Blockchain had a good run in 2016 with a lot going on, including over $1.5 bln invested in startups, the likes of IBM and Microsoft betting the shop on this new pervasive technology.
We saw Barclays Bank’s first live commercial banking transaction, Hyperledger’s very promising Corda technology coming of age and, of course, more attacks requiring more forks. In addition, the Scaling Conference in Milan showcased some amazing projects that bode well for Blockchain’s amazing future.
Experts have laid out some of the reasons that may have led to the surge in price, including the yuan-to-Bitcoin correlation, exposure of bank corruption, increasing demonetization of cash and the restriction on physical assets.
Other experts and investors, including Digital Currency CEO Barry Silbert and BTCC COO Samson Mow, in which they hinted that the devaluation of the Chinese yuan and the local government’s increasing capital controls played a vital role in the rising price of Bitcoin. Mow also noted that Bitcoin passed the $800 mark for over a week in China, a country that controls approximately 93 percent of the global Bitcoin exchange market. In China, Bitcoin is being traded at around $835 on average, demonstrating the rising demand for Bitcoin. As Silbert stated on social media, the devaluation of the yuan and the Chinese government’s restrictive regulations on money transmission and outflow of cash spurred the interests of mainstream and high-profile investors in China towards Bitcoin.
Bobby Lee’s BTCC is one of the leading Chinese exchanges - the largest Bitcoin trading platform on the market - to record a new all-time high price of CNY$7,666 or $1,103. He maintains that the drivers of Bitcoin price have not changed but have been the same for the past eight years of its existence.
"The reason that people are more paying attention to Bitcoin in the past year is because of the geopolitical stuff happening around the world. We have the demonetization effort in India and Venezuela; we have the foreign capital control in China; we have the excessive money printing in other countries, especially in the US, Japan and so on and the high debts. So when the existing money system has problems, people maybe turn to Bitcoin."
Bitcoin will continue its rise from its three-year high to reach parity with gold, continuing the trend post the devaluation of the yuan, the withdrawal of large Indian notes, as well as the Trump and Brexit effect.
As 2016 was the year of the Proof of Concept, 2017 will be the year when Blockchain breaks out of the lab and into production environments.
Banks will try to make Smart Contracts - smart and legally binding software code - and will continue to be slow adopters of the technology as they try to stay within regulatory boundaries.
The Bitcoin community is divided regarding Segregated Witness and the scaling issue could drive another split in the community. Then there is Lightning – bring it on.
Bitcoin will become a safe haven asset for people struggling with geopolitical changes, currency volatility in their country and/or where banks in countries such as India have started to withdraw large notes. It may also fulfill this role in nations that have continually devalued their savings following the devaluation of the yuan and recent fluctuations in the African and Latin American economies.
As Western central banks, BoE and the Fed dither and withhold their crypto position, Asian and MENA banks will commit further. The first sovereign government to issue debt on Blockchain will be Asia.
Western governments will try to influence cryptocurrencies by seeking insight and control (e.g. recent Coinbase IRS), not realizing that the market will simply shift to more accommodating economies.
The strongest adopters and evangelists of Blockchain will be supply chain, insurance and reinsurance. Although healthcare, banking and government want to embrace it, they will be beaten back by bureaucracy and regulation.
Investment slowed in the second half of 2016. VC and PE decline is explained by investors having not grasped the fundamentals - they see Blockchain more as a bubble to pile in and ride the wave. In 2017, organizations will invest more in Blockchain businesses directly as with FinTech.