Four Triggers Behind The Next Bitcoin Price Boom

Investing, News, Regulation | May 8, 2018 By:

We have all witnessed bitcoin’s significant price drop firsthand, which has caused potential new investors to approach the market with trepidation. Both current and prospective investors are frequently asking themselves when the market will rebound again and what to do now given its current state. And while prices across digital currencies have dropped heavily in the first quarter of this year, I believe the start of our next big bull run is just around the corner.

Many experts will agree as well. For example, based on analysis from the currency’s 22 corrections since 2010, Thomas Lee, managing partner at the popular financial firm Fundstrat Global Advisors, anticipates a record peak for bitcoin by July.

Below are some important factors that could contribute to bitcoin’s eventual spike.

Retailer Acceptance

Bitcoin is currently accepted at several major retailers, including Overstock.com, Expedia, Microsoft, with even more on the horizon. I believe that with more retail acceptance, we will see an increase in the number of transactions made, wallets created and overall bitcoin holdings, as consumers must purchase Bitcoin in order to pay for goods and services.

Recently, we’ve seen Coinbase’s aggressive move into the retail space with the launch of its new product: Coinbase Commerce, which enables retailers to accept bitcoin alongside traditional payment methods such as credit card or paypal.

Additionally, Amazon has secured some cryptocurrency domains, and Starbucks CEO Howard Schultz expressed his interest in using cryptocurrency for large-scale retail adoption. He stated, “I personally believe that there is going to be one or a few legitimate trusted digital currencies off of the blockchain technology. And that legitimacy and trust in terms of its consumer application will have to be legitimized by a brand and a brick and mortar environment, where the consumer has trust and confidence in the company that is providing the transaction.”.

With Starbucks’ mobile app already redefining the customer experience in its brick and mortar stores, adding cryptocurrency seems like a natural progression and one that has potential to contribute to the next bitcoin boom.

Lightning Network

The Lightning Network is a decentralized network that uses smart contract functionality in order to enable instant payments across a network of participants. An “off-chain” solution that is built on top of the blockchain, the Lightning Network’s transactions and scripts are parsable and can be enforced on the blockchain when needed. The blockchain’s off-chain solution, however, allows transactions to be processed faster and with much lower fees than before.

Elizabeth Stark, co-founder of Lightning Labs, says that the goal of the Lightning Network is to process “many thousands of transactions per second and maybe someday even millions of transactions per second,” surpassing the capabilities of traditional credit card companies like Visa. With this kind of technical innovation in the works, bitcoin prices have potential to soar. But, it may take a little bit of time. As Stark said herself, “bitcoin is a marathon, not a sprint. People wanted it to be a sprint.”

However, on March 15, Lightning Labs launched a beta version of its Lightning Network (LND) software specifically available for the developer community. Designed to tackle some of the legacy blockchain’s obstacles surrounding high fees and slow transaction times, LND uses smart contract functionality to enable payments and process transactions off the blockchain.

SEC Approval & Regulation

When an industry scales and grows at lightning speed, the increased want and need for regulation is inevitable. I believe that regulation is a positive change for the industry, as it is indicative of cryptocurrencies’ long-term power and increased popularity in the mainstream. Regulating a previously notoriously unregulated industry is undeniably nuanced territory, and for many in the space, will require a big change in attitude. Therefore, we should stop looking at regulation as a problem for the crypto space, and instead put that energy into working with regulators to make this industry more compliant, transparent and reliable. Ultimately, these regulations will help increase the public’s confidence in crypto investments, and if we want this industry to flourish in the mainstream financial world, securing the trust of the common man is a major key to success.

Progress is already being made towards regulation, as in early March, the U.S. Securities and Exchange Commission (SEC) issued a statement declaring that all cryptocurrency platforms meeting the definition of a “security” must register with the SEC as a national securities exchange. While this likely contributed to bitcoin’s short-term price decline, I believe this type of increased regulation is serving the consumer’s best interests in the long term, as it provides a necessary level of oversight in safeguarding against scammy ICOs or hacks.

Additionally, at least one regulatory body has confirmed publicly that it does not want to alter the growth of cryptocurrencies through regulations. In fact, the chairman of the U.S. Commodity Futures Trading Commission (CFTC) recently confirmed this by stating the need for balance and a “do no harm” approach when regulating cryptocurrencies.

Exchange-Traded Fund Approvals

ETFs, or exchange-traded funds, are marketable securities that track an index, commodity, bond or a basket of assets like an index fund. It is a type of fund that owns the underlying assets (stock shares, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. The actual investment vehicle structure (such as a corporation or investment trust) will vary by country, and within each country there can be multiple co-existing structures.

Traditionally, ETFs were created for products that are difficult for investors to hold, such as oil and gas. In the same sense, setting up crypto wallets and executing trades is considered difficult for average investors, so the potential of crypto-related ETFs may allow for simpler trading through brokerage accounts.

According to the SEC, “the agency has started the process to approve or disapprove a change in its rules that allows two bitcoin ETFs to be listed on the NYSE Arca Exchange.” SEC approval for a bitcoin ETF exchange will help to further cement bitcoin’s mainstream presence and likely also contribute to a massive price increase.

With so much momentum surrounding bitcoin and other digital currencies,  I believe it is only a matter of time before prices rise again. The above reasons offer only a glimpse into bitcoin’s potential price boom, and we all look forward to seeing it grow.