The Future of Bitcoin: The S&P 500 Index Can Predict Bitcoin Price

The performance of U.S. equities market is reminiscent of the bitcoin’s development pattern.

Photo: Haydn Blackey/Flickr

Photo: Haydn Blackey/Flickr

Obviously, it’s almost impossible to predict the future direction in which the stock market is going to develop. Still, traders believe in market timing and try not to miss the opportunity to profit. The current situation within the bitcoin ecosystem is similar to those observed in the U.S. equities markets in 2009.

Six years ago, when the Standard & Poor’s 500 index dropped below the 700 mark, every investor was wondering whether the prices would continue to fall. It has been the most serious decrease recorded by the S&P 500 since 1997.

The S&P 500 a stock market index, which is based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.

As of January 2015, the price of bitcoin decreased by over 45% since the start of the year. The downturn can be compared with the dramatic decline of the NASDAQ composite index and the S&P 500 in the years of 2002 and 2009, respectively.

The S&P 500 has risen by 210% since 2009, while the NASDAQ composite increased by 350 from 2002. Likewise, the value of bitcoin has grown by more than 56% since January, although its price is still low if compared with its highest level reached in 2013.

Despite the decreased value, bitcoin is more attractive now as an investment opportunity than it was a few months ago.

The number of registered bitcoin wallets, as well as the adoption of digital currency by merchants has significantly increased since 2013. Besides, the world’s leading companies, including Dell, Expedia, Overstock, Microsoft and PayPal, are now accepting payments in cryptocurrency.

Meantime, developers have shown interest in the blockchain technology, which is widely used in the creation of new applications.

During five years since the development of bitcoin, more than $50 million was invested in the digital currency startups. But it is incomparable with $499 million that were invested in the ecosystem since 2013.

In the first two months of 2015, the bitcoin companies received more than $100 million in venture capital from investors.

In 2013, bitcoin was mainly perceived as a financial instrument and could not be viewed in other applications. However, people began using the digital currency in such areas as accounting, smart contracts, politics and insurance.

The industry has changed a lot since the development of bitcoin in 2008. Taking into account the growing merchant adoption, higher usage by developers and favorable governments’ attitude, it is evident that the bitcoin has high potential to grow in the years ahead.

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