LIVE NOW

Bitcoin is rising again, and at this rate could hit $75,000 in 2019

Posted: 27 May 2019 12:43 pm
News

Picture not described: cryptocurrency-market-activity-shutterstock-738.jpg

Bitcoin has crawled, almost unscathed, from the wreckage of its 2018 crash.

From the start of 2019 to today, Bitcoin is up more than 130%, rising from a low of about US$3,700 at the start of the year to a new yearly high of about $8,700.

And at this rate, it could hit $75,000 in 2019.

Sounds ridiculous, right?

History repeating

History doesn't repeat, but it does rhyme, and that $75,000 Bitcoin price is what you get when you assume 2019 will be rhyming with 2017.

So far it has been.

The table below shows what Bitcoin prices did in 2017.

Picture not described: bitcoin-compound-gains-20172.jpg Image: Getty

The red line shows where we were at by this time in 2017. It's not too dissimilar from where we are now, and as you can see Bitcoin prices this year have so far been a very close echo of Bitcoin in 2017.

The green line shows how much higher Bitcoin will get in 2019, assuming it keeps mimicking 2017. A 770% increase from now until then brings us to around $75,000, which is where that absurd $75,000 figure comes from.

Fact or fiction?

On the one hand, it would be ridiculous for Bitcoin to hit $75,000. On the other hand, the math magic of compounding returns does ridiculous things.

The black dotted lines in the chart divide the gains of 2017 into two roughly equal portions of 350% each. By itself, neither is especially unbelievable. But once you put two consecutive 350% rises together, they turn into around 2,000% all up. A 2,000% price rise is hard to believe. But it's slightly more feasible-sounding when you frame it as two consecutive 350% rises.

And Bitcoin is up 130% this year.

Past performance is no guarantee of future returns

Of course, you can't just look at similarities in the percentages and extrapolate that into a crazy prediction.

You obviously need a lot more money, in dollar amounts, to take Bitcoin prices from $10,000 to $75,000 than from $1,000 to $7,500. The percentages are the same, but the sheer amount of dollars involved is entirely different.

In fact, if it reached prices of $75,000, Bitcoin would have a total market cap of more than 1.3 trillion dollars.

But that doesn't mean people need to buy over a trillion dollars' worth of Bitcoin. The thing about cryptocurrency prices and markets caps is that they actually have very little bearing in reality, which helps make those eye-watering numbers much more feasible.

You don't actually need to buy $1.3 trillion of Bitcoin to send prices to $75,000. You just need to have more buyers than sellers, and Bitcoin prices can keep rising as high as they want. And as long as prices keep rising, you're naturally going to get more buyers than sellers.

This is why "digital gold" is such an apt description for Bitcoin – because just like gold, it doesn't actually do anything except store value. One of the only ways something can be fairly priced at both one cent and $75,000, and deliver such enormous price rises, is by having almost no practical purpose except to store value.

That's what Bitcoin does.

Opinion: Bitcoin is valuable because it's worthless

Bitcoin's most ardent critics will often point at a lack of intrinsic value as Bitcoin's biggest weakness, when in fact it's one of its biggest strengths. If Bitcoin actually did anything, you'd be able to point a price tag on its contribution and decide that it's over or underpriced. But because Bitcoin, as an asset, has no purpose except to sit around looking pretty, it can be worth as much or as little as it wants.

The Bitcoin network itself has some applications, but the actual bit coins, which are what you buy and sell, have no function except to be valued.

This is why people say Bitcoin's biggest challenge was going from $0 to $1. The hard part was convincing the world that it was worth anything at all. Now that it's crossed that hurdle, it can be fairly valued at any price.

Lest it all sound stupid, remember that this isn't unique to Bitcoin and that the most valuable things in this world tend to be utterly worthless.

The fashion industry is worth an estimated $2 to 3 trillion, precisely because it's purely aesthetic. If the only point of the industry was to keep people warm and protect their modesty, it would just be a fraction of that amount. Meanwhile, the faddish illicit rhino horn industry is worth countless billions precisely because rhino horn does not actually have any medicinal purposes. If it did, people would compare options and then stick with the cheaper and better conventional medicines.

Gold might be the biggest offender. People will often point to its mild industrial applications as evidence of purpose, but in fact the vast majority of demand for gold comes from people who want it for reasons of zero value.

Picture not described: gold-demand-by-industry.jpg

Pound for pound, silver should actually be much more valuable than gold in a more rational world. Proportional to its supply, silver is more in-demand for jewellery, industrial and value-storage (coin, bar) applications. In fact, one of the main practical downsides of silver for practical value storage purposes is that it's not worth as much as gold, meaning you need more square footage to contain the same amount of value.

Bitcoin's complete lack of intrinsic value bodes very well for it. If it actually did something, $75,000 would probably be overpriced. But because it does nothing at all, $75,000 could be closer than one might expect.

Bitcoin is pointless. If it wasn't, it would probably be overpriced.

How to buy Bitcoin.



Also watch


Disclosure: The author holds BTC, BNB, ATOM and IOTA at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Shutterstock

Latest crypto guides

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site