The sharp rise and high trading activity in the market of digital currencies in the first half of 2017 has raised questions about what will happen to cryptocurrency in the second half of the year.
Bitcoin has reached a record high level of $3,000 during the auction on 11 June, but fell by 27% in the following days. The currency was met by the end of the first half at $2436,7, more than doubling the market price for the previous three months.
The rise of bitcoin is largely due to the growing demand in Asia. In early April, Japan enacted a new legislation which officially recognized the bitcoin as a legitimate currency, and major retailers have begun to accept it as a payment method.
But digital currency came under pressure amid growing disagreements between developers and entrepreneurs about how best to increase trade opportunities for the currency because transaction speed is slowed down the growth in trading volume. As a result, the bitcoin can be broken down into separate competing currency types.
It is expected that new proposals for solving this problem, will be available later this year, which could lead to changes in network bandwidth of bitcoin is called a fork, or split currency into two separate entities, thereby creating a "hard" and "soft" version of the fork.
Concerns about a possible split of the currency has reduced investor demand for bitcoin and strengthened the demand for new digital currency, ether.
On 11 June, the air has reached record-level prices at around $419,3, but then fell sharply. Digital currency has completed the II quarter at the level of $260,52.
According to Business Insider, the ether, came on the market in 2015, is the largest cryptocurrency by market capitalization after bitcoin.
Bitcoin currently has a market capitalization of about $41 billion, while the total cost of airtime is estimated at approximately $26 billion.
However, there are several key differences between bitcoin and ether. Some of them are purely technical, such as the time required to complete the transaction, but the most important difference is related to the appointment of currencies.
Bitcoin was created as an alternative to Fiat money and digital currency. The developers of ether also rely on the development of a platform that facilitates transactions between individuals through peer-to-peer contracts, or, as some say, "smart contracts". Simplified explanation: transactions are broadcast between members of the network at any level will allow you to make the payment simultaneously with the execution of the terms of the transaction.
Although bitcoin and ether as competing cryptocurrency, they really should not be considered as direct competitors
.
The blockchain technology
In recent years, the interest from the digital currencies has shifted to the fundamental technology, namely the blockchain. Potentially this could cause a big revolution in the financial world than the digital currency.
The blockchain is a chain of blocks of a financial transaction stored in the web.
After recording the data in the block cannot be changed without changing all the related units in the network. In may this year, the global financial-technological consortium R3 has raised approximately $107 million to develop commercial applications based on the blockchain.
Banks hope that technology that checks and monitors the transaction itself, can eventually help them reduce the complexity and cost of such activities as trade settlements and international Bank payments.
ICO – a new word in attracting investment
In the second half of 2017, the price of bitcoin and ether, most likely, will depend on the ICO (Initial Coin Offering) which became the preferred tool of fundraising to launch new cryptocurrencies. ICO is, to some extent, a mixture of crowdfunding and classic IPO that offers digital tokens or "coins" created using the blockchain technology, in exchange for the digital currency, which can instant convert.
The development of air initially financed by the ICO. And with the growing interest of speculators to the rapid spread of blockchain technology, bitcoin price live, and probably will continue to grow as funds continue to flow.
Alternatives to bitcoin and the airwaves
Litecoin and Ripple for a long time played second and third fiddle in the cryptocurrency market before the advent of ether.
In recent years, Ripple has surpassed Litecoin in market capitalization, coming in 3rd place after bitcoin and ether.
As bitcoin with ether, Ripple and Litecoin have different goals. Ripple is a payment Protocol, secure way of reporting and transfer of any item of value. It is used by banks such as UBS (NASDAQ:UBSI) and Santander (NYSE: SAN), and the currency cannot be generated that means that the creation of additional units Ripple is centralized and can be implemented only by the owner or one of his representatives with access to appropriate technology.
Litecoin, although similar to bitcoin, technically more perfect, because transactions can be processed faster, reducing the number of potential delays often encountered when trading bitcoin.
