Bitcoin predictions for 2015
In our blog post 10 Reasons Why Bitcoin is the Future, Xapo’s Chief Strategy Officer Ted Rogers wrote that “it will take years for bitcoin to achieve its status as a global unit of account but, as it spreads across borders and becomes a de facto global currency, it will transition naturally into the standard unit for measuring value.”
That’s the long-term view of bitcoin’s future. But what about the short-term? What role will 2015 play in bitcoin’s trajectory toward becoming a “de facto global currency”? Here are some of my 2015 bitcoin predictions.
Tipping and remittances will continue to increase
One interesting thing to watch in 2015 will be the total number of bitcoin transactions on any given day. I expect this number to continue heading skyward, driven in part by microtransactions, tipping and remittances. Take a look at the chart below (from blockchain.info), which shows the total number of bitcoin transactions throughout 2014, and you’ll see what I mean.
Microtransactions are one transaction type that will continue to rise. Using a credit card to pay, say, 50 cents for an article you read online doesn’t make financial sense, due to the transaction fees. But it makes a lot of sense to pay for that article with bitcoin, which has a default transaction fee that’s one-third of a penny. Similarly, services like Xapo make it financially feasible to tip your favorite bloggers and others online with bitcoin.
Ecommerce using bitcoin will grow in 2015, now that giants such as Microsoft, Expedia, Dish and Overstock.com are enabling customers to buy products with bitcoins. Compare that to early 2014, when virtually no large companies in the U.S. accepted bitcoin.
Other large companies—not wanting to fall behind or miss out—will soon follow. Also, international remittances are especially ripe for bitcoin, compared to slow, inefficient and expensive legacy payment systems.
There will be more mainstream institutional investors
During 2014, interest among institutional investors in bitcoin grew as the digital currency matured. I believe this trend will “go big” in 2015. At Xapo, we’ve been having a lot of real-world conversations with institutional investors who are attracted to our secure storage and ease of use, as well as to bitcoin’s growing acceptance on Wall Street. Even Bloomberg LP and Thomson Reuters now include bitcoin pricing data and charts on their institutional trading platforms.
People will increasingly understand bitcoin security and best practices
Early on, there was fear and some misunderstanding about bitcoin security. But in 2014, the thinking about bitcoin security evolved. People came to understand what the risks and best practices are. I expect this understanding to spread and deepen in the coming year.
For example, there’s a greater realization today that whenever a bitcoin customer’s private keys touch the Internet, there is risk. To be most secure, private keys must remain in deep cold storage. That’s the approach Xapo is taking, and it’s one reason why we believe we offer the most secure bitcoin platform—and why others, such as the The Wall Street Journal, recognize that we’re working to become “the Fort Knox of bitcoin”.
More clarity around bitcoin regulation
Heading into 2015, potential government regulations are probably the biggest issue facing bitcoin. As the year progresses, expect to see more governments beginning to address bitcoin regulation. We won’t see the regulations that every bitcoin pursuit wants, of course. There will be trade-offs; customer protections should increase, but other regulations may impact innovation.
It’s too early to predict how this will all shake out. But this much seems clear: The clarity that government regulations will bring, whether you agree with the regulations or not, will be a large boon for bitcoin. Once governments have figured out how they want to regulate bitcoin, those who have been watching from the sidelines may feel comfortable at last becoming part of the bitcoin economy.
Overestimating and underestimating
Here’s something I can predict with 100 percent certainty: Technical innovations and disruptions will always be overestimated in the short-term and underestimated in the long-term.
Bitcoin is a great example. In 2013, there was tons of breathless bitcoin hype, and its potential in the short-term was overestimated. In 2014, it became clear that a lot of work needed to be done on bitcoin’s infrastructure. Use cases for mainstream bitcoin adoption were questioned, and the drumbeat of government regulations grew louder. And so, in 2014, bitcoin’s long-term potential became significantly underestimated.
I expect bitcoin’s long-term future will continue to be underestimated in 2015. There’s still a lot of hard work to be done, in terms of gaining mainstream adoption, figuring out government regulations and their impact. It’s clear that, as we head into 2015, bitcoin still has a way to go before it becomes a world-changing currency, but it’s long term destiny remains exactly that.