What Exactly Is Behind This Much Bitcoin Surge?
Everyone in all the world’s different financial markets is currently talking about Bitcoin. The first cryptocurrency and largest coin by market capitalization hit and surpassed $8,000, its highest price in quite a few months. The crypto market which was bearish from 2018 and spilled into 2019 before it saw a major turnaround when Bitcoin initially surged in early April.
Since then, Bitcoin has surged over $2,000, making these significant leaps in a few days. This can only mean that the initial surge in April spiked considerable interest in the opportunities the market offered and because people didn’t want to miss out, there was a substantial influx in the price of the coin, pushing it higher.
Analysts and experts are now of the opinion that the crypto winter is now over as a proper bullish market as set in. The current market state may have happened as a result of a combination of a number of things. Some of them might include:
Bitcoin Is Decentralised And Based On Speculation
The decentralization that forms the main frame of Bitcoin is a factor to be considered. Bitcoin is a public decentralized cryptocurrency which is not controlled by any one entity and has no tangible representation like fiat currency or other assets like oil or gold. The major cause of a change in price, whether positive or negative, is speculation.
Usually, when there is bad press and unsupportive stories about Bitcoin, the market has been known to respond in a proportionate manner, dropping its value dropping. However, when there’s continuous positivity in the stories being spread about usage and adoption of cryptocurrency whether individually or institutionally, (even among some governments in the world) people then begin to have some trust and confidence in the market, causing them to buy in. This buy-in creates a scarcity in the market causing the value to rise. This might seem fleeting but it means that the market can naturally rise as much as possible without any interference whatsoever.
Bitcoin is programmed to go through a halving, every four years. The only way new Bitcoins can be added to the network so there is a continuous stream of the asset is through the miners. When a new block is mined and added to the Bitcoin blockchain, the miner gets a block reward which is currently 12.5 new Bitcoins. However, this reward is to be halved every four years meaning that the next halving will see miner block rewards drop to 6.25 Bitcoins.
The next halving event is about a year from now, in May of 2020. Because it’s this close, most investors want to buy in and accumulate as many as possible before the block rewards drop and the supply also drops because miners are less incentivized.
Major Corporate Involvement
Even though the push for substantial adoption is still on, there is some progress with involvement as quite a few of the world’s biggest firms are now either creating their own assets or deploying various blockchain solutions with their business. JP Morgan, for example, has created its own JPM Coin, to facilitate payments between clients and also for cross-border solutions. Other big names that have some interest or the other in the blockchain sphere include Amazon, Facebook, and Microsoft. Microsoft has announced plans to fully float the new Azure Blockchain Development Kit for Ethereum. The computing giant is also in an official partnership with JP Morgan, to improve the latter’s blockchain platform – Quorum.
Furthermore, Bakkt, a key digital asset platform, for major corporate firms, merchants and even individual customers alike, announced that by July, it would be ready to test its Bitcoin futures.
Kelly Loeffler, Chief Executive Officer of Bakkt, announced in an official blog post saying:
“Today, we’re pleased to update you on the launch of bitcoin futures contracts developed by Bakkt in collaboration with ICE Futures U.S. and ICE Clear U.S. We’ve worked closely with the CFTC to develop contracts that both meet our customers’ needs for trading, transparency, and market certainty, and are also compliant with Federal regulations.”
Bakkt is very interested in attracting substantial institutional investments from big firms who have been uncomfortable with the deregulated cryptocurrency space by offering some level of regulation. This might placate some of these institutions who are worried about the ease with which cryptocurrency could be used for illegal activity.
If corporate investments begin to enter the crypto market and continue considerably, the market will respond by pushing the price of Bitcoin and even the market’s own capitalization, making it even juicier for more institutions to come in.
Fear Of Missing Out (FOMO)
This is undoubtedly one of the factors responsible for the Bitcoin rally. When the price of Bitcoin starts to increase, all the people who didn’t hold any or held a very small amount of the currency would naturally start to buy in for fear that they will miss out on the possible profits to be gotten from a price spike. As more people buy in for FOMO, prices always increase.
This same phenomenon happened in 2017 when Bitcoin hit its all-time high of almost $20,000. When it initially started to rise, FOMO set in and pretty much everyone made a lot of investments, pumping so much money into the market that prices eventually hit an all-time high.
Some bullish analysts have already started predicting that the current rally could still push the price of the coin up to its previous all-time high or even higher because of FOMO.
The crypto market is largely unpredictable and has disappointed even some of the most adept and proficient analysts. Whether or not the current bullish market will continue can only be hoped but cannot be said for sure.