Bitcoin Gains $5,000 in Less than Three Weeks Between June 6 and July 20 (2019), Bitcoin has experienced one of its most impressive runs to date. The coin rose in price from $7,802.57 to $10,617.80, representing an incredible 36 percent increase in value. Across the market, this run has been interpreted in a variety of different ways. Some speculators believe that this rise represents Bitcoin’s return to its “true” value—something that hasn’t been seen since the coin’s epic collapse in December 2017. Others worry that the coin may be experiencing another bubble and, in response, are choosing to approach the market with a greater degree of caution. In the first week of January, Bitcoin was trading around $3,800, representing a tremendous disappointment for a coin that breached the $20,000 mark less than 13 months prior. Since then, the coin has more than tripled in value, offering a supportive argument to both sides of the debate. Tip - you may want to check out this strategy on trading bitcoin for profit. Why has Bitcoin increased in value? There are quite a few theories regarding Bitcoin’s impressive 2019 run. One of the most well-supported theories is known as the “halving” theory. In order to maintain the blockchain, Bitcoin requires active miners. As miners complete complex problems using their computers, they are directly compensated with units of Bitcoin. Over the course of the next year, the reward for mining is expected to decrease by half. Instead of receiving 12.5 Bitcoins, miners will receive 6.25. Halving occurs approximately every four years, though Bitcoin in 2015 is difficult to compare to the Bitcoin of today. However, this constraint to supply, naturally, will cause each already existing coin to be worth significantly more. In an email to CNBC, eToro’s Mati Greenspan projected that Bitcoin’s inflation rate to drop from its current rate of 3.76 percent. According to Greenspan, “In May of next year, it’s scheduled to be reduced to 1.8 percent.” Anytime supply is tightened, without a corresponding increase in demand, prices can be expected to increase. This phenomenon can be seen in forex markets, where monetary policy announcements from central banks are immediately reflected in currency values. However, if halving accounted for the entirety of Bitcoin’s rise, this wouldn’t be reflected in other crypto markets. But Ether, Ripple, Litecoin, and most other “alt coins” have
experienced excellent runs this June as well. Some speculators are claiming that we are on the verge of a major industry breakthrough. As more governments, banks, and other major players begin using cryptocurrency and blockchain technology, the entire industry is perceived as more legitimate. Facebook’s recent launch of its own coin, Libra, seems to have had a positive impact on nearly all coins. “You’ve got this stuff about Libra going on, which is renewing interest in Bitcoin. Crypto is back in vogue” said CMC Market’s Michael Hewson in a recent interview. Elsewhere, Malta’s recent decision to register all rent contracts in Blockchain has helped legitimize the industry even further, relieving the nerves of some initially skeptical investors. Other national governments, even China and the United States, have also been loosely entertaining new ways of exploring the use of blockchain technology as well. Are we on the verge of another “Bitcoin Bubble”? For those who were involved in the crypto industry in late 2017 and early 2018, Bitcoin’s June rally may feel all too familiar. After all, it was the perception of increased legitimacy that caused Bitcoin to rally to around $20,000 in the first place. After watching the coin lose more than 85 percent of its value in a matter of months, Bitcoin investors have plenty of reasons to be hesitant. But there are still plenty of signs indicating that, maybe, things are different this time around. Many investors feared that Bitcoin’s natural ceiling hovered around the $9,000 mark. But as it approached this mark last week, the coin didn’t see any resistance—in fact, it’s rate of growth actually increased. Circle’s Jeremy Allaire thinks that things might have genuinely changed. He told Squawk Box, “There’s a broader understanding of crypto as an asset class.” Facebook’s use of cryptocurrency has helped popularize the industry even further and “really indicates what is ultimately going to be a massive mainstream phenomenon touching billions of people.” Increased levels of volatility in the stock and bond markets have also caused Bitcoin to appear as a comparably less risky alternative. As long as cryptocurrency is viewed by the market as a legitimate vehicle for storing wealth, it will likely continue to lead the way forward.
Looking Forward to a Hot Summer It is entirely possible that Bitcoin will overshoot its “true value” and eventually experience some degree of regression. Eventually, the market will adjust for the effects of halving and other direct price forces. However, there are few signs that Bitcoin will be anything near like what it experienced around the end of 2017. Even Twitter’s Jack Dorsey has been committing $10,000 per week towards Bitcoin, an ongoing investment that has been mirrored by many other Silicon Valley titans. June and July were incredibly hot months for Bitcoin, which saw the coin produce a rate of return that has not been seen in years.