Bitcoin was the Top Performing Currency of 2015. What is the success based on? Can bitcoin hold the lead this year as well? How do certain companies determine the bitcoin exchange rate for operations with this currency? We tried to take a closer look at the issues by summarizing JETWIN’s expert views and analysing the statistical data compiled since the birth of bitcoin.
To make it easier for the reader to understand the bitcoin price formation, we shall begin with a brief explanation of how BTC/USD exchange rate is determined at the bookmaker company JETWIN.
JETWIN is the indisputable leader in the bitcoin gambling industry that provides a variety of products, such as, Bitcoin Casino, sports betting and the best free online slots. The company allows its customers to have multicurrency accounts, i.e. not only in BTC, but also in the traditional currencies like USD, GBP and EUR. Since JETWIN highly values and respects interests of all customers, including those who prefer to preserve their privacy, it lets users choose to create anonymous accounts that do not require them to reveal any personal information except for an email address.
Upon deposit, the bitcoin exchange rate is calculated based on the current BTC/USD bid rate shown on Bitstamp.
If the user decides to keep money in USD, the exchange rate is calculated in the same manner. However, if upon signup the user selects a different currency, for instance, EUR, the currency rate is estimated based on BTC/USD rate from Bitstamp and EUR/USD rate set by European Central Bank (ECB).
The Bitstamp BTC rate is then divided by the ECB rate, and, as a result, the overall amount for the relevant currency is found. The same calculation but in reverse order is carried out during the withdrawal process. It should be noted, however, that if for whatever reason Bitstamp stops working, the exchange rate is calculated using the data from BTC-E.
JETWIN has another remarkable feature – instant deposits and withdrawals. In addition, the company pulls every effort to make the service more convenient for its customers; therefore, it has introduced the system that allows bitcoin amount in the user account to be expressed in mBTC (millibitcoin). Just for reference: 1 BTC = 1,000 mBTC.
Moreover, JETWIN has relatively recently launched another unique feature, namely, fixed BTC exchange rate for withdrawals. Since only 95% of all payouts had been made instantly and the system had used the exchange rate actual at the time of the physical transfer of funds, and not at the moment of the request made by the user who could not foresee the exact exchange rate at the withdrawal, the company decided to improve the situation. Now, regardless of whether the transaction is processed instantly or not, JETWIN offers a fixed exchange rate for withdrawal so the user can personally confirm it when filling out the withdrawal form. Thus, JETWIN customers have an opportunity to find out in advance what amount they will receive in the end.
JETWIN can provide convenient and efficient services due to the company’s commitment to improve its performance on a regular basis by listening to its customers and developing better quality standards. JETWIN is one of the services that contribute to a more widespread usage and adoption of bitcoin. More importantly, its success as well as that of other companies dealing with bitcoin has a direct impact on the growth of the cryptocurrency’s price.
Factors that Influence the Bitcoin Price
What lies behind the concept of ‘bitcoin price’ is the monetary value of the cryptocurrency. As many know, currency price depends on the scale of its mass adoption as well as on the user activity. The higher the demand for a currency, the higher its price. In the case of bitcoin, it may be rather difficult to predict the price because of its typically high volatility, i.e. instability. However, there is a wide range of factors that can point at possible, even if not accurate, future price changes, since the presence of these factors may explain the user’s behaviour causing either their approval or hesitation about cryptocurrencies, such as, bitcoin. The reasons that may affect the bitcoin price are listed below:
1. New opportunities that appear in the market serve as stimuli for the user activity raising the public interest and encouraging society to trust bitcoin. Among those:
- Cryptocurrency exchanges – marketplaces that allow users to complete different trading operations with bitcoin, i.e. buy and sell the currency at a favourable price. Through this kind of trade users frequently tend to gain profit, since, as it was mentioned above, owing to the lack of external regulation bitcoin is a volatile currency. Although, this bitcoin feature is hardly a positive one, fluctuations in the cryptocurrency’s exchange rates is something the so-called ‘speculators’ attempt to benefit from by buying bitcoin at a lower cost and selling it high when the price goes up. However, it should be borne in mind that speculators’ activity helps bitcoin, for it ensures the price growth and, subsequently, the currency’s further development. The creation of this type of exchanges is useful because it allows bitcoin newcomers to buy at least a small amount of coins and take part in trades or make a purchase at venues that accept the cryptocurrency as a payment method. Exchanges operating in the bitcoin-industry today include such widely known names, as Kraken, Bitstamp, Bitfinex, BTCC, OkCoin, etc.
