Published: August 23rd, 2020
Having traded at $5,000 as recently as March, Bitcoin jolted the cryptocurrency markets by shooting above $12,000 for the first time this year. The record figure is an indication that investors have shifted to crypto as a hedge against risk during this pandemic period.
The value of Bitcoin has tripled since March and is now trading in the regions last seen in 2017. The world’s first cryptocurrency rose more than 3% in just 24 hours, taking the coin above the $12,000 for the first time in 2020.
These latest gains imply that Bitcoin has increased in value almost three times since March 2020. This surge came despite the strict lockdowns that most countries enforced earlier on to curb the spread of coronavirus.
Many cryptocurrencies have mirrored Bitcoin’s price trends. For instance, Ethereum has risen from just about $100 in March to about $410 currently.
Despite the threefold swell in Bitcoin’s price, it is still way off its 2017 record price of almost $20,000. However, the steady recovery may be an indication that cryptocurrencies are a safe haven asset.
Often during economic uncertainty, investors resort to assets with a fixed supply such as gold, and now Bitcoin. Such assets are not affected by inflationary measures such as quantitative easing.
Bitcoin joins the gold’s league because of its finite supply. There will be a maximum of only 21 million Bitcoin in circulation ever. This quality probably is the reason the tech world refers to the coin as digital gold.
Besides, the adoption of Bitcoin as a premier treasure reserve asset is continuing in earnest. Early this month, MicroStrategy, a business analytics firm based in Virginia, became the first Nasdaq-listed company to do so.
MicroStrategy used about $250 million of its asset reserves to invest in Bitcoin. In a statement by MicroStrategy’s CEO, Michael Saylor, the company said its investment is a reflection of the company’s belief that Bitcoin, aside from being the most adopted crypto coin globally, also is an attractive asset and a reliable measure and store of value.
Saylor added that Bitcoin has a long-term potential to appreciate and serves more than only hold cash. Since MicroStrategy pulled this bold move, its stocks have risen by more than 20%.
The much attention coming the Bitcoin way is all good. However, some experts are warning the markets to tame their excitement. They think that even though these investments such as MicroStrategy made contribute to the gains that Bitcoin is seeing, they may lead to a price stall.
According to Simon Peters, a senior account manager at eToro, Bitcoin’s steady push upwards is good. Still, while it is happening, the markets should note that an elevated Bitcoin price may result in a psychological barrier that locks out the retail investor.
Where investors ask for fractional shares, cryptocurrency holders also hold bits of Bitcoin. However, the fact is that most retail investors also want to have the whole Bitcoin. But, the price at which anyone can do so is quickly slipping out of the average retailer’s hands, Simon added.
All experts do not agree with Simon’s school of thought. Some market experts opine that the rise in Bitcoin’s value is because of the trends underpinned by the supportive technical indicators.
A Bloomberg report indicates that the peak of $12,473 on Monday, August 17, reflects the market’s optimism. It could also be a reflection of the market factoring in the effects of the Bitcoin halving that happened in May.
The increase in value has come about three months after the Bitcoin halving event. The Bitcoin network customarily halves the block reward (the compensation paid out to miners for discovering new blocks and including them to the blockchain) after every 210,000 successful blocks.
If the historical price action charts are anything to go by, then the price surge is only beginning. Usually, Bitcoin’s price tends to peak about 18 months after every halving event. So, while 18 months is still far off from the May event, market insiders think that this latest price increase is the initial step towards a peak that may be seen around mid-2021.
Traders remain optimistic, expecting the coin to remains true to the above projections. The traders interviewed said that $12,000 is both a round number and a firm technical liquidation level. Meaning, it can offer adequate resistance while allowing the coin to keep climbing.
Bitcoin is now trading at about 44% higher since the halving event. This value firmly ushers in the third epoch in Bitcoin’s short but illustrious history.
Despite all the good vibes Bitcoin is emitting, it is essential to note that the world is still in turmoil, and the markets are acting like a bag of mixed nuts. The possibility of nice rebounds is still high; Bitcoin is doing that already.
However, the markets are giving no guarantees. Mati Greenspan, an analyst with Bitcoin Market Journal, advises investors to approach high-risk markets with great caution. He said that proper money management is critical now more than ever.
The analyst insists that traders that go for assets that do parabolic cycles should take out their profits often and diversify holdings whenever possible. He added that holding onto value coins should be because they are relatively stable stores. According to Mati, such coins include the cryptocurrencies that have established a broad presence and have a strictly limited supply.
Bitcoin falls in this category. Importantly, he said that it is better to wait and watch what happens since the markets are still crazy.
Bitcoin has shocked the markets by climbing past $12,000 for the first time this year. The rise came despite the harsh economic times. A section of experts thinks the surge in value is because of the market’s shift to assets with definite supply. Yet another school of thought holds that the Bitcoin network is only factoring in the recent reward halving. Whichever camp is right, the markets will have to wait and see.