In the first days of January the Bitcoin community experienced the painful departure of one of it’s core developers. This small community has been creating the code and systems that the rest of us rely on for our transactions. In his blog post explaining his thoughts, Mike Hearn suggested that Bitcoin has now failed.

His departure, combined with the announcement of problems at one of Bitcoin’s exchanges, lead to a sudden drop in price and considerable volatility for the rest of the month. Some of December 2015’s bullish price predictions have been made to look a little silly in the short-term, but given the extreme nature of BTC price movements, anything could be possible for this year.

Given a year or more for us to see the outcome of Hearn’s departure, he may eventually be proved correct. Who can say whether his exit will galvanise the community to solve the problems he highlights, or divide it further? In the meantime, there has been significant progress and 2016 is set for more positive developments. Below are four reasons why 2016 ought to be a great year for the coin and it’s investors.

The Economics Of Bitcoin Are Changing Forever

Perhaps the most important reason to be bullish in 2016 relates to the coming halving. Bitcoin’s algorithm is designed to gradually reduce the number of new coins that will be made available until a total of 21 million have been created.

Coins are created when complex math problems are solved. The solving of these problems, requires very significant processing power in what is known as “mining”. Each problem represents a new round of verified transactions on the blockchain.

Initially, the total number of coins created as the reward was 50, but four years ago that number was cut to 25. This summer it will be halved once again. The impact of this halving will be to limit the creation of new coins even further just as total transaction volumes seem to really be growing. The impact on supply is very likely to see the price pushed upwards.

The Economics Of China Are Changing

It isn’t well known, but China plays a huge role in Bitcoin.

The first reason for this relates to mining. As with many consumer electronics, manufacturing happens in China. However, the Chinese realised that when it came to building technology to mine BTC, they were better off not selling it to buyers in America and Europe. Instead, it has become very hard to obtain the latest mining technology and most of the largest mining operations are located in mainland China. While the operators will need to sell coins to pay their wages, rent and energy bills every month, it is very likely that they are also storing lots of coins away for the future.

Additionally, there are many people in China that are using bitcoins to protect their wealth. There have been a number of price spikes that correspond very closely with negative movements on the Chinese stock market or the yuan.

As the year has opened and global markets have tumbled, lead by China, it would be easy to predict that more uncertainty will lead to more buying in one of the few currencies that normal Chinese people can access.

The Economics Of Bitcoin Use Are Changing

Any substance or commodity with a finite supply will at some point be ruled by the laws of supply and demand. 2016 will see supply limited further, however, 2015 was a year that saw demand and the use of bitcoin rise substantially.

It would be silly to tell you that mass adoption is here, because it isn’t. But, as the months and years pass, adoption continues to grow consistently. The end of 2015 saw total transaction volumes rise week after to week to new highs. There is clearly much more demand than ever before and it is easier to buy, invest, spend and hold bitcoin than ever before.

If this trend continues, then it is very likely that the world will get to a place where there is a permanent supply crunch in BTC. If you are a holder of the stuff, this will be music to your ears. If you are not yet an owner, now might be a good time to ask yourself why not…

Needless to say there are reasons why this is happening. The prime reason for greater use would seem to be that it is now much easier than ever before to get started. Coinbase, perhaps the closest thing Bitcoin has to a central bank, is now so easy to use that total beginners can get started and not even need to know what cryptography is. Just a couple of years ago, securing your coins needed a very technical understanding – now you can just transfer your coins into the Coinbase Vault. It takes seconds!

This is important because the subjects surrounding Bitcoin – macro economics, web development, cryptography and algorithms – are not easy for a lay person to understand. If Bitcoin is going to become mainstream then normal people that do not understand these things need to be able to buy, sell and invest safely too.

The Reputation Of Bitcoin Is Changing

A few years ago if you read about Bitcoin in the news, it was almost certainly part of a story about crime, drugs, the Silk Road and criminals. Bitcoin is semi-anonymous and this online layer of protection enabled illicit trade to flourish on sites that operated like eBay for criminals.

Since then, the Silk Road has been closed, it’s founder sentenced to life in prison and no other marketplace has been able to successfully step into the void. On top of that, the reality is that transactions using Bitcoin can be traced if you have certain parts of the transaction history. Infiltrating and taking down the Silk Road has provided reams of data that law enforcement is now slowly using to round up the people that were selling drugs, guns and whatever else.

As many of the negative connotations are being removed, they are being replaced by more positive developments elsewhere. For example, it is widely known that the Bank of England is looking into ways to use either or both of the blockchain or Bitcoin. Many other banks, fearful of the disruptive power of this technology are researching ways to harness it themselves. From the Silk Road to the Bank of England is quite a journey in just a few years.

Clearly, while the risk of Bitcoin failing may have just risen by a notch or two, there is enough happening to presume that there ought to still be many good days ahead for the primary digital currency.

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