2017 was in no doubt a Bitcoin year. The cryptocurrency stole the show from others, even in the mainstream, rising from under $5,000 to more than $19,000.
No sooner did it start to report successes than many other factors begun to come into play and which could determine its price in 2018. But it has huge potential given the high interest from institutional and retail investors. It will depend on how the following issues develop.
“The drawbridges for institutional investors have only just been lowered,” Spencer Bogart, a partner at Blockchain Capital told CNBC. According to him, a trickle-down effect will attract retail investors to cryptocurrency markets.
Network transaction speed, congestion and cost issues
Bitcoin developers have been up to the task but the network continues to struggle with delayed transactions that sometimes take several days, high transaction fees that have reached tens of dollars from a few cents in a few months time ago.
To solve the backlog of transaction and fees, core developers plan to implement a new wallet interface that features SegWit in May 2018. Segregated Witness hard fork, which is already implemented in Litecoin, will increase block size and hopefully speed up transactions and lower fees.
Coinbase wallets will also be compliant with SegWit in 2018.
Testing of the SegWit on Bitcoin ecosystem could make more companies to activate it. For instance, only about less than 20 have implemented it since inception and it constitutes of only 10% of all bitcoin transactions. Handles to its implementation include difficulty in implementing related security and technology upgrades and the complexity of the fork.
Scaling issues have clogged Bitcoin for long. It is expected that side chains and Lightning Network (supported by SegWit) will solve the problem. With state channels, two parties could perform transactions off the main chain.
Volatility has been one of the main concerns for investors. Even the recent discontinuation by Microsoft and Steem are blamed on volatility. There is no doubt that volatility will continue even at the launch of Bitcoin futures in the last year according to Bogart. But how Bitcoin prices fair will determine its acceptability by many.
If most of Bitcoin price influence comes from its utility in daily transactions than media mentions, government regulation, and institutional money, then volatility would be a past.
While 2017 saw Bitcoin prices go to unimagined levels, most governments were gathering up in readiness for Bitcoin regulation. Even though Bitcoin rose against the ban challenge in places such as China and India. There is no doubt these bans and crackdowns affected growth and popularity to some extent. It is possible that this will be one of the greatest determinant for Bitcoin survival and excellence this year.
Most of the complains have relied on customer protection, use of Bitcoin in crime and hacking or cyber crimes.
Security concerns, hacks, malpractices
Even as Bitcoin prices soared, many people and entities suffered hacks, scams and other malpractices as a result of security breaches and irresponsibility.
Its popularity as a store of value
Bitcoin has been a good store of value for many so far. It is likely that this will continue as solutions for high transaction fees, congestion, volatility and scaling issues are found.
Bitcoin’s main problems are a blessing partly because they offer a chance for people to innovate and create what could catalyze network growth and this will also determine its success.
Also, challenge and competition from other cryptocurrencies will determine Bitcoin success and prices as they compete for customers.