- Apart from trading platforms, there are numerous specialised exchange points in the bitcoin-market that allow users to convert fiat currencies into digital money and vice versa quickly and easily. Many people frequently use these services in the hope of getting some profit. They normally wait for the bitcoin currency rate to fall in order to buy it and then convert the funds back into fiat as soon as the bitcoin rate rises, thus, earning the profit they intended to get. Among the most recognizable exchange points, there are BitPay, Coinbase, Livecoin and many more.
- As bitcoin’s popularity is growing and its community is expanding alongside, the number of bitcoin ATMs installed around the world continues to increase. Most ‘cash machines’ are set up in Canada, North America and Europe.
Bitcoin ATMs allow people to purchase the cryptocurrency without providing any documents or accounts linked to a certain bitcoin exchange. It is worth mentioning that a world-renowned former heavyweight boxing champion Mike Tyson has launched his own bitcoin ATM in Las Vegas after deciding to partake in the digital revolution that continues to gain pace.
- Perhaps, one of the most significant factors that attracts the majority of bitcoin supporters as well as those who plans to try it out for the first time is the acceptance of bitcoin payments by various retailers. Today a large number of world leading stores and services, including Expedia, Dell, Microsoft, Amazon, Subway, Virgin Galactic, Tesla, Overstock to name but a few, offer their customers to purchase different products using bitcoin as a payment method. Among gambling companies embracing the cryptocurrency there are BOVADA, 5Dimes, BetCris and many others. By showing their openness to the cryptocurrency popular international organizations heighten bitcoin supporters’ interest and make the digital money become more appealing to all curious enthusiasts.
- It would be impossible not to mention the role that banks and financial institutions play in bitcoin promotion – they get actively involved in different projects and show their willingness to explore the cutting-edge innovation. Financial entities, for instance, Goldman Sachs, Bank of America, Barclays, UBS, Santander Bank and others, become increasingly interested in bitcoin and blockchain technology underpinning it. While some companies create their own labs that focus on the research of the technology potential, others encourage their employees to join different initiatives and collaborate with the industry experts and enthusiasts for execution of various experiments and tests. The increased interest and support from the financial sector giants make the society think about real benefits and efficiency of the cryptocurrency that, despite its ups and downs, continues to develop.
- Today bitcoin users have another unique opportunity – they can instantly buy bitcoin using their debit/credit cards of such brands, as Visa or MasterCard. Coinbase, Circle, 247Exchange, ChangeTip – these are only few names of the services that offer customers to purchase bitcoin with the aforementioned cards.
2. One of the most important reasons why the community of bitcoin supporters keeps expanding relates, of course, to low transaction fees irrespective of the recipient’s or sender’s location. In some cases commissions are not required at all; however, when fees are charged, their amount can hardly be compared to the commission taken for a standard money transfer through a bank. In the bitcoin payment system there is a notion of ‘voluntary transaction fees’ that help speed up the transaction confirmation process or serve as a reward to bitcoin miners. These bitcoin advantages can undoubtedly have an impact on the increase in the demand and price of bitcoin.
3. Apart from low or zero commission rates, bitcoin has another distinctive feature that makes it even more attractive for users – instant transactions. Funds can be sent to any part of the world in just seconds, from one continent to another – any place that provides an access to Internet.
4. Since the bitcoin network is generally perceived as anonymous, users in most cases do not have to share their personal information with a third party when transferring the digital money. In order to make a bitcoin transaction, one needs to have a bitcoin address to receive funds from the second party or to transfer a certain amount to other participants in the bitcoin network. This possibility attracts many enthusiasts and new bitcoin users that, as a result, leads to the expansion of the bitcoin community.
5. An important factor affecting the demand for the cryptocurrency as well as its price is news or statements made by influential people, which can shift the society’s views or even cause changes in consumer behaviour. As many other developing industries, bitcoin ecosystem is subject to both positive and negative criticism due to the constant flow of news expressing different and sometimes opposite attitudes. For instance, announcements about large retailers accepting bitcoin payments or representatives of the financial sector willing to explore applications of bitcoin technologies or their integration in other sectors are likely to provoke society’s interest in the use of virtual currencies, such as, bitcoin. However, the cryptocurrency is often surrounded by less favourable news. Those normally cover events related to a bitcoin-company bankruptcy or shutdown, a theft of a huge bitcoin amount or scandals about major bitcoin exchanges, such as, MtGox, MyCoin and, perhaps, the most famous one – Silk Road with its convicted creator Ross Ulbricht whose seized bitcoins were auctioned off by the U.S. Marshals Service. Regardless of the connotation, constant delivery of bitcoin news will continue to fuel public interest in the cryptocurrency.
