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Saturday, September 20, 2014

Bitcoin Prices: Deja Vu All Over Again

Newcomers to the world of Bitcoin and cryptocurrencies might be wetting their pants right about now, depending on when they decided to get on the bus. We've gone from a high of around $660 in July to the current price of just over $400, with dips as low as $375 (give or take). The early hype stages of Bitcoin are now clearly over and it's time for things to slide into oblivion... or at least that's the pessimistic view of things. But you know what's interesting about pessimists? They've been predicting the demise of Bitcoin for well over three years now, and so far they've been wrong every time.

Yes, we've had ups and downs, some bigger than others, and there have been a variety of reasons for the spikes and valleys. Major accounts have been hacked and dumped, exchanges and other services have evaporated into thin air with large numbers of Bitcoin, China has jumped on -- and then been pushed off -- Bitcoin. But even without some of those events, Bitcoin like all markets is going to have upward and downward trends. And right now, we're clearly in a downward trend, but here's the question: how low will we go, and when the inevitable rebound occurs, how high will we climb?

2013 was, by all accounts, a very exciting year for Bitcoin. It took a while, but we finally eclipsed the previous high of June 2011... and kept on going! Around early April, Bitcoin reached a then unheard of high of around $260, at which point there was a major sell-off and some other stuff like the MtGox fiasco that caused a crash back to the $50 range. Then we went back to $170, down to $80, up to $130, and then there was a downward trend to about $66 again. The naysayers were out in full force, as you might guess, and then things started to pick up around August.

Bitcoin went up to $130 or so again, and basically hovered around that mark for a bit. There was a big dump to $85 in late September (I think that might have been an exchange getting hacked or something similar), and then we started to jump up in prices. The first plateau was back to $200, and I'll admit I cashed out of quite a few Bitcoins at that point. Over the next month I just had to shake my head as we repeatedly set new highs, eventually topping at over $1150.

After such a rapid climb, the fall-off was almost as dramatic, but it was far more seesaw in nature. Slowly but surely we've been heading down again, but we're still at more than three times the prices of last September.

Now, I'm not going to guarantee anything with Bitcoin right now, especially not on any short-term time frame, but what I will say is that this downward slump is nothing new. I suspect we'll even go as low as $300 or even $200, though that's a gamble if you're going to sell now and try to buy back in, but mark my words: Bitcoin is going to go back up again.

My take is that the holiday season is about to kick into full swing, and when people start buying lots of gifts and other products, companies start looking like they're doing well and stocks go up. Bitcoin most definitely isn't a stock, but there are many investors that play the stock market and they're now playing Bitcoin, so it's often treated like a stock. That being the case, the end of this year and the start of 2015 could be as exciting as last year, perhaps even more so.

Personally, I'm hanging onto all the Bitcoins I can get my grubby little hands on right now, and my Zen Hashlets are helping me accumulate more at a nice steady rate. Long-term, I think the next major spike in Bitcoin prices will eclipse $2000, and possibly go as high as $5000, and then we'll see the usual collapse again as prices consolidate around a new high that will very likely be over the $1000 mark. If you sell now, you might become yet another one of those "weak hands being shaken out", though as long as you're not selling at a loss I suppose that's fine. Just remember: the real winners are the people that successfully play the long ball.

Come talk to me again in 2015 and let's see how my prediction pans out. Again, no guarantees, but I think we're going to see a major upswing some time between now and January 2015. That's where I'd place my bets at least, if I were a betting man. And since Bitcoin is almost like gambling, maybe in this sense I am a betting man.

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