Bitcoin (BTC), cryptocurrency prices rise near half

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Mehmet Ali Ozcan | Anadolu Agency | Getty Images

A bitcoin rally drove the cryptocurrency market higher before a major technical event for the digital coin, and industry participants are reporting increased interest from institutional investors.

Bitcoin crossed $ 10,000 Friday morning in Singapore, the first time it has reached that price since February, according to data from CoinDesk. The cryptocurrency had reduced some of these gains and was trading around $ 9,900.75 at 1:39 p.m. Singapore time, still representing an increase of more than 6.4% compared to the previous day.

The market capitalization or total value of the cryptocurrency market jumped more than $ 13 billion from the previous day, around 1:39 pm Singapore time. This decision was largely motivated by bitcoin, which constitutes the major part of this figure. The overall market value was $ 268.07 billion.

Industry participants said a number of factors – from the central bank’s favorable monetary policy to the increased interest of institutional investors – took into account the bitcoin rally.

Bitcoin suffered two bouts of intense sales in March, placing it at a low of around $ 3,867, a price unmatched since March 2019. Since then, the price has risen more than 150%.

At the same time, the stock markets, which also registered sharp declines in March, have recovered. The Dow Jones Industrial Average is up 28.4% since its March low.

“Overall, markets have been bullish since March lows and this affects all asset classes, including crypto,” Vijay Ayyar, head of business development on the Luno cryptocurrency exchange, told CNBC . “The impression of money from the Fed and other central banks around the world has given investors a lot of confidence that the economy will be supported no matter what. “

The United States Federal Reserve has announced an unprecedented number of measures to help cushion the economic blow from the coronavirus epidemic. Other central banks around the world, including the European Central Bank (ECB), have unveiled their own stimulus plans. Central bank policies support risky assets like stocks.

The “halving”

Part of the bitcoin price hike since the March trough was the anticipation of a technical event known as “halving”.

Bitcoin is not issued by a centralized authority like fiat currencies. This is why it is often called a “decentralized” cryptocurrency. Instead, it is governed by code and is supported by a technology known as blockchain.

In the bitcoin world, so-called miners with high-powered specialized computers compete to solve complex mathematical problems in order to validate bitcoin transactions. Whoever “wins” this race is rewarded with newly issued bitcoins. This “mining” activity takes place in blocks, which are essentially a group of transactions joined into one.

Currently, these miners receive 12.5 bitcoins per block extracted. The rewards are cut in half every few years to limit inflation. On May 12, the miner’s reward will be further cut in half to 6.25 new bitcoins.

The effect is that the supply of bitcoin entering the market is reduced. Previous halving events, which occur every four years, have preceded sharp price increases for bitcoin.

“In recent weeks, we have seen new players enter the BTC market, with prices tending to rise in anticipation of halving, as bulls see it as an opportunity to buy BTC before a pop price and what many expect from a meaningful price. “Matthew Dibb, co-founder of Stack, a provider of bitcoin index funds, told CNBC. BTC refers to the bitcoin currency code as USD for the US dollar.

“It has undoubtedly continued this week and could even continue over the weekend as the halving approaches. “

Institutional purchase?

Dibb said there are also other factors at play, including more institutional money being injected into bitcoin.

Paul Tudor Jones, a Wall Street hedge fund manager, said in a message that one of his funds held a small single-digit percentage in cryptocurrency futures, Bloomberg News reported.

“The news that a renowned investor, Paul Tudor Jones, supported bitcoin – publicly praising the asset for its properties as a store of value almost certainly helped to catalyze the sudden movement of BTC in the US $ 10,000 area, “said Dibb.

“With monetary easing policies and unlimited economic stimuli” recently unveiled around the world, fiat currencies appear to be on the verge of weakening considerably. This, in turn, has led the narrative of bitcoin as a “store of value” to gain additional traction among investors seeking to protect themselves from the volatility of traditional markets. “

Bitcoin has often been compared to gold as a so-called safe haven during turbulent times for other risky assets like the stock market. However, recently bitcoin has gone down and up when the stock markets have done it.

Flashbacks until 2017?

Bitcoin has always been known as a very volatile asset subject to huge price fluctuations. In 2017, bitcoin experienced a sort of frenzy that drove its price from less than $ 1,000 at the start of the year to a record high of more than $ 19,700 in December of the same year.

However, in 2018, the price of bitcoin fell to just over $ 3,000 in mid-December.

Dibb believes the recent rally is different from what was seen in 2017.

“This market is not just moving on the back of retail speculation – and it is mainly Bitcoin that is gaining, not the altcoin market,” said Dibb, referring to small digital coins. “It is only now that we are really starting to see institutional and accredited investors operating in the Bitcoin space, bringing a level of market maturity and financial understanding that was almost absent from the cryptocurrency industry until 2017 and 2018. “

However, the risk of a substantial decline remains.

“We went from 3K to 10K in 2 months, too fast, too early. There will be a setback, and that will determine what type of accident it is, “said Ayoar de Luno.

“We could go back to 8K, hold on, and they would go back to 15K. Or we could go down to 3K as well. At this point, however, you have to be bullish, unless we see a violent downward movement. I think the current climb is part of a bigger climb, so don’t think we’ll see 3K again anytime soon. But if we go up to 15-20K, then the probability of a big move down and a bigger correction is higher. “

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