Despite what the pessimists have been saying, it appears that the Bitcoin bull market is showing no signs of slowing down. At the time of writing, BTC prices have gone above the $9k mark, bringing it to an all-time 13 month high.
With prices at the highest that they’ve ever been since 2018, investors and speculators are understandably excited. Having defied all expectations, what can we expect from Bitcoin next? What is driving the prices of Bitcoin to such levels?
Here, we take a look at some of the possible reasons behind Bitcoins current bull market run.
1. The Escalating U.S-China Trade War
Love him or hate him, President Trump is without a doubt, an extremely polarizing figure. However, in the wake of the U.S-China Trade War, it’s highly likely that investors love the man. Increased tensions between the U.S and China have sent markets crashing with investors searching for a safe haven.
This subject might seem unrelated to Bitcoin news, but you will understand why it matters. The absence of a central monetary authority means that Bitcoins are relatively insulated from external factors such as geopolitical tension. Prized for its decentralized nature, investors from all sides have begun snapping up Bitcoins as if there were no tomorrow.
Due to the upwards pressure on the demand for Bitcoins, it’s no surprise to see that valuations are increasing.
2. Speculation on Bitcoin Halving
For the unaware, halving is an occurrence where the amount of Bitcoin rewarded for each solved blockchain transaction is literally halved. For example, before halving you could be rewarded with 50 BTCs for each successful transaction. After halving however, you’ll only be receiving 25 BTCs.
As explained by the enigmatic Satoshi Nakamoto, halving is intended as a safeguard against Bitcoin inflation. This is because miners receive a significantly smaller reward the more Bitcoins are mined. Hence this has the effect of discouraging miners to flood the market with Bitcoins.
Reducing the incentive to mine Bitcoins has the effect of discouraging miners from minting more of the cryptocurrency. This decline in supply then causes a sharp increase in demand as the market corrects itself.
As can be seen from past data, investors have often scrambled to buy up Bitcoins prior to the next halving. Thus, this current price increase we are seeing could be due in part to investors looking to get ahead of the market.
3. Positive market sentiment
Over the past several months, Bitcoin valuations have climbed by nearly 200% to above $9,000 per BTC. This is in stark contrast to just 6 months ago where Bitcoins were valued at merely $3,100. Back in those days, some predicted that the Bitcoin trend had past and the age of cryptocurrency was over.
However, just several months later, Bitcoin valuations would improve dramatically. This sudden change in fortunes was attributed to a variety of factors. Positive market sentiment was one of those factors.
Driven by the news that major retailers such as Starbucks and Nordstrom would being accepting BTC payments, speculators have begun buying into the cryptocurrency craze. This positive market sentiment would in turn encourage on-the-fence investors to also follow suit.
The increase in demand for BTCs would undoubtedly push prices upwards; a fact supported by the current bullish market sentiment.
4. Institutional interest
In the past, Bitcoins typically belonged in the domain of the deep web, where it was used as a medium of exchange. However, in recent times, this could not be further from the truth. As reported by JP Morgan, increased trading on exchanges and in BTC futures indicates that institutional investors are waking up towards the idea of cryptocurrencies as a viable investment.
The volatile nature of Bitcoin and other cryptocurrencies means that fortunes can be made and lost in the blink of an eye.
Author: Benjamin Lee
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