Bitcoin Cost: Since its inception in 2009, bitcoin has made dramatic comebacks from numerous wave of market crashes to record multiple all-time high prices. In 2009 and early 2010, the digital asset barely had any value as people transacted it for fun. Within the twinkle of an eye, it started getting value and was traded on some of the early exchanges.
When the historical Bitcoin cost is accessed through the lenses of fundamental and technical analysis, one thing is always clear- bitcoin cost can be predicted. Just as any other assets, its price is largely dependent on a number of factors. Based on its previous performance with regards to some determinants of bitcoin cost, this article will present three reasons why the bitcoin cost is likely to stage a massive bull run sooner or later.
Bitcoin Halving Scheduled on May 2020
Bitcoin halving is an occasional event that takes place every four years on an average block of 210,000. This event takes place to divide the bitcoin block reward into two. The first-ever bitcoin halving event took place in November 2012, when the bitcoin block reward was reduced from 50 to 25.
The second halving event happened on June 2016 when the block reward was reduced from 25 to 12.5. The third halving is scheduled to take place in May 2020, and this will see the 12.5 block reward reduced to 6.25.
Interestingly, these events are followed by an unprecedented market price surge usually a year after the event. After the 2012 halving event, bitcoin took a significant price surge from $13 in December 2012 to trade at an all-time high price of $1324. The second event which took place in June 2016 saw the bitcoin cost staging a massive bull run to record an unthinkable price of near $20,000. From this historical assessment, it is obvious that the bitcoin cost would reach another all-time high after the $2020 event.
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Many questions have been raised on why the bitcoin cost rises to a near all-time high after each halving event. There are two rational answers as at now. Firstly, when the block mining reward is reduced by half, the cost of mining increases in relation to a decreasing profit. This leaves mining in the hands of a few miners who can afford to balance their production cost and the reduction in profit. Miners who take advantage of free electricity would not be bothered. However, the supply may decrease.
In the law of demand and supply, the price of an asset rises when supply decreases. This means there are more purchasing power or demand chasing the limited supply, and ending up pushing the price.
Another reason for the bitcoin cost surge after the halving events is linked to the activities of bitcoin whales who pump more money into the market before the halving, causing the price to rise. Soon after manipulating the price, they withdraw their funds leading to a market crash. This makes sense considering the fact that market crash usually follows a massive bull run.
Positive Projection of Adoption Rate
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A number of cryptocurrency analysts including John McAfee have predicted a huge price surge with his popular prediction establishing that Bitcoin would trade at $1 million by the end of 2020. These predictions are some times possible when the adoption of bitcoin increases by accelerating rate among the mainstream companies.
In 2018, a report established that some US schools have begun accepting tuition in Bitcoin. Also, airline companies such as AirBaltic and CheapAir allows passengers to buy tickets using Bitcoin. Not just this, a number of restaurants and institutions have shown a strong positive feeling towards the implementation of bitcoin technology into their services.
On 18 June 2019, the CME Group posted on their Twitter page that the CME bitcoin futures show an incredible sign of growing institutional interest. According to information, the bitcoin open interest set a new record on June 17 rising by 643 contracts on that day. This means there was a total contract of 5311 which was also a new all-time high, amounting to about $250 million. This was more than the volume recorded on the day Bitcoin recorded a near $20,0000 all-time high price in 2017.
According to a report released by the Imperial College London, bitcoin has a huge potential and may become mainstream in the next decade. This makes sense as its adoption rate increases year after year, making it an asset-based more on valuation than speculation. In addition, Kaspersky Lab revealed on this February that bitcoin merchants have over the years increased significantly.
According to their publication, bitcoin merchants have increased by 700% in the last 6 years. Also, 13% of individuals have made purchases online paying with bitcoin. It is interesting to note that the adoption of bitcoin is not only centred on institutions but also, retailers. The possible increase in retailers’ interest in bitcoin in the future would send bitcoin skyrocketing. Many other retail shops such as Starbucks, Nordstrom and Whole Food are exploring possibilities to start accepting payments in bitcoin.
The bitcoin cost has shown to be like any other valuable asset which is affected by external forces and invisible market forces. Soon after bitcoin started grabbing headlines of major newspapers and making waves among investors and ending up recording a record search on google, various governments started crackdowns on exchanges and cryptocurrencies. Concerns were raised that bitcoin can be a strong tool in the hands of criminals for money laundering. The crackdowns affected the price severely forcing the price down to a little above $3000 from its all-time high price of near $20,000.
This strongly shows that the price of bitcoin cannot only be crashed by unfavourable government regulations but can also be positively affected by the favourable conditions set by governments.
Experts have noticed that the inflamed trade war between the US and China has made a number of people to convert their fiat currencies into bitcoin with many others waiting to join the race. Bitcoin, though maybe a highly volatile digital asset but can be a safe haven to investors just like gold.
Bitcoin cost is expected to stage a massive bull run as many governments, especially in the developing countries have been advised to adopt bitcoin to reduce corruption which has been a thorn in their flesh. Using bitcoin may reduce the untraced transactions recorded in developing countries and make sure any money sent out and received is accurately recorded without any fear for manipulation, thanks to the Blockchain technology.
It is expected that the benefits of bitcoin would outweigh the negative impacts perceived by various governments to increase its demand and a subsequent price surge.
It has been argued that there is no causal relationship between trade wall and bitcoin price. However, there is a good stand to say economic crisis or hyperinflation sometimes work in favour of bitcoin. Zimbabwe and Venezuela resorted to cryptocurrencies in the period of economic crisis as people found it wise to convert their fiat currencies into cryptocurrencies.
In most cases, bitcoin is affected by the interplay of multiple factors. In these cases, bitcoin sometimes record a high institutional interest but also face a poor government condition. When this happens, the stronger determinant determines the direction of bitcoin cost movement.
A number of people gave up on bitcoin for its recent market pullback. Others labelled it as scam and bubble ready to crash. However, its price history says otherwise. Bitcoin at a point dropped in price by about 80%, bt took a rebound to outrun its all-time high price to record a new all-time high.
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