Bulls,

It has been a bittersweet year for us, but I'm more optimistic than ever looking into the future. The most important thing for me to remember at this point is not to go "all in" I have to keep reminding myself I already have enough exposure to bitcoin that it doesn't make sense to put more capital in, even at what I see as low prices.

Sweet

Bitcoin is on it's way to revolutionizing the financial industry. It is happening much faster than I thought it would last year.

Examples of it happening are great news like Expedia, Dell, Overstock, Square integration, Stripe integration, Digital Rivers integration, venture capital investment, Apple unbanning bitcoin apps, PayPal integrating bitcoin, etc. etc. etc.

There have been few major negative newstories like: Mt. Gox collapse, New York Bitlicense regs, and dark market.

Bitter

It's been a bitter year because despite the overwhelming increase in the fundamental value of bitcoin and the likelihood for it to succeed increasing the price has dropped all year with a market cap under $6 billion.

Bitcoin has the potential and is on track to be as disruptive to finance, banking, and payments as the internet was to communications. The big difference is that if bitcoin achieves that level of disruption the market cap will need to be in the trillions.

I feel bitcoin is an increasingly mispriced asset. As the risks have gone out and the ecosystem has become more valuable the price has dropped.

Why

I think the reason is because bitcoin's value is still speculative. The practical use cases for bitcoin don't exist today. This makes people swing trade and cut and run. Lots of people who bought in and are under water are bailing out. Lots of bulls are shorting bitcoin, looking for short term profit.

2014-4th Quarter

There is a big opportunity for bitcoin's price to explode in the 4th quarter. As I mentioned before there has been great news all year that hasn't been factored into the price. Recently the PayPal integration was huge news. Google search traffic for bitcoin has been spiking, and each week there is a new exchange in the world making bitcoin more liquid.

This sets us up for what could be an explosive 4th quarter.

What news events do I see triggering that explosion?

Second Market's ETF

Most likely SecondMarket's ETF is slated to launch in the 4th quarter.

NY BitLicense

The other event (unlikely though) is a reversal of the New York BitLicense. If the license reversed position and made it less burdensome that could trigger a price explosion.

Instead I expect the regulations will be slightly less burdensome than the ones proposed and that news may contribute to a bitcoin buying frenzy.

December BItcoin Bowl

The third event which can accelerate buying in a frothy market is the Bitcoin Bowl on December 26th. If bitcoin's price has had a strong showing in December, the Bitcoin Bowl will generate a lot of buzz and get people talking about and buying bitcoin, further accelerating the upward movement.

If the bitcoin price is not already in a significant uptrend when the bitcoin bowl airs I don't see it having an immediate, noticeable impact on bitcoin's price.

Wildcards

This year has been an awesome year for bitcoin news. I would be surprised if there isn't more great news coming out in the fourth quarter. I expect at least a few more publicly traded companies to begin accepting bitcoin, along with newsworthy startups like AIrbnb, Uber, etc.

After 2014.

The bitcoin industry moves so fast it is hard to predict what will happen next week, let alone next year. At a high level I expect continued volatility until countries begin using bitcoin as the primary unit of account.

I do expect the COIN ETF to be listed on NASDAQ in 2015.

I expect if the 4th quarter of 2014 does have a significant price increase (2x+) at some point in 2015 we'll see a retracement. Many people buy into bitcoin looking to get rich in a month or two and when that doesn't happen they sell, especially if there is a negative news event and the price drops 10%+.

Regulatory Actions Will Drive Price

From a large picture perspective the prime drive of bitcoin price fluctuations will be regulatory actions. As bitcoin becomes more useful citizens and companies will more and more be drawn to bitcoin because of it's advantages over other currencies. This should naturally result in a positive feedback loop of increasing prices.

However governments will have problems with bitcoin. Bitcoin fundamentally empowers people and that power comes at the loss of power to the financial industry and governments. The financial industry has (see Isle of man) and will continue to pressure governments to regulate bitcoin.

As bitcoin is more and more successful governments will lose the power to print money, this will significantly reduce some governments power. For example think about how governments used to be able to control information by controlling the newspaper, television, and radio. With the internet today this is more and more difficult if not impossible.

Some countries will ban bitcoin, some will tightly restrict it, and some will embrace it. Unless all countries ban bitcoin I expect all countries will eventually embrace bitcoin. No country can afford to avoid such a massive improvement in technology. Bitcoin is like the printing press, industrial revolution, electricity, automobile, telephone, or internet industry. Any country that bans bitcoin will do so to the detriment of their people, and no western countries will be able to maintain a ban if any other countries embrace bitcoin.

Signing Off

Well Bulls, it has been a great getting to know you, and even meeting some of you at the North American Bitcoin Conference in Chicago this year.

I've appreciated your support and hope to stay in contact. My personal email is dave@bitcoinbulls.net and my twitter is DavidSilvaSmith.

If you are at a conference where I'm speaking please come up and say hi!

--dave