Bitcoin (BTC) was hit by the $ 10,000 limit on Friday night and posted a record price after the price record in 2019. What are the reasons for this steady increase? And what makes this rally different from the famous rally in late 2017 when bitcoin exceeded $ 20,000?
1. Fear of losing (FOMO) among institutional investors
Everyone agrees that $ 10,000 counts as a psychological limit. Romper takes more attention (media). For example, this weekend, the Washington Post pays attention to bitcoin (BTC) and crypto coins.
This inspires more people to feel that they are losing the boat. Your neighbor likes bitcoin increase and you do not. You also want to belong and also buy the BTC. FOMO is a fact. This leads to more demand and logically at a higher price.
It is not known how dominant this variable is, but it is a variable. Fundstrat analyst Tom Lee frequently picks up the FOMO card.
Not everyone can agree to Lee's talk, like "bear" Tone Vays. He says:
"I do not think breaking the $ 10,000 is really important, but in 2017, that limit did not cause a delay in price increases, and that seems to be the case again in 2019."
Peter Brandt, a veteran of investments, discarded a tweet after the discