Up more than 1370 per cent, 2017 was an absolutely stunning year for Bitcoin. And one does not have to search far and wide to find many who think the world’s most famous cryptocurrrency will fall back to earth this year.
But Canaccord Genuity analyst Michael Graham thinks the wind is still at Bitcoin’s back. In a research report to clients Wednesday entitled “Bitcoin 2018: Tailwinds should trump headwinds” the analyst tackled the oft-discussed future of the currency that is on everyone’s lips these days.
Graham, while acknowledging the bear cases for Bitcoin, argues that the bulls will have at least as much to say.
“While we find it easier to identify a greater number of potential headwinds for BTC value in 2018 (which should lead to event-driven volatility), we think the tailwinds will generally prove more powerful,” the analyst says.
Graham points to the arrival of CBOE and CME futures in December and the more than 100 crypto funds that have formed, noting that institutional investors in the space is a relatively new phenomenon. The analyst also points out that bitcoin’s popularity is not limited by country specific assets or currencies. And he says the Bitcoin Cash fork in August effectively produced a tidy dividend for Bitcoin holders. Graham says he expects several more of these.
Graham says headwinds to Bitcoin’s continued success include regulation, the rise of alternative cryptoassets, Bitcoin’s low speed and high transaction fees, and mining inefficiencies. But the analyst returns to the fact that Bitcoin is truly global game.
“Importantly, Bitcoin is an inherently “global” phenomenon – even despite the massive uptick in interest seen domestically in late-2017, the U.S. still accounts for just ~38% of bitcoin’s overall volume,” he says. “Beyond the U.S., Japan and South Korea have proven to be bitcoin’s most active markets thus far, as their governments have remained relatively receptive to bitcoin and other cryptoassets even as China continues to ban exchanges and ICOs.”
As for a valuation, Graham is less comfortable with a particular price than he is with estimating the portion of the overall market that Bitcoin will win.
“Without setting a price target, we refresh our valuation framework, removing several payments use cases. We estimate the current value of BTC requires capturing ~4% of primary payments use cases and ~20% of the gold market by 2025. This seems ambitious without significant scaling progress (faster & cheaper transactions),” the analyst says.