2016 was a big year for Bitcoin. Nearly every area related to Bitcoin moved forward in a positive way, or at least a way leading to more clarity about how to use and regulate it. Let’s check out a couple of the bigger trends from last year.
BlockChain is the new buzzword
Until 2016, everyone in the crypto and fintech communities was watching Bitcoin and what it would do with varying degrees of interest. 2016 was the year that very large money center banks and other financial companies discovered Blockchain, Bitcoin’s underlying technology. Banks were so impressed with the technology and its potential ability to save millions on back office operations that they formed a consortium called R3CEV. At its peak, R3 had more than 70 large institutions in the group. The R3 banks are interested in this technology for some specific financial functions like clearing and settlement of bonds and other securities transactions. Banks like Goldman Sachs, Barclays, Deutsche Bank, and Citi are all members, although Goldman has recently left the group.
The last big idea that banks are adopting in the R3 consortium is the notion of a private or ‘permissioned’ blockchain, which would work differently than a public chain like Bitcoin. Some trust is built into their systems already since Barclays NY, Barclays London, and Barclays Singapore are all part of the same large money center bank. This makes the need for the ‘trustless’ and public nature unnecessary to these banks. The jury is still out on whether they will follow with this development path, if it will stay permissioned or if they will go the public route.
Bitcoin Price and Market Value Growing
If you are reading this then you know at the end of 2016 that Bitcoin’s price approached $1000 for the first time since 2013, shortly before the infamous collapse of the Tokyo based Mt. Gox exchange. The Jan 1 price was $432.25, and by the year-end, the price had risen to $968.23 on the Coindesk Price Index. During the early part of 2017 we have seen the price reach over $1000, only for it then pull back slightly during the first week in February. Since then it has recovered and resumed on its upward trend. Here is a price chart of that market activity from the beginning of 2016 to date. Source: Coindesk –
Where the Price is an important factor in trading, another significant factor is the total Market Capitalization for Bitcoin. Given that there are many more Bitcoins in circulation than there were in 2013 (when the price last broke $1000), the total market value is now sitting at all time high of just over $18 Billion. Impressively that makes the entire Bitcoin market worth more than the value of social media platform Twitter.
Use Case as Emerging Market Store of Value: Venezuela & India
One of the more interesting use cases for Bitcoin to come up in the last year focuses on two emerging markets, Venezuela and India, who find themselves in very different economic circumstances.
In Venezuela, Bitcoin is becoming a stable store of value for a market where the devaluing of its currency, the Bolivar, and triple digit inflation each quarter means that even bread and milk are less affordable. The average Venezuelan would prefer to get USD but cannot get dollars so the proxy for dollars and the store of value against a rapidly devaluing currency is Bitcoin.
India is a different story. Their economy is growing. However, in November, the Indian Prime Minister issued a currency ban on their 2 largest bills the Rs 500 and the Rs 1000. Since the new bills were not ready to issue in their place, this became a demonetization policy taking money out of the economy and leaving it in the banks. With money in the bank but less money out on the street, this opened up the opportunity for digital and virtual currencies and payments. India is mostly a cash economy so the opportunity for this huge market to get into digital and cryptocurrencies is bullish for Bitcoin for the short and intermediate term. If only 1% of India’s 1.2 billion population gets into digital currencies and payments that still means an additional 120,000 users.
As the price of 1 Bitcoin trades today at $1153, this is less than $100 shy of the all time high, combined with record trading highs in Q4, 2016 of 459 million BTC, the ever growing market value makes Bitcoin a serious investment proposition.