In the week, the Bloomberg cryptocurrency report captured a bold cryptocurrency price predictions by the Satis group for the next ten years. The report captured a good market performance for some cryptocurrencies and surprisingly predicted doom for many other digital assets.
In light of the report, this article seeks to briefly analyze the predictions based on two key concepts: Valuation and Speculation. I will focus on valuation because the Bloomberg prediction was based on valuation. I will also briefly talk about speculation because the cryptocurrency market price mainly thrives on speculations.
According to the release, Bitcoin will trade at $96000 in 2023 and finally settle at $144,000 in ten years; whiles Ethereum will rise to $800 and later drop to $588 in ten years. Monero would trade at $19000 in five tears and proceed to trade at $39000 in ten years.
As claimed by the report, there would be a massive dominance from the coins that focus on privacy. In this context, Zcash will trade at $4400 in the next five years and then proceed to trade at $9000 in ten years. Dash would trade at $1900 in the next five years and later trade at $3000 in ten years.
For the rest of the most promising coins, the report stated that they would almost crash with Litecoin trading at $225 in ten years, Ripple (XRP) trading at $0.004 and Stellar lumen finishing the decade with a price range between $0.01 and $0.02. For Cardano, it would fail woefully with a price of $0.0001 in ten years.
According to them, Bitcoin Cash would never get anywhere near $1000 as it would trade at $268 in five years then trade at $180 in ten years. They used Top-down, Bottom-up and Peer-based methodology for this valuation.
Why these Predictions May Blow Away in the Light of Valuation and Speculation
The price of an asset is usually influenced by either speculation or the performance of its value. A company is said to have a value when it can quantify its asset, potential, earnings, sales, and revenue. In the case of cryptocurrencies, their prices are more determined by speculations than valuation. The possibility that a cryptocurrency will widely be adopted by institutions influences investors to speculate what the price will be in the future. The hope that favorable government regulations would open a way for the price to rise to the moon is a reason that causes investors to buy more of an asset.
This step pushes the price even higher. Speculation was the primary agent that took Bitcoin close to $20000 in December 2017, not valuation.
The methodology for the valuation of the assets may be right. However, the cryptocurrency market is strongly affected by speculations which cannot be measured, and the possibility that the prices would rise in the future will attract more investors into the market to push the price above the predicted prices.