Bitcoin Boom: Coinbase Adds 35,000 Customers Per Day

By Michael Hooper

The laws of supply and demand govern the price of things in a free market. At least in theory that is how free market economics work. Vast quantities of demand with limited supply will push up the price of anything. Well, that is what is happening with Bitcoin, which is up about 500 percent this year.

Laura Shin of Forbes recently reported that new money is coming into Bitcoin.  "Every day on Coinbase alone, about 35,000 new accounts open -- a figure that sometimes reaches 50,000 -- and thousands of people in South Korea and Japan, two countries where Bitcoin has taken off, are also bringing new fiat money into the system."

With the trend happening at Coinbase, it is likely to sign up 3.1 million new customers in 90 days (90*35,000 new accounts per day). And that doesn't count the thousands of accounts opening daily around the world.

This reminds me of when 1 million customers per month were signing up for America Online in the 1990s. After reading that fact in 1997, I bought shares of AOL, which shot up 36% in one month for me, before I sold it for a quick profit.

Today Bitcoin is all the rage. And the forces behind it are unshakable. China has cracked down on exchanges of crypto currency and introduced new laws to stop fraud in the ICO market in China. But that doesn't stop the price of Bitcoin. Fears of a proposed fork in Bitcoin over the summer caused Bitcoin's price to fall 30 percent ahead of the Bitcoin Cash split. Bitcoin's price quickly recovered and went onto to set new records.

A new fork is facing Bitcoin, I believe this is affecting the price. The Bitcoin Segwit2x fork is projected to take place on November 16th and will result in two bitcoin blockchains. Following the fork, Coinbase will continue referring to the current bitcoin blockchain as Bitcoin and the forked blockchain as Bitcoin2x, according to a letter from Coinbase to me.

Any customer with a Bitcoin balance on Coinbase at the time of the fork will be credited with an equal amount of the Bitcoin2x asset on the Bitcoin2x blockchain. No action is required—Coinbase will automatically credit your account. So, if you have 5 Bitcoin stored on Coinbase before the fork; you will have 5 Bitcoin and 5 Bitcoin2x following the event.

Coinbase said the Bitcoin Gold fork occurred on October 23rd. Information about this fork has been limited and there are concerns about its security and stability. As a result, Coinbase does not believe it is safe to allow support for Bitcoin Gold at this time. If the blockchain proves to be secure and valuable, Coinbase may choose to support it.

Meanwhile Bitcoin has fallen 7% from its high of $6145.38. I bought a little more BTC at $5600 and $5300. I think worldwide demand is going to outstrip supply and continue to drive up price. The economics are there.

Based on the current trends, I expect Bitcoin price to be extremely volatile with big run-ups of 10% to 20% but big falloffs too of 10% to 30%.

Bitcoin's price may fall off a bit ahead of the Nov. 16 fork from Bitcoin.

That's probably why we are seeing today some divergence away from Bitcoin, as other currencies like Ethereum and Litecoin are climbing.

Source: Coinmarketcap.

The 2017 momentum for cryptocurrency feels like 1998 when tech stock valuations were high but they went even higher in 1999 before crashing in 2000-01. Out of all that tech run-up of the 1990s we gained transformative technology like Google search engine and Amazon online shopping.

With Bitcoin, we will see a run-up and a crash, probably multiple times, but over the long term, BTC is here to stay. And Bitcoin will be transformative, just like the Internet was. Out of Bitcoin, we have a blockchain technology that is secure and reliable. These technologies for securing data and contracts will have far reaching effects on every person some day.