At least one bitcoin expert says the cryptocurrency isn’t a bubble.
Bitcoin has officially surpassed $10,000, marking an incredible rise this year. But is there any gas left in the cryptocurrency’s tank? According to one expert, the answer is yes.
David Drake, the founder and chairman of LDJ Capital, believes that the price of bitcoin could continue to head higher this year. He believes it will hit $20,000 in 2018.
“There’s a fixed supply of it, but growing demand,” says Drake. “When that happens, the price rises.”
Drake is referring to the fact that only so many bitcoins are mined each year. A million new bitcoins hit the market last year. So far this year, the number is approximately 630,000.
What’s more, the code underlying the creation of new bitcoins caps the total number at 21 million. That’s only 4.3 million above the supply today.
Assuming demand for bitcoin continues rising, it seems fair to think Drake is right.
But while that may seem like a reasonable assumption, it seems equally reasonable to think that the rapidly rising price of bitcoin this year doesn’t actually reflect its value as a currency or medium of exchange, but rather that it reflects a speculative fervor along the lines of the tulip bubble in 17th-century Europe.
Even a cursory glance at a chart of bitcoin’s price almost invariably leads one to suspect that it has long since entered bubble territory. It has climbed from less than $1,000 per bitcoin up to more than $10,000 just since the beginning of this year.