6. Bitcoin regulation remains one of the most sensible and controversial issues in the crypto-industry. The growth of bitcoin popularity has become a concern for governments around the world because of the lack of control over the decentralised digital currency, including bitcoin capital taxation. A couple of years ago, though, the US Internal Revenue Service published a guidance on how virtual currency are to be taxed in the country. According to the agency, cryptocurrencies like bitcoin should be treated as property and its users must comply with the general tax rules applied to property transactions.
Authorities in different countries keep arguing that the digital money presents a threat to national currencies and governments in general, as this kind of payment method is often involved in the black market trading. There are no unified standards in bitcoin regulation. However, the issue is being investigated by different governments, including the UK that looks into both benefits and risks associated with digital currencies in order to help legitimate businesses in the sector develop and to support new technologies. The Isle of Man government, in its turn, concluded that bitcoin exchanges working on the island do not have to obtain a special financial license to keep operating in the self-governing Crown dependency. Among bitcoin-friendly countries, there are also Germany, Canada, the Netherlands and Luxembourg. In contrast, Russia and some states in the US took a rather negative stance towards cryptocurrencies. Russian authorities are planning to apply criminal penalties for the use of the so-called ‘money substitutes’ like bitcoin, while some American states, for instance, New York, have already imposed certain restrictive measures on the virtual currency and related businesses. Unfortunately, for fear that national currencies will lose popularity many countries refuse to investigate the potential of the promising technologies without even trying to identify the benefits they could bring to users. Clearly, government attitude towards bitcoin may influence the number and activity of the cryptocurrency users who, willingly or not, are subject to state propaganda.
7. Bitcoin block size is another issue that has raised many questions and heated discussion within the community. The cryptocurrency technology developers keep holding debates over whether the bitcoin protocol should undergo changes that imply the increase of the block size limit. There are those who argue that the changes are essential because the number of bitcoin users continues to grow very rapidly, and soon the system might struggle to handle transactions as successfully as before. Although, many experts acknowledge the necessity of such changes, there are concerns about the consequences that the introduction of the so-called ‘hard fork’ may cause, possibly leading to the block failure to work on the un-updated user systems. It may result in a considerable disruption of the network as a whole, which will have a negative impact on the image and price of the bitcoin currency.
There is a huge number of factors affecting events in the bitcoin-industry and influencing the cryptocurrency’s development and price. Due to its anonymity and efficiency, the digital money attracts enthusiasts from all around the world. This helps it become more popular and widely accepted as well as stimulates various bitcoin services to launch encouraging the currency’s mass adoption. It is well known that a high level of user activity makes the cryptocurrency price go up; however, possible regulation and endless disputes among the bitcoin specialists can undermine the virtual currency’s reputation and scare potential users away; this, in turn, will be reflected in lower demand and price fall.
Future Forecast: What Changes in Price Can We Expect from Bitcoin?
History shows that it is extremely hard to predict the price of bitcoin – the currency is described as ‘volatile’ for a reason. Even after a stable or rapid growth, the price may plummet overnight, leaving users bewildered. Nevertheless, based on the above-mentioned factors and a thorough analysis of the existing situation in the world, it is still possible to anticipate the bitcoin price movements at least in near future.
Despite many sceptical views towards bitcoin and its perspectives, the majority of specialists believe that the bitcoin price will continue to increase gradually and will surpass the current average. At the time of writing this, the price of 1 BTC is $450.
However, according to the forecasts, the cost is likely to reach at least $600, but in 2017 – up to $700 or rise even higher. There are optimists who make even bolder predictions saying that the price will soar up to $1200 or above.
It is well known that initially bitcoin was worth pennies compared to its market price today. Some years later or, to be more exact, in 2013 the cryptocurrency hit the peak of almost $1200 per one coin that was followed by a subsequent sharp price drop to around $300.
In spite of the fact that the price was seen to fall even lower, it eventually began to stabilise and later went up. The trend of a slow, though, steady growth continues today. The gradual increase in the bitcoin price can be deemed as ‘a positive development’, since the long-term stability ensures more credibility and contributes to the expansion of the bitcoin user community, while unexpected sharp drop may cause some suspicion.
