Despite the constant flux in recent months, cryptocurrency investing is still surging with bitcoin remaining the star of the show. Some experts are predicting the market potentially reaching the trillion-dollar mark in 2018.
Jamie Burke, CEO at Outlier Ventures talking to CNBC, said they believed after February the market will likely go on a bull run comparative if not greater than last year before a crypto winter sets in where the market becomes more focused on proper market fundamentals.
Bitcoin began 2017 worth $1,000 per coin but closed the year at more than $19,000. The head of APAC business development at cryptocurrency exchange Gatecoin, Thomas Glucksmann, said there is no reason why they couldn't see it pushing $50,000 by December.
He added: "Increasing regulatory recognition of cryptocurrency exchanges, the entrance of institutional capital and major technology developments will contribute to the market's rebound and push cryptocurrency prices to all new highs this year.”
Although Gluksmann believes regulatory recognition will be key to whether or not cryptocurrencies have a bright future, others fear bitcoin prices may fall further if there is increased regulatory scrutiny.
How does cryptocurrency work?
Cryptocurrency is a digital currency that is created through the use of encryption software. It designed to be secure and, in many cases, anonymous. According to blockgeeks.com, a simple definition of cryptocurrencies is: “limited entries in a database no one can change without fulfilling specific conditions.”
A cryptocurrency runs on a blockchain that is a shared ledger or document duplicated several times across a network of computers. The updated document is distributed and made available to all holders of the cryptocurrency. Every single transaction made and the ownership of each cryptocurrency in circulation is recorded in the blockchain. Miners then confirm these transactions and update when a transaction is made.
In direct opposition to traditional financial systems, cryptocurrencies do not rely on central authorities to govern transactions and regulate exchanges. As a result regulators have begun to grapple with the challenges presented by virtual currencies that mostly bypass regulated banks, financial firms, exchanges and central clearinghouses.
While many in the financial industry predict it’s just a matter of time until cryptocurrencies are subjected to stiffer regulation, some say a degree of balance will be crucial as over-regulation will stifle innovation.
J. Dax Hansen, a partner at law firm Perkins Coie who leads its Blockchain Technology & Digital Currency industry group, said: “Digital currencies, token sales and blockchain initiatives of all types have ignited a global phenomenon unlike anything I have ever seen. As the technology underpinning these developments disrupts products and services in nearly every industry, lawmakers, regulators and law enforcement are scrambling to keep up."
The European Securities and Markets Authority (ESMA) said this week it expects the rapid pace of financial innovation developments across the EU securities markets to continue in 2018 and therefore monitoring of blockchain technology and cryptocurrency will be a key priority.
This is the first time that the watchdog has included cryptocurrency in its supervisory agenda, signalling the increasing scrutiny the regulator is applying to the growth of cryptocurrency and blockchain technology in the European region.