since 2012 was touched on January 14, 2015, when a bitcoin exchanged for an average of $177.
At about this time, the cryptocurrency was receiving negative coverage from mainstreaming media, especially in relation to the Silk Road case, which was ongoing.
After that, the price rallied and contained itself between $200, as the floor, and $300, as the ceiling, for much of the year.
It is only in the month of November that the price broke the $300 ceiling and went all the way to approaching $500. It has since retreated but remained within the regions of above $400.
What are the predictions for 2016? Will the price look upwards, stay in the current regions or bottom further?
Halving of the block reward and the Bitcoin price
Among the factors that might influence the Bitcoin price in 2015 is the halving of the block reward. As we cross over to 2016, Bitcoin miners are receiving 25 bitcoins after every 10 minutes. That is about to change.
The Bitcoin protocol is designed in such a way that the reward halves after every four years. 2016 is the fourth year since the last halving. Sometime within the New Year miners will begin receiving a reward of 12.5 bitcoins per every verified and confirmed block.
Many are bullish on the Bitcoin price on this account alone. Daniel Masters, co-founder Global Advisors, a Jersey-based hedge fund with interests in Bitcoin startups, predicts that the price could go as high as $4,400 by the end of 2017. Of course, this will make the 2013 highs of above $1,100 like nothing much
“If OPEC (Organization of the Petroleum Exporting Countries) came out tomorrow and said, ‘in six months’ time we’re going to halve oil production’, the oil price would instantaneously react,” Daniel has been quoted saying in an interview with Reuters, “But the Bitcoin market is still in its infancy, and I don’t think that factor is discounted into the price fully.”
Good media coverage will impact the price of Bitcoin
Another factor that might influence the price of Bitcoin in 2016 is how the mainstream media covers the cryptocurrency. The year 2015 could well be described as the year when mainstream media began reporting a lot of positivity in the technology, especially the blockchain (the public ledger on which bitcoin transactions are recorded).
With time, there was less association of Bitcoin to crime like Silk Road and more acknowledgement of how the technology underlying it could change how things are done in many aspects of trade, public administration and finance.
That happened especially after major financial institutions such as Goldman Sachs, Santander and JPMorgan as well as technology companies such as Linux and IBM began researching and thumbing up the blockchain.
This positive coverage is bound to become even more common in the New Year. This is especially with major blockchain ventures in the pipeline. One of such projects is the Open Ledger Project, which Linux Foundation is working on in conjunction with various major financial institutions and technology companies.
Of course, the media is shifting its focus away from Bitcoin to the Blockchain. Nevertheless, having the latter in a positive limelight does give Bitcoin a lot of credibility.
As a result, the public will have confidence in the entire technology and more people will want to own part of the cryptocurrency. This will contribute to driving not only the adoption but also the price of Bitcoin up.
Possible negative influences on Bitcoin Price in 2016
However, even with these positive expectations, it should not be lost to us that there are also factors that are likely to pull the Bitcoin price in the other direction. One of these is the continuing wrangling within the bitcoin community on the solution to the block size scaling problem.
While it seems a lot of ground has been covered after the Hong Kong Scaling Bitcoin conference early in December, the debate is still toxic. The differences on whether to implement BIP (Bitcoin Improvement Proposal) 100, 101 or 102 are still too sharp.
And that could result in an acrimonious upgrading of the Bitcoin network, which in turn will lead to a hard forking. Of course, a hard fork of the blockchain will discourage investors and thus resulting in a downward movement of the Bitcoin price.
This status of affairs is already attracting some anxiety.” As an investor, I’m mainly concerned with which solution will give more value to my holdings,” one user has posted on Reddit, “I have to say I’m quite concerned that nobody knows what percentage of their assets the “experts” …… hold in Bitcoin.”
Nevertheless, going by the optimism in the community, this is highly likely not become a major issue.
Therefore, taking into consideration the block reward halving, positive coverage from mainstream media, interest of major companies in the blockchain and everything else, 2016 might turn out to be the golden year for Bitcoin. And that will be evident through its price at the market place.