The price of a bitcoin might rise to $3,000 by the end of 2017. That’s the prediction of South Africa’s Vinny Lingham the CEO of the identity protection service Civic.com.
Lingham thinks bitcoin prices will rise because he believes interest rates will increase in 2017. The catalyst that drives up bitcoin prices will be the US Federal Reserve, which might raise rates in order to prevent inflation.
“Essentially, the higher the rates go, the higher the demand for Bitcoin will be,” Lingham wrote in a December 27, blog post. “When the fed raises rates, emerging market economies have their currency devalued, which raises the effective price of Bitcoin for people in those markets, creating more equity value in their Bitcoins and driving up demand for more.”
Rising interest rates in the US drive other currency values down; because governments and businesses in many of those nations have to make interest payments in dollars. “Bottom line is that rate hikes devalue foreign currencies and strengthen the dollar,” Lingham wrote.
Higher interest rates strengthen the dollar, weakening other currencies and increasing the demand for bitcoin. People fearing they will lose what little value they have left, rush to buy bitcoins.
Is Bitcoin a Commodity?
His whole thesis is that bitcoin serves as a hedge against inflation; particularly for people in nations with unstable currencies.
IE; a Venezuelan that uses her bolivars to buy bitcoins, understands that the bitcoins will retain more of their value than the bolivar. Since bitcoin is easy to buy, easy to hide by electronic means and easy to sell it is the perfect medium of exchange.
Another factor driving bitcoin’s popularity that Lingham fails to touch upon is bitcoin’s utility. It can be used to make a wide variety of purchases online including Amazon and other gift cards; which can be used to purchase items in short supply in some countries.
There are even a few websites such as Overstock.com where it is possible to make direct purchases with bitcoin. Such purchases cannot be made with gold but they can be completed with bitcoin.
Lingham also makes the important point that bitcoin, like gold is a commodity.
“This is because the price to mine a Bitcoin is largely uniform (electricity price, aside) in every country in the world and it’s a commodity that trades freely across global markets — labor input costs are not germane to Bitcoin, unlike Gold,” Lingham wrote.
Gold is vulnerable to outside costs such as fuel and labor, which lowers its value. One reason why the price of gold has been falling lately is that fuel prices are lower which means it is cheaper to mine gold. That gives miners a powerful incentive to dig more gold, which drives down the price.
Falling gold prices drive bitcoin up because traders and speculators are looking for an alternative to the yellow metal. Since bitcoin is another commodity that’s growing in price they buy it.
Is $3,000 bitcoin realistic?
“Without a doubt, Bitcoin will rise further next year,” Lingham wrote. “I expect to be within the $3k range by the end of next year, as I have previously forecast.”
Since Lingham was one of the few observers that predicted the current bitcoin rise we should certainly take a look at his latest assertion. His reasoning is sound and the thesis he makes is realistic.
Lingham forecast bitcoin’s rise to $900 on December 11, The Cointelegraph noted. Lingham also correctly argued that bitcoin would quickly rise from $800 to $900 in December which it did. The cryptocurrency was trading at $754.11 on December 1 and $962.81 on December 31, 2016.
Governments will Embrace Bitcoin
Lingham makes three more predictions that we should pay attention to. Here they are:
- Governments will start buying bitcoins and invest in bitcoin mining companies. I imagine that is already going on in places like Russia and China. Many regimes in developing nations, particularly those dependent on natural resources like oil will take the lead in this trend. One major investor might be Saudi Arabia. Government entities that operate below the radar; such as intelligence agencies and some law enforcement and military units, will also become heavily involved with bitcoin. Bitcoin would be a perfect means of paying spies or informants, making bribes and paying troops or military advisors in distant lands such as Russian forces in Syria. There is also the possibility that cryptocurrency itself will become a weapon of war.
- Governments will start giving official endorsements or sponsorship to bitcoin. That means governments will start accepting bitcoin as payment for taxes and license fees. Some governments might also start using bitcoin to pay for services such as banknote printing as well.
- There will be more government crackdowns on bitcoins. A likely place for this to occur is India, another is Venezuela. The crackdowns will drive up bitcoin prices in the black market and make it more desirable.
So buckle up folks and buy some bitcoin, it looks as if 2017 is going to be an interesting year. If Lingham is correct the humble cryptocurrency with the shady past might just be the world’s best investment.