Is an investment in Bitcoin still worthwhile, or is it already too late?

Bitcoins is now on everyone’s lips and, in addition to its growing popularity, is also enjoying extreme price increases. Every day the new highs are broken and the Bitcoin is at dizzying heights. But how effective is it now to choose the cryptic currency as an investment and jump on an already moving train?

The Bitcoin share price did not develop particularly positively last year. After nothing could prevent BTC from rising at the end of 2017, it is currently a tough battle for every percentage point. But where do the problems actually lie and can they be statistically proven? What do the experts say about the issue? And can things be solved in the future?

What’s Bitcoin’s problem?

The exact value was $19,409.50 when the Bitcoin price reached its highest value in history on a Sunday in mid-December 2017. Exactly 12 months later, $3291.92 was left. The drop of over 80% could not have been foreseen in this form, as Bitcoin was to act as the next major object in the financial market. In February 2019, after a short period of recovery, the share price was again well below $4,000 and could not even crack the $3,500. After $6,000 was regarded as the limit over a long period, even the biggest optimists can no longer discuss the crisis away, which, in addition to Bitcoin, also fell most of the other crypto currencies.

The reasons for the crash are manifold, but not completely attributable to their extent. An important point in the case of Bitcoin is in any case the standstill, which can be stated in terms of further development. The so-called Distributed Ledger technology, which serves as the basis for the blockchain, is constantly being further developed by other companies, while Bitcoin remains in its current form. A good example is Ripple with XRP, which, thanks to continuous development, is increasingly entering into partnerships with banks and other companies. In the end, the Bitcoin blockchain lacks two main characteristics that ultimately led to many conflicts in the community: speed and scalability. Currently the mining of Bitcoin is not really worth it, because it is more expensive than the actual value of the coins.

The current trend began mainly in mid-November, when the price was still at a safe $6,400 (see chart below). Since then it has halved to mid-December, reaching its lowest level since April 2017. Since December 2018, the Bitcoin has rallied for a short period before falling back below $3,500.

An important aspect when looking at Bitcoin is still the number of users. Instead of establishing itself as a major alternative to the usual banking system, Bitcoin still has to take a back seat. A 2017 study by the Cambridge Centre for Alternative Finance used data from over 100 crypto-currency companies to analyse the user base. The final result was between 2.9 and 5.8 million active users. Considering that 7.65 billion people make up the world’s population, it is a tiny fraction that still does not necessarily speak for the significance of the currency. The problems of scalability and speed mentioned above, along with negative news, prevent many people from making a Bitcoin investment. Even if the total number is likely to have risen after the hype at the beginning of 2018, the accessibility of the masses remains a major task for companies and start-ups.

However, if you look at the trend of investor Charlie Bilello, you can see some patterns in the annual return on the Bitcoin investment. Especially the years 2014 and 2018 stand out due to their big losses. The latter had a similar amount and each amounted to more than 50%. However, they also had a bull run in common last year. This was 5507% in 2013, before rising to 1331% in 2017. Does this statistic already give hope for the year 2021?

What do the experts say?

The experts are still not sure what the future holds. Bitcoin moves too uncertainly in 2018 and reaches one negative point after the next. Venture capitalist Tim Draper may also be sure, given his job, that Bitcoin will rise to $250,000 per coin by 2022. Draper makes it clear:

“At the moment there are 86 trillion US dollars in political currency. They call it ‘Fiat’ currency, but it’s political. And I believe that this currency is slowly being eroded by a better currency that is global, decentralised and smooth. […] Bitcoin is a better currency.”

The founder of the crypto token Yield Coin, Samuel Leach, expects a significant upswing in the world of digital currencies as early as 2019. According to Leach, however, Bitcoin will not lead this upturn. Rather, he calls Bitcoin “the grandfather. You can see others coming up like Ripple, who has a solid team that is constantly developing it and driving it forward for the future. Since Bitcoin has little development, Samuel Leach says it is a project that will slowly but surely step aside and pave the way for a growing market for ambitious companies.

Outlook for the future of Bitcoin

As the expert opinions already show, there is no uniform forecast for the future of Bitcoin. Rather, it is already a matter of solving the known problems in order to maintain the dominant position among crypto currencies in the coming years. The transactions must be possible faster in order to keep up with the aspiring competitors such as Ripple or even Bitcoin Cash. In addition to speed, the aim is to improve scalability. In the Bitcoin network it is only possible to carry out a certain number of transactions per second, depending on the technology used. This is simply higher with other digital money.

Much will also depend on acceptance in society. While a region like Scandinavia already relies completely on digital payment methods and is therefore inherently open to Bitcoin & Co., it will certainly take a little longer in Germany. The dominance of banks in Germany continues to prevent the growth of crypto currencies on a large scale. While the current problems therefore prevent a significant rise in the BTC price, these are not insoluble difficulties. Provided there is agreement, the potential is far from exhausted.