The end of 2017 has been one heck of a roller coaster ride when it comes to your favorite cryptocurrency. Bitcoin has been through more ups and downs than a kid on a pogo stick, yet market conditions have continuously driven its valuation ever higher into the stratosphere, past $17,000 USD and beyond.
There’s more to what’s going on with Bitcoin than just what you see in your wallet balance, though. Developments behind the scenes have been influencing BTC’s recent growth while also setting the stage for new possibilities in the not-so-distant future. Here are just a few things that have been going on and what they might lead to in the new year.
Adoption and Speculation
Cryptocurrency adoption is at an all-time high around the globe. Market capitalization for cryptocurrency in general is well above 250 billion USD, and Bitcoin makes up a massive percentage of that. The downside, of course, is that this huge uptick in adoption has led to increasing amounts of volatility, especially with Bitcoin itself as market corrections and fluctuations of several hundred or even thousands of dollars’ worth of valuation have become commonplace.
It’s likely that one of the primary sources of recent adoption efforts has been India, which as a country has experienced a cryptocurrency awakening. Crypto exchanges headquartered in the country have been experiencing record growth as of late – oftentimes doubling their user base over the course of a month – and with a burgeoning, increasingly cyber-connected populace that has cultural inclinations towards savings activity, India is likely to continue to drive crypto growth for the immediate future.
Crypto’s Massive Energy Consumption
The more popular cryptocurrency gets, the more demand there will be for new coins. That means more stress is placed upon crypto miners to increase output – and with Bitcoin making it more difficult for miners every 2,016 blocks that are mined by increasing the hashing requirements, it’s going to take increasingly robust mining rigs to provide smooth growth, further centralizing Bitcoin mining to corporations with deep enough pockets to invest in the resources needed.
While this leads to all sorts of issues in creating and maintaining the physical equipment needed to mine Bitcoin, an unforeseen cost has also emerged: the amount of electricity needed to run the thousands upon thousands of rigs mining cryptocurrency. So much energy is needed, in fact, that the more than 29TWh consumed by crypto mining exceeds the amount of energy expended by nearly 160 countries worldwide. Efforts to power mining rigs through solar power and transitioning away from proof-of-work to proof-of-stake are two possible solutions that are currently being pursued.
Too Big for its Britches?
Bitcoin’s adoption is only going to increase over time, especially as global audiences continue to see the writing on the wall when it comes to the limitations of fiat currency and the advantages of cryptocurrency as an alternative. Yet the growing pains that Bitcoin is experiencing now could pale in comparison to future issues; even as solutions are sought to ameliorate these problems, additional difficulties are growing daily and may place the stability of Bitcoin as a viable replacement currency in jeopardy.
Due to its lack of scalability, Bitcoin has been experiencing ballooning transaction fees as of late. This has prompted some e-commerce establishments to scale back or even rescind their support for the cryptocurrency. Valve’s online gaming platform Steam, which had accepted BTC as a payment option for years, recently announced a reversal of that policy, citing transaction fee issues and volatility as reasons for eliminating the option. Infrastructure issues are also becoming more commonplace, with Coinbase suffering through a 200,000 transaction backlog that saw some users waiting 48 hours or more to complete BTC transactions through the exchange.
Don’t Run for the Hills Just Yet
The crypto landscape ahead is certainly going to be rocky. Demand for Bitcoin – and adoption of cryptocurrency – isn’t going to taper off anytime soon, which is inevitably going to exacerbate scalability and cost issues. Naysayers will certainly point to all the drawbacks of Bitcoin’s rampant growth and sound the warning bell, claiming that the bubble is going to burst in a spectacular manner, wiping out whole swathes of fortunes in one fell swoop.
It’s absolutely true that Bitcoin as a blockchain does have some serious limitations; there’s no denying that. Yet at the same time, the market is unlikely to be close to a burst bubble just yet. There may very well be a strong correction in the very near future – when BTC approaches the $20,000 milestone, this could easily trigger a massive sell-off and price drop. That being said, Bitcoin has more than proven its flexibility in the past, and will likely bounce back to reach even newer highs in 2018 and beyond.