Can Bitcoin Reach $15,000 Before February 2018?

The question of whether Bitcoin (BTC) can reach $15,000 by February 2018 is an intriguing one, and the answer is both yes and no. While it is plausible for Bitcoin to soar to such a price, it is equally likely to drop significantly in the same period. This article delves into the factors driving such volatility, the current momentum driving Bitcoin, and potential obstacles that could impact its trajectory.

Factors Influencing Bitcoin's Value

Key factors to consider are velocity and volatility. Bitcoin (BTC) is renowned for its high volatility, which means its value fluctuates rapidly. Just this past month, the one-month return on BTC, as seen on platforms like Coinbase, underscores this volatility. While this doesn’t necessarily endear it to conservative investors, it does indicate a dynamic market with a high degree of unpredictability.

In the past few months, cryptocurrencies (including BTC) have seen significant appreciation. As of June, investors might have tripled their investment in BTC, Ethereum, and Litecoin, respectively. However, these gains are not without risk. The swings in value have been substantial, reflecting both gains and losses. The underlying principle is that while the market is highly volatile, it also offers the potential for substantial gains.

Price Valuation and Market Mania

Bitcoin is currently overvalued, as I've attempted to calculate its intrinsic value, arriving at an estimate around $1,600. The intense hype and mania surrounding BTC should be considered. However, barring extreme circumstances such as war or an economic collapse in a reserve currency economy, I do not foresee a major crash in Bitcoin before February 2018. Instead, we may see some profit-taking and slowdowns, which institutional investors might exacerbate due to the lack of contradictory data.

Despite the speculative nature of the market, investment banking analysts have set targets for Bitcoin, predicting it will reach between $11,000 and $14,000. In an environment where many are bullish on BTC’s performance, it seems highly likely that this momentum could push the price closer to these estimates. However, the current velocity and momentum suggest that hitting such targets before February is a realistic possibility.

Key Dates and Events: January 2018

The month of January 2018 is crucial for several reasons, which I will outline below:

FOMC Meeting Minutes and New Leadership

The January FOMC (Federal Open Market Committee) meeting minutes will be released, with Chair Janet Yellen handing the reins over to Jerome Powell, assuming he is confirmed. The FOMC under Yellen has been focused on gradually raising interest rates in a challenging macroeconomic environment. Whether Powell will continue this stance remains to be seen, but recent market conditions suggest that changes in interest rates and economic policies could significantly impact cryptocurrency valuations.

Holiday Retail Reports and Economic Impact

In the U.S., brick-and-mortar retailers have struggled, and holiday retail reports could reveal just how severe the situation is. If the earnings reports in February are as poor as anticipated, there could be a shock to the economy, possibly leading to an increase in unemployment, particularly among less-skilled workers. This could dampen consumer spending, which is essential for the prolonged economic growth. Such a scenario would create a binary decision for Bitcoin investors: to hold or to cash out, given that the market is already at a 900% return and may be trending downward.

Regulatory Developments

Interestingly, regulatory pressures could play a significant role in February. By the end of 2017, most regulators would be focused on wrapping up their fiscal year, checking off regulatory boxes. However, the start of a new year often brings renewed legislative activities, which could take effect in early February. With 10.5 weeks of trading in BTC futures by the end of February, enough data will become available for other regulatory agencies to reassess the landscape. The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), the Financial Conduct Authority (FCA), and others will be revisiting the regulation of digital assets. This could lead to stricter rules, especially for Initial Coin Offerings (ICOs), which may influence the overall sentiment in the market.

Conclusion

While the question of whether Bitcoin will reach $15,000 by February 2018 is complex, the environment remains volatile. The key is to understand the underlying dynamics driving the market, including velocity, volatility, and regulatory impact. Bitcoin’s journey in the coming months will be shaped by these forces, and February 2018 could indeed be a pivotal time. However, the final outcome will depend on a range of factors, and as with all speculative investments, there are significant risks involved.

For more insights into the evolving regulatory and legal issues surrounding cryptocurrencies, you can listen to the podcast I am launching, which will cover these topics in greater depth and provide actionable steps for due diligence in investing in these new alternative assets.