Why is the cryptocurrency growing now? Are we on the verge of major financial changes?
May 2019 bewildered many cryptomarket investors with a sudden rise of Bitcoin. Its market price (as of May, 24) exceeded $8000. Such high rates were last registered in the summer of 2018. The unexpected increase attracted people’s attention to other cryptocurrencies as well.
Some might wonder why this event is so remarkable. After all, it’s not even a record mark for the Bitcoin price. Nevertheless, the currency which was once extremely volatile has had a long period of stability. After this violent leap Bitcoin owners don’t know what to expect.
The surge triggered many questions. Why is the cryptocurrency growing now? Are we on the verge of major financial changes? Will the growth end soon, or is it only the beginning? Is it a good time to buy or sell Bitcoin? We have gathered expert opinions on these and other relevant issues in this article.
Some reasons Bitcoin might be on the rise now
The first plausible explanation is linked to BitMEX. It has been positioned as Bitcoin’s most advanced trading platform. In April, its main trading pairing was responsible for 15% of all Bitcoin trades globally. Such activity is possible due to BitMEX’s insurance fund. It offers more Bitcoin/USD liquidity than any other platform. BitMEX’s XBTUSD market is, in fact, the most liquid in the world.
Exchanging derivatives allows trading more money than the shareholders actually possess. The fund is used to cover the losses caused by excessive liquidation. BitMEX’s insurance fund had been steadily increasing lately, but more recently it started slowing down. It meant more traders than usual were liquidating their positions. Therefore, some traders predicted the so-called “black swan event”— a massive change in the markets.
Quite a while ago, experts who continuously studied the Bitcoin charts traced clear signs of a bearish-to-bullish trend reversal. For instance, in February, bitcoin’s 50-week moving average dropped below the 100-week MA. Considering the market history of repeated trading patterns, analysts suggested bitcoin’s price may have bottomed out, which signaled that a new bull run could begin this year.
Another confirmation was the bottoming of MFI on March 4, that contradicted the lower low in bitcoin’s price. A falling MFI is generally considered a sign of increasing selling pressures.
According to Dan Held, co-founder of Interchange, the currency’s resurgence might be attributed to the fact that people consider it a “risk off” trade — an investment treated as a safer bet in times of market turmoil. Some examples of such investments are bonds or gold. It is not a coincidence then that Bitcoin has been often called digital gold. As the expert noted, the currency skyrocketed in value right at the time when the Dow plunged 617 points, suggesting that investors might have turned to bitcoin as a safe haven asset.
Another reason might be that customers begin to consider Bitcoin trustworthy along with reputable institutions claiming their interest in the crypto market. The giant of Wall Street, Fidelity has recently announced that it will start buying and selling Bitcoin in the weeks ahead. When one of the largest asset managers in the world turns to something, ordinary individual investors are bound to consider its prospects too.
Now, that we have listed the main probable causes for the Bitcoin surge, it’s time to study expert opinions on the currency’s near future.
Tuur Demeester of Adamant Research predicted that the BTC price could soon witness another retracement. He believes that it is needed to make the currency more sustainable. On May, 23 his predictions came true, though currently there are no fundamental reasons for the market dump; traders just fixing their profits. We still might see a Parabolic Bull Run like in 2017.
Yet Bitcoin’s price will not be likely to skyrocket the same way it did before. Experts of Investing Haven noticed that the introduction of Bitcoin futures on December 17th, 2017 resulted in subdued returns to Bitcoin going forward. They allowed large investors to put pressure on Bitcoin’s price to staple it down. According to the InvestingHaven’s blockchain & crypto investing research, Bitcoin will only function as the leading indicator for the crypto market, setting the high-level direction, per its chart structure. Their prognosis for the 2019/2020 trading period is that the leading cryptocurrency will not exceed $25000 at its peak. However, even this forecast is quite optimistic for the investors.
On the contrary, economist Joe Davis believes Bitcoin’s price to be a function of speculation only. Considering his position as head of Vanguard’s investment strategy group, his ideas are to be taken into account as well. Davis remains conservative about Bitcoin believing it is a poor store of value, due to its volatility. His opinion was supported by Bill Gates who implied that sooner or later the Bitcoin market will implode. Last year, he asserted
However, Tom Lee, ex-Chief Equity Strategist JP Morgan, co-founder and head of research of Fundstrat, along with his colleague Sam Doctor, an analyst from Fundstrat, believe BTC would grow as they take into account numerous institutional investors taking on Bitcoin and a steady increase in Bitcoin user base. Tom Lee stated that the BTC fair value is much higher than the current price. The current fair value is somewhere between $13,800 and $14,800 which he believes might increase and reach $150,000 per coin as soon as bitcoin wallets account for seven percent of 4.5 billion Visa holders. Sam Doctor was more modest in his predictions estimating that by 2019, BTC might reach nothing less than $36,000, with the probability of $64,000 at the maximum and $20,000 at its lowest.
While human visionaries keep their hopes about Bitcoin’s future high, machine-based smart algorithms bring them down to earth. For instance, the Forecast System of WalletInvestor suggests BTC is a bad long-term (1-year) investment. Their smart technical analysis reveals high risks for potential investors within that period. The similar situation is with Coinpredictor. At this moment the Bitcoin price prediction algorithm is estimating that within 24 hours BTC price will be +7.1% targeting $8,168.4, in 7 days +21.2% approaching $9,243.79, in one month -4% on the move to $7,321.81 and in 3 months -22.8% targeting $5,887.96. The Long-term forecast is showing that Bitcoin will be dropping in cost.
Whom to believe? There’s no clear answer to that. After all, no crystal ball or time machine could show us the actual future of the cryptomarket. Still, many leading fintech companies believe in Bitcoin’s potential.
For instance, Twitter and Square CEO Jack Dorsey has predicted that Bitcoin could have the potential to overtake the strength of the dollar in the very near future, particularly in online markets.
“The world ultimately will have a single currency; the internet will have a single currency. I personally believe that it will be Bitcoin,” he said back in 2018. “This would happen over the next decade, but it could go faster.”
Amongst the recent Bitcoin hype, he continued to follow his own way and got one step closer to launching Square’s long-awaited crypto project. Dorsey wants to fund the growth of Bitcoin directly through Square Crypto.
If more organizations and businesses support his aim to create an open-source Bitcoin ecosystem, the rosy prospects of many Bitcoin optimists might as well come true.
SEE ALSO: Blockchain and precious metals