Bitcoin Looks Unlikely To Cross $10,000 Again This Year
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July was a solid month for cryptocurrencies overall, with the price of Bitcoin reversing the steady declines seen over the previous two months to hover around $8,200 around the end of the month. This marked a strong recovery from the low of $5,755 seen in late June, but was still well below the all-time high of almost $20,000 last December, and also a good 18% lower than the ~$10,000 figure seen less than three months ago.
Notably, there was a recovery in the level of activity on the Bitcoin network over the month of July, with the average number of unique addresses and the average transaction volume per unique user improving from the lows seen in June. However, with both of these key metrics sliding lower over the first two weeks of August, the price of Bitcoin has slumped to below $6,500. Given the current weakness in Bitcoin trading activity, we have reduced our forecast for number of unique users as well as transaction volumes in our interactive Bitcoin Price Estimator. We now expect the Bitcoin price to settle around $9,500 by the end of the year for our base case scenario – down from our earlier estimate of $10,500. The graphic below captures our base case forecast for the monthly average price of Bitcoin this year based on our estimates for transaction volume and number of Bitcoin users, and also shows a possible price range for the cryptocurrency taking into account a relatively bullish as well as bearish outlook for the rest of the year.
TREFIS
Understanding What Drove The Price Fluctuations Over Recent Months
The global cryptocurrency industry has seen a flurry of new developments since December. Many of these developments had a negative impact on the growth prospects of cryptocurrencies, such as restrictions by banks on the use of credit cards to buy cryptocurrencies, and calls by financial regulators across the world for caution while investing in digital currencies (with some countries even banning their use). This sent cryptocurrencies sliding in value from the all-time highs seen in mid-December 2017, as demonstrated by the slump in Bitcoin’s price from almost $20,000 then to below $6,000 in early February.
However, Bitcoin prices saw a sharp recovery over April and early May, primarily because the traditional financial industry began warming up to cryptocurrencies. While Goldman Sachsbecame the first investment bank to start a cryptocurrency trading desk, IntercontinentalExchange (which owns the NYSE) reported its ongoing work on a new trading platform that will allow institutional investors to buy and hold cryptocurrencies. As this points to increased adoption of cryptocurrencies in the near term, the good news propelled Bitcoin prices higher.
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