Apart from the advantages mentioned above, including anonymity, instantaneity, usefulness and more, the bitcoin price rise is determined by other unique features of the cryptocurrency. Unlike fiat currencies, bitcoin has a limited supply. Miners are expected ‘to extract’ 21 million bitcoins within the whole period of approximately 100 years. The process of ‘mining’ involves solving mathematical equations of different complexity levels. As of today, around 2/3 of all bitcoins have been already mined. However, bitcoin extraction is getting harder with the level of problem solving difficulty increasing over time. Miners frequently join the so-called ‘pools’ in order to make the bitcoin search more effective. In addition, the equipment, i.e. special hardware used for solving math problems, with time becomes more technically advanced and elaborate so miners can continue to work as efficiently as before. The bitcoin price will soar as soon as the last coin is issued, and those who are aware of this now tend to make large investments into the cryptocurrency in order to gain profit in the end.
The technology industry as well as the financial sector follow the principles of economics, such as, competition that stimulates development of innovations. Guided by the fact that bitcoin has certain shortcomings and is often associated with scandalous news or events that undermine its reputation, some developers have attempted to create new types of cryptocurrency that could overthrow the well-known bitcoin. Thus, in the future the price of bitcoin will depend on the emergence and development of competitive cryptocurrency alternatives. At the moment there are few of them, including the digital currency Dash as well as Ether used on the decentralised application platform Etherium. The latter was only launched last year, but many have already claimed it will be a long-term success. Due to the appearance of new competitors in the market, the price of bitcoin in the future can either rise or plunge. The outcome depends on the achievements of the crypto-industry newcomers as well as on the advancement of bitcoin itself.
Generally, the popularity of non-traditional currencies grows when the society faces challenging times. The instability in the global economy has a significant impact on the rise of the exchange rate of such digital currencies, as bitcoin. For instance, in the US, which sees the most rapid growth of bitcoin, people often demonstrate their distrust of the national currency – the US dollar whose value seems to be declining for quite a while now. Moreover, the national debt of the country has been on the rise since a long time ago and, therefore, causes even more suspicion and mistrust among the citizens. These kind of situations explain why many individuals are in favour of decentralised, state-independent payment methods. In addition, investors are constantly looking for new opportunities to allocate their capital. Today big investors frequently buy large amounts of bitcoin hoping to earn more money in the future. They also tend to plough into various bitcoin-projects and startups that in time are expected to bear fruit and radically change both the technology sector and financial system.
Nevertheless, USA is just one of the best examples that reflect how cryptocurrencies can become somewhat of a rescue for local citizens. For example, China’s recent stock market crisis as well as the introduction of capital control measures have also affected the bitcoin user activity in the country. When searching for alternative money storing and transferring methods, bitcoin seemed to be a reasonable solution for the citizens; since then the price of the cryptocurrency has also increased. A similar situation could be observed in Greece that has been going through a prolonged economic recession. After the state’s government was forced to accept creditors’ terms and toughen capital controls in the country, news agencies were constantly reporting about a surge of interest in bitcoin and other digital currencies among Greeks. Until it becomes clear when the financial crisis will come to a close, the number of bitcoin users will continue to rise.
Apart from the above-mentioned, other global events that can shift the financial system as a whole include a mounting terror threat in the world’s leading countries as well as the worsening migrant crisis that governments have failed to regulate properly. In addition, the global economy has come under severe pressure from a looming energy crisis, the stock market crash and subsequent sharp fall of the exchange rates of traditional currencies. Currently, the instability of such currencies, as USD, EUR, RUB and others, has given rise to the public concern all around the world, making people look for alternative solutions like the use of non-traditional currencies that, as a result, develop and gain value.
Given the emergence of a great number of technology projects, startups, business accelerators, special funds and innovation research labs, the cryptocurrency ecosystem seems to be flourishing. Digital currencies have found favour among many investors, including well-known merchants, leading world organisations, financial and technology companies. This demonstrates that the crypto-industry is not standing still and, clearly, is not going to vanish away. Those who look into the future can already foresee the active development of the bitcoin technology and wider acceptance of the cryptocurrency. The progress can be observed already now. Unlike previous years and regardless of the drastic price fluctuations, the number of people taking bitcoin seriously has risen significantly, making the community expand beyond its current boundaries. Although the price of bitcoin is subject to volatility and depends on many factors, it has always managed to recover. Bitcoin opens borders and breaks barriers providing its users with many unique opportunities. Having thoroughly examined its potential, one can benefit from using the cryptocurrency, even if buying in a small amount to start with on a trial basis. The crypto-community needs support of bitcoin-enthusiasts whose activity influences the price of the digital currency, and this, in turn, can help revolutionise the entire financial system.