However, in the afternoon trading, the price movement range will be is still under the control of traders. One thing is certain: 20%-s ' jumps in quotes in a matter of minutes still left in the past, and we will be able to observe them in the future.
According to the latest figures on the market today are available more than 800 different digital currencies, including such esoteric names as MarxCoin, PonziCoin, and SelfieCoin PutinCoin, and the number is only growing. That's why the market does not cease talking about the impending "bubble".
Over the past few months, many of these currencies rose in price exponentially. For example, SelfieCoin cost $0,000002 in early June, and now trades for $0,000026. It may look funny, but the increase was 1300% per month. PonziCoin (a title that hints at the status of the bladder itself) grew from $0,0014 in March to an annual maximum of $0,087. It is a 6250% increase, or 62.5 times more than its original cost.
The possibility of such enormous profits explains well the current growing demand for crypto-currencies, pushing them higher and higher.
ETFs and mutual Funds in cryptocurrency market
Given the potential profit in the market of digital currencies, it is not surprising that groups and management companies of investment funds also seeking to enter it.
Investment Fund Grayscale (OTC:GBTC) is ETF trading outside the stock exchange, which means the presence of identifiable trading counterparties; the management company describes the Foundation as the first "public system, to ensure safe profit from trading bitcoin". ETF does not provide the growth that is directly equal to the increase in the price of bitcoin as it trades above par pair BTC/USD. In may, the Fund had learned of the extraordinary revenues by 248% on the background of the growth of bitcoin by 72%. From the beginning of 2017, the profit amounted to 199% due to the growth of bitcoin by 129%.
Other players are also showing a desire to join the bidding, but not all succeed in this. In the decision issued on 10 March this year, the Commission on securities and exchange Commission (SEC) rejected the request of Tyler and Cameron Winkles on admission Winklevoss Bitcoin ETF (COIN) to trading on the exchange BatsBZX. The refusal was motivated by the fact that present the risk of fraud and lack of regulation of world market of bitcoin.
24 Mar Bats the company has appealed the decision by filing a petition for reconsideration of the refusal. A month later, the SEC agreed to consider the petition. Potential investors of bitcoin is waiting for the next round of discussions on this issue and the possible cancellation of the initial decision to the SEC. The price of bitcoin rose after the news. According to CNBC, the probability of lifting the ban is quite high.
Last month the Swiss Crypto AG Fund, announced that plans to establish a Foundation of digital currencies, which will be a European mutual Fund in index-based cryptocurrency that will invest in the most famous digital currency, including bitcoin, ether, Ripple and others. The Foundation plans to begin work in the fourth quarter of 2017.
The fundamental factors influencing the market of digital currency
Along with the official recognition of investment funds there are a number of fundamental factors that can support the cryptocurrency prices in the second half of the year. State recognition of virtual currencies as a legitimate means of exchange and payment will boost demand. Japan has recently recognized bitcoin as a legitimate payment instrument, after which the currency immediately soared to a record high level.
The authorization of the Fund and the official recognition of virtual currencies can, in turn, to draw wider attention to the market. Today, even with the growth of interest in cryptocurrencies, only a small part of the population even knows about their existence, and even fewer actively involved in the trade. And their value will increase as growth opportunities for the use of digital currency in everyday life.
Finally, bitcoin, ether and other currencies can be considered as a tool of "currency risk hedging" because they are not regulated and exist independently from the Federal governments and Central banks. Although their volatility prevents them to fulfil the role of assets, "safe Harbor" if the situation with North Korea escalates, we fully expect that bitcoin and other currencies will grow rapidly.
Some will argue that without reliable government oversight of the growing market of digital currencies the market is somewhat chaotic, and bears the imprint of "the wild West". It seems that the main drivers are the rumors and news headlines. In addition, to claim the status of asylum – pretty heady stuff even for a new asset, not to mention completely new category.
What awaits cryptocurrency in the second half?