Will Bitcoin Crash in 2018?
As of this minute, the price of Bitcoin (BTC) is $15,903.08. That “minute” is particularly important because, as of the next minute, Bitcoin could potentially be worth a thousand dollars more or less than that amount.
No wonder so many people are struggling to find an answer to the question: “Will Bitcoin crash in 2018?” And, if the rumors of a crash are correct, they want to know what a viable Bitcoin alternative might be.
These questions show how volatile the world’s leading cryptocurrency is. But, with a market capitalization of roughly $300.0 billion, we’re not dealing with play money anymore. That’s why predicting the course of Bitcoin in 2018 has become such big business, and why I believe that so many readers and investors will ultimately be unsatisfied with what they find.
When Will Bitcoin Crash?
As a blockchain-based currency, Bitcoin has always operated somewhat in the shadows. Although it’s not as anonymous as competitors like Monero (XMR), it’s still relatively obscure. That’s not ideal for financial analysts; it leaves them with a lot of guesswork.
Every time we put together a) guesswork and b) obscene amounts of cash (with even crazier rates of growth), we’re going to get a lot of speculation that ends up being downright wrong.
Let’s take a look at some of the things analysts have said about Bitcoin when trying to answer when will Bitcoin crash that have been, so far, completely wrong.
Back in October 2017, Tom Lee, co-founder of Fundstrat Global Advisors, LLC, announced in an interview that he was bullish on BTC prices. Why? Because he reported that he had it all figured out. Using a short-term valuation model that he built on Metcalfe’s law, Lee claimed that he had an explanation for almost all of Bitcoin’s volatility.
Metcalfe’s law says that the value of a network is proportional to the square of the number of users on the network. So, imagine Facebook. The more people who use it, the more valuable it is for the people already on it—disproportionately so. Double the number of users and you more than double the utility of being on Facebook.
It’s not hard to see why Lee believed that this law would apply to a massive, growing network of users like Bitcoin. The more people who use Bitcoin, the more useful Bitcoin becomes.
Unfortunately, and I don’t want to ruin the ending, but Lee’s analysis left him rather short. At the time of his interview, when Bitcoin traded for just about $5,500, his model predicted that it would reach $6,000… by the middle of 2018.
Of course, now we know that Bitcoin almost reached $20,000 in December 2017. That doesn’t give us much faith in the predictive powers of Lee’s model.
Here’s another example of a mistaken bull: John McAfee. His initial success comes from the antivirus software company McAfee, LLC, but he also sought the political spotlight, competing for the Libertarian Party nomination in the 2016 presidential election (he lost the nomination to Gary Johnson).
McAfee predicted on Twitter that Bitcoin would reach $500,000 by 2020. He even used some pretty colorful language in his Tweet (let’s not reproduce it on these austere pages, though). Unfortunately, it turns out that his prediction was based on a model that assumed Bitcoin would reach $5,000 by the end of 2017. (Source: “John McAfee Bullish on Bitcoin Price Reaching $1 Million by 2020,” CCN, December 3, 2017.)
When that analysis turned out to be completely wrong, McAfee was forced to amend his original Tweet. Now his Bitcoin price forecast is that the cryptocurrency will reach $1.0 million by 2020.
Ultimately, it’s beginning to look a lot like nobody has any idea what Bitcoin will do. And there’s some real merit to that statement. Jim Cramer, host of Mad Money on CNBC, says that this cluelessness comes from five great unknowns:
- Nobody knows who created Bitcoin.
- Nobody knows how much Bitcoin the creator holds.
- Nobody knows who’s doing what.
- Nobody knows how governments will react.
- Nobody knows how vulnerable it is to hacking.
That hasn’t stopped bears on the other side of the aisle from prognosticating Bitcoin’s doom just as feverishly as the bulls forecast its million-dollar destiny.
Jack Bogle, a founder of The Vanguard Group, Inc., said to “Avoid Bitcoin like the plague” because it has “no underlying rate of return.” (Source: “Why Vanguard Legend Jack Bogle Says You Should ‘Avoid Bitcoin Like the Plague’,” Money, December 3, 2017.)
Revered investor Warren Buffett called Bitcoin “a real bubble,” which doesn’t make any sense and is doomed to implosion. (Source: “‘A Real Bubble’: Billionaire Warren Buffett Doubles Down on Bitcoin Doubt,” CoinDesk, October 26, 2017.)
Howard Marks of Oaktree Capital Group LLC argued that Bitcoin’s price is determined by speculative buying, which is causing extreme volatility.
JPMorgan Chase & Co. CEO James Dimon called Bitcoin a “fraud” that would
“eventually blow up.” (Source: “Jamie Dimon calls bitcoin a ‘fraud’,” CNN Money, September 12, 2017.)
And Denmark’s Saxo Bank A/S/ (originally named the somewhat harder-to-pronounce Midas Fondsmæglerselskab), made an “outrageous” prediction that Bitcoin would hit $60,000 before crashing to $1,000 by 2019. The reason that China and Russia will eventually release their own cryptocurrencies and outlaw Bitcoin. (Source: Bitcoin Will Peak at $60,000, The Telegraph, December 11, 2017.)
That certainly sounds believable, but Saxo Bank also predicted in 2016 that Bitcoin would triple in value in 2017 from $700.00 to $2,100, so their track record isn’t bringing home any bacon either.
Part of the problem with predicting the Bitcoin price (or a Bitcoin crash) in 2018 is that nobody knows what to do with Bitcoin. It’s the most widely accepted of the cryptocurrencies, it’s the largest, and it’s the most expensive.
But it’s also ponderously slow and prohibitively expensive to actually use.
Although its name carries a certain brand recognition, it seems likely that Bitcoin’s lack of real utility for commerce will ultimately doom it to the ash heap of history.
But the premise, and the blockchain upon which Bitcoin is built, still holds extreme promise for the world. More than likely, other new-generation cryptocurrencies will eventually find their footing and break out into wider acceptance in a way that Bitcoin is unlikely to do.
Monero far outpaces Bitcoin in terms of privacy and security. Using ring signatures and confidential ring transactions (RTC), the “always on” privacy setting is far more robust for users who don’t want their transaction history to be traceable.
Another good Bitcoin alternative is IOTA (MIOTA). Being designed for microtransactions on the Internet of Things (IoT), means IOTA has a purpose and focus that Bitcoin lacks. The fundamentals underwriting the “Tangle” (its alternative to the blockchain) makes it far faster than Bitcoin, with zero transaction fees.
Should I Invest in Litecoin for 2018?
Another option in our Bitcoin alternatives 2018 list is Litecoin (LTC). Its market cap has reached $17.5 billion, making it the fifth-largest cryptocurrency. Let’s compare Litecoin vs. Bitcoin: Is Litecoin the best alternative investment to Bitcoin?
Recently, Litecoin’s price has surged more than 75× since January 1, 2017. Here’s a chart that shows this explosive growth:
Litecoin growth (Source: CoinMarketCap, December 20, 2017)
The current Litecoin price forecast for 2018 on Profit Confidential has already been passed!
However, a shocking twist in the Litecoin story occurred only recently: Litecoin’s founder Charlie Lee sold almost all of his Litecoins.
In a post on Reddit, Charlie Lee claims that he sold his Litecoins because he believes that, as a key influencer and founder, it is a conflict of interest for him to hold LTC. (Source: “Litecoin price, tweets, and conflict of interest,” Reddit, December 20, 2017.)
Nevertheless, this should set off alarm bells for investors. With the frenzied growth in the LTC price, the sudden exit of its founder could be seen as an escape—in a market already extremely sensitive to claims of a bubble. And that means that LTC prices could soon go tumbling down.
|Litecoin Pros||Litecoin Cons|
|Faster than Bitcoin (2.5 minutes vs. 10 minutes)||Linked to Bitcoin|
|Easier to mine||Founder recently sold all his coins|
|More scalable than Bitcoin||Not widely accepted by businesses|
So, if you’re asking, “Should I invest in Litecoin for 2018?,” it’s a good idea to ask yourself first what you know that Charlie Lee doesn’t.
Ultimately, cryptocurrencies promise explosive wealth as-of-yet unseen in human history. And there’s no question that Charlie Lee will retire an extremely rich man. It’s clear that there’s money to be made for clever investors.
But remember to be extremely cautious. The safest way forward is to seek out the expert advice of analysts who can pay attention to the minute details in the crypto market. They have the best chances of predicting price changes in 2018. Otherwise, investing in cryptocurrencies is little more than gambling. That can be fun, but just remember: in a casino, the house always wins.