Bitcoin is not Just Stopping at $20,000 This Time – Here are Four Reasons Why
This month has seen the abrupt and very welcome surge of Bitcoin’s value over this year, and its price continues to set itself new yearly highs in stark contrast to the less than impressive displays over the previous year.
While we are seeing an impressive rise in Bitcoin’s value year on year, the question that is taking the front seat in the minds of investors and enthusiasts of all kinds, is whether this bullish upswing is different to the surge that took place in late 2017.
The best way for us to understand whether or not this is, in fact, different, we need to take a close look at why this market rally is well and truly different compared to the investment ‘bubble’ that was 2017.
What a good number of experts and analysts point out is that bitcoin has currently been pushing about the key upper and psychological $10,000 price mark. This push above the $10k point brings with it the prospect of triggering a broader feeling of FOMO (or the Fear of Missing Out), according to experts like Tom Lee of Fundstrat. Lee himself goes on to add that Bitcoin, as a result of this fact, that Bitcoin is now in a position to take out some of its all-time high price points.
This is not a uniform opinion among market analysts and investors, however. Others, like Tone Vays is among those that disagree with this theory, he argues the following:
“I actually don’t think it’s important at all. The $10,000 benchmark did nothing to slow down price back in 2017. And it looks like it did nothing to slow down the prices here in 2019.”
With the Bitcoin Bus Heading Uphill – Who’s in the Driver’s Seat? Institutions
While one of the main drivers for the massive bullish uptick of 2017 for Bitcoin was attributable, to a large extent, the interest of retail companies and investors, allowing for the upswing of its value to $20,000 – the same is not the case for this uptick, however.
This time, the very same public and retail investors have pretty much been sitting on the sidelines instead of putting themselves back into the game, according to Google Trends.
The most prominent example of this that we’ve seen is from the number of Google searches related to Bitcoin, or cryptocurrencies; both of which are only around 10 percent of what they were in contrast with the public hype of 2017.
To put this another way, while momentum has picked up for Bitcoin’s value, there has yet to be any clear feeling of FOMO among the same retail investors that drove the bullish trend this year. This factor may suggest that the price of Bitcoin has the potential to rise far higher than in 2017.
According to developments from June 17th of this year, there was some very open interest from the CME Group, which saw the creation of more than 5,311 contracts worth a total of more than 26,555 BTC, translating to more than $246 million – which dwarfed the volumes seen during the bullish upswing of 2017, even at its peak.
“CME Bitcoin futures (BTC) shows growing signs of institutional interest,” according to the CME Group during the same week through its Twitter feed.
“BTC open interest rose by a record 643 contracts in a single day, establishing a new all-time high of 5,311 contracts on June 17 (26,555 equivalent bitcoin; ~$250M notional).”
There have been some other indicators seen within the institutional market – these include the GBTC price premium, which, along with the charted record volume for Bitcoin-based derivatives within the exchange – BitMEX (this weekend). Both of these suggest that there is a larger deal of ‘Smart Money’ entering the crypto ecosystem.
Better Than Ever Before – Network Fundamentals
Along with the side-lining of retail investment, along with the increasing level of institutional investment, there have been other attributes that we can look to as indicators that Bitcoin is on a different trajectory.
One of these is the report from this week that Hash rates from Bitcoin have since reached an all time high, totalling more than 65 million TeraHashes Per Second (TH/s). So what does this mean, exactly? Bitcoin is proving to be more secure than it ever has been and, in order to actually influence the network – entities would need an ungodly amount of power in terms of computational power in order to get away with it.
In the meantime, other fundamentals have developed in conjunction with the increasing hash rate of Bitcoin. Some of these include the Daily on-chain transaction volumes, the relative block size, height, weight and number of transactions within each of these blocks. These are also confirming that there are far more people than ever before making use of Bitcoin.
Along with these attributes, the networks transaction fees, in contrast with the levels seen during 2017 between users, have remained comparably low over 2019. We can thank innovations such as off-chain, layer-2 scaling solutions such as the Lightning Network being used in order to ease congestion, along with SegWit and Merkle Trees in order to optimize the network overall.
11 Months Away From Bitcoin Reward Halving
The current upswing in Bitcoin to five figures is taking place with a long time before the next halving of Bitcoin mining rewards takes place – the latter of which is scheduled to happen during May 2020.
With this taking place, any mining block rewards will be cut from 12.5 Bitcoin to 6.25, reducing the underlying number of Bitcoin being minted by the miners of the community – who are commonly the biggest market sellers.
One of the interesting facts is that – during the last halving event within Bitcoin, which occured during the summer of 2016 – this was more than one year before the price of Bitcoin surged upwards. What makes this time different is that the pairing of BTC to USD is headlining this bullish event, with the halving event still under one year away.
PlanB, who is one of the more well known analysts of the Bitcoin market has since suggested that investors could be waiting around until the expected reduction in supply that will coincide with the halving of Bitcoin rewards in May 2020. PlanB goes on to further add –
“Front running would be in line with Efficient Market Hypothesis: if you believe S2F and that BTC will be $50k May 2020, why wait?”
Looking at the Macroeconomics for Bitcoin
When it comes to the day to day movements of Bitcoin, these developments aren’t exactly as critical to pay attention to if you’re a low time preference investor, or in it for the long-haul. These same ‘Hodler’ types have a good degree of confidence in Bitcoin and its potential to go higher.
These Hodlers point to its intrinsic fixed supply of Bitcoin over time as a way in which it will prove able to outperform conventional supply and demand fiat currencies – with their relative volumes of supply increasing at a far faster pace now in contrast to just decades ago.
According to reports out of the European Central Bank in June 18th, the head of the institution – Mario Draghi dropped hints that, in light of a still sluggishly performing Eurozone economy – that a monetary stimulus package may be in the works. Draghi’s hints represent a more dovish tone that has since been met with a great deal of positivity by the financial districts of the European Union.
At the same time, however, Draghi has since been criticized by the President of the United States – Donald Trump. The US President arguing that this move by the central bank of the EU would spark an unfair level of competition against the United States – the latter of which has put pressure on the United States Federal Reserve to hold off on any push to raise interest rates.
Anthony Pompliano, one of the co-founders of the financial institutions – Morgan Creek, has since stated that this economic state of affairs and respective macroeconomic instability would make Bitcoin an even more scarce resource, especially as interest rates go lower and more fiat currency is created and issued.
“Cut rates. Print money. Make BTC more scarce. Long Bitcoin, Short the Bankers!”
Generally speaking, the macroeconomic landscape for Bitcoin and its associated investors is looking very bright. Especially as more and more investors, on an individual and institutional level, are scrapping the now depreciating fiat currencies in order to pour more assets into Bitcoin as a hedge against economic uncertainty.
In addition to this, investors of all kinds are starting to broadly see that the supply of Bitcoin is itself fixed and wholly transparent. But, along with these factors – it is a wholly neutral, open-access money that has no centralized system of authority that can control it.
To put this in a different way – what the first and later iterations of the internet did to the concept of information, Bitcoin is starting to do with the world of money.
The historic market cycles encountered within Bitcoin, the rising level of interest from institutional investors, along with increasingly durable network fundamentals, along with the confirmation of the depreciating nature of fiat currencies, all of these have the potential to push the price of Bitcoin to a scale that has never before seen – exceeding even the levels seen within 2017.
- Source: First Appeared Here
- Published Time: 2019-06-23 21:45:12
The views and opinions expressed in the article Will the Price of Bitcoin in USD Value Stop at $20,000 This Cycle? Here’s Four Catalysts for New Highs do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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