Bitcoin Price Soars to $10,000 but Cryptocurrency Remains Vulnerable
The COVID-19 pandemic has caused huge common on the global market as stocks go up and down, countries dealing with economic crises, and manufacturing processes slowing down or stopping entirely. Bitcoin didn’t remain intact by the pandemic. In fact, some important changes occurred on this front as well. The well-known cryptocurrency has been the best performing asset over the last year or even a decade and bearing in mind all the money injected into the system and the upcoming halving, and Bitcoin was expected to continue outperforming amid COVID-19 pandemic as well.
Earlier this year, one survey showed that Bitcoin investors were upbeat and expected the price to soar to over $20,000 per Bitcoin in 2020. However, the proportion of global crisis caused by COVID-19 was unexpected, which, together with some important events in the Bitcoin pipeline, contributed to speculations about the vulnerability of this cryptocurrency as people wonder how it’s going to deal with the new situation.
Price soars since March
At the beginning of April 2020, Bitcoin has entered the second quarter of the year, and they did it with a bang. The prices of this cryptocurrency increased above $7,000 per Bitcoin, which was a significant boost considering they fell in March under $4,000 in response to the market crash induced by COVID-19. Toward the end of April, the price of Bitcoin has jumped toward $10,000, thereby returning the cryptocurrency to its pre-coronavirus path of success. Compared to March, the value of Bitcoin has grown by 30% in April and managed to outperform the U.S. and S&P 500 index and other major markets.
The COVID-19 pandemic has turned the market across the globe upside down, so it may seem surprising that at the time of the biggest spread of the virus, Bitcoin’s value increased. But the reason could be down to the fact that investors into this cryptocurrency are driven and not scared of taking risks even in the harshest circumstances. Bitcoin investors take into consideration long-term goals and aren’t that fazed by recent volatility. This attitude could be behind the growing value of the cryptocurrency in April.
Some theorists believe that Bitcoin needs correction to sub-$9,000 waters, but it’s not the time for “buying the dip.” In fact, they believe we need to be ready or another big or small dip as the next stage of Bitcoin accumulation. Some go to theorise that the prices of Bitcoin in the near future are likely to fall below March value.
Bitcoin halving in May 2020
A Bitcoin halving, also referred to as the halvening, is defined as the event wherein the reward for mining new blocks is halved. This means the miners receive 50% fewer Bitcoins for verifying transactions.
Before we get into this, it’s important to clarify the whole idea of halving, as many find this subject confusing.
Every 10 minutes, Bitcoin network issues new Bitcoins, and for the first four years of the existence of this cryptocurrency, the number of newly-released Bitcoins every 10 minutes was 50. Then, every four years, this number was cut in half. The day on which the amount is cut in half is called halving. Back in 2012, the number of new Bitcoins released every 10 minutes lowered from 50 to 25. In 2016 it dropped from 25 to 12.5. That means in 2020, the number of newly-issued Bitcoins every 10 minutes will decrease from 12.5 to 6.5.
The halving reduces the number of new Bitcoins generated by the block. The supply of Bitcoins decreases as a result. Lower supply with steady demand tends to induce higher prices in the normal market. Bitcoin is not exactly the regular market, so standard rules don’t necessarily apply here. Bearing in mind that halving decreases supply, but demand remains steady, it has preceded some of the cryptocurrency’s biggest runs.
Generally speaking, Bitcoin halving is scheduled to take place once every 210,000 blocks, which is about every four years, as you could have concluded above. This means the next halving is highly likely to occur in 2024.
No two Bitcoin halvings are identical, so it would be difficult to anticipate absolutely everything we can expect this year. The next Bitcoin halving is set to occur in the week starting May 12, 2020, when the number of blocks reaches 630,000.
When the value of Bitcoin soared after a dramatic fall, many tried to speculate why it happened. Besides the incredible drive of investors, it was thought the upcoming halving had a lot to do with the increased price of the cryptocurrency. But the real reason could be entirely different. Before the 20% Bitcoin rally, a big transfer of the stablecoin Tether was made to Bitcoin and cryptocurrency exchange Binance. Tether is a type of cryptocurrency whose value was meant to mirror that of the U.S. dollar. The idea behind Tether was to create a stable cryptocurrency that can be used like digital dollars, hence the term “stablecoin.” At the moment, there are 6.3 billion tether tokens in circulation, whereas there’s “just” 18 million Bitcoin.
As the halving is getting closer and closer, we will probably see Bitcoin getting more trading activity as the interest keeps increasing as well. The traders and investors across the globe are starting to realise the overall potential of Bitcoin, if they haven’t understood it before, and they will want to have a piece of this fruitful cake. The turmoil on the global market, which is happening right before the halving, strengthens trust in Bitcoin even more and shows the true importance of this cryptocurrency. This is particularly important if we bear in mind drastic changes in oil prices and the fact that governments across the globe are trying to save the economy the best way they can.
As time goes by, the interest in Bitcoin keeps growing, and the COVID-19 pandemic didn’t change that. In the beginning, the year Bitcoin value was steady, but it had a drastic fall in March and managed to go back up in April. Predictions are that Bitcoin could be one of the best-performing assets on the market if everything goes well. The increased value of Bitcoin could be due to the unexpected severity of the global crisis caused by novel coronavirus coupled with the upcoming halving, which is set to occur in May 2020. However, the well-known cryptocurrency is still relatively vulnerable, and it wouldn’t be shocking to witness another dip this year. The time will tell, but one thing is for sure Bitcoin has become a force to be reckoned with.
Written by The Original PC Doctor on 17/5/2020.