23 November 2019, 13:11
2 min reading
Bitcoin is one of the most volatile assets that the financial world has seen. This cryptocurrency has seen historic rise and drops, and the most historic rise is certainly when it crossed the $20,000 mark in December 2017. This unprecedented rise turned many investors towards cryptocurrencies, who since then have been waiting for such a
Bitcoin is one of the most volatile assets that the financial world has seen. This cryptocurrency has seen historic rise and drops, and the most historic rise is certainly when it crossed the $20,000 mark in December 2017. This unprecedented rise turned many investors towards cryptocurrencies, who since then have been waiting for such a bull run to repeat.
However, the Bitcoin price has been gradually moving down since then, with a few price swings on the way. The world’s most popular cryptocurrency bottomed out below $4,000 and has been trading in a range between $7,000 and $11,000 for most of 2019.
Yet, a recent short-lived rally and a few macro factors have given investors some hope that the digital currency may hit $20k by the end of the year. Last month, Bitcoin added 42% in 24 hours, marking its best daily performance in the past six years.
On the one hand, where many saw this rally as just another price swing, those bullish on BTC see this as a sign of it returning to the historic 20k level again. Bullish expectations are primarily based on three ideas:
Bitcoin has always been the most dominant coin in the crypto sphere, accounting for about 70% of the total crypto market. There are no other altcoins that are even close to it. Though several coins have gained popularity over the last few years, BTC remains way ahead.
Moreover, bullish investors expect BTC to further extend its lead over other coins to account for 90% of the entire market. Thus, it is believed that such expectations, along with the liquidity offered by BTC, will continue to attract more investors towards it, eventually leading to higher prices.
Chinese investors have been lately a driving force behind Bitcoin. Going ahead, their interest in BTC and the overall cryptocurrency market is expected to increase.
And there are many reasons to support that. First, the expectation of crypto-friendly legislation around January 2020. Second, the future launch of a CBDC by the People’s Bank of China. The price of several digital assets with links to China (such as NEO, TRON, and others) are already showing bullish signs.
Bakkt, which is a Bitcoin futures exchange and digital assets platform, will soon open trading for Bitcoin options. This would further add to the growing BTC volume and also help provide some stability to its price.
Options trading would also attract more institutional investors as it would be less risky than investing in BTC directly.
Munich-based Bayern LB, one of the leading banks in Germany, has recently supported an outstandingly bullish scenario for Bitcoin.
In a report titled «Is bitcoin outshining gold?», bank analysts outlined that BTC price will grow significantly following the 2020 Bitcoin halving event. The event will cut by half the Bitcoin mining reward for completing a transaction from 12.5 BTC to 6.25 BTC.
“If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000 (the current model value is roughly USD 7,500).”
If this institution is right, then a price jump to $20,000 is more than an achievable target for Satoshi’s cryptocurrency. However, bearish investors insist that Bitcoin’s return to its historic peak is not taking place any time soon due to several factors, including…
When Bitcoin started to recover from the so-called «crypto winter» in early 2019, headlines at the time pointed out that well-known institutional investors were joining the cryptocurrency revolution.
But as Bitcoin’s recovery slowed down in August, data suggested a different reality: institutional interest in the cryptocurrency dropped to an expressively low level.
A recent study by The Tie showed that “mentions of institutional interest in bitcoin in news headlines have plummeted to a 2019 low after seeing significant growth throughout the summer.”
Institutional investors are hesitant because of the uncertain future surrounding BTC and the crypto market as a whole. Even though BTC has been around for over a decade now, and it continues to be one of the best performing long-term investments in the financial world.
Another thing holding back the institutional investors is the custody problem or lack of backing by any reliable institution. Though companies like Fidelity, Bakkt, and BitGo are working on solutions that meet the industry standards required by institutional investors.
Further escalation of the BTC network is also an aspect heavily scrutinized by the crypto community. Nowadays, all eyes rely on the Lightning Network and Blockstream’s Liquid network. In case you’re not familiar with these two, here is a brief explanation:
Lightning Network: allows you to send your Bitcoin across a network of nodes. Each channel interfaces to the Bitcoin Blockchain. It is used for small-sized transactions, such as e-commerce payments.
Liquid Sidechain: allows you to transfer your Bitcoin to a secondary Blockchain that interfaces with the main Bitcoin Blockchain via a single multi-sig account. It is mainly used for processing large transactions between institutions.
These technologies have seen no promising development in the past few months. And bears believe the little improvements technology-wise will ultimately weigh on the speed BTC adoption.
While Bitcoin is undoubtedly the most popular crypto, the overall market sentiment does not support a price hike of $20,000. Each time BTC has crossed the $10,000 mark, investors have been quick to take profits, preventing further gains.
There are points both for and against BTC hitting the $20,000 mark. Though an experienced investor could never expect an asset to gain about 150% in a month, with BTC you could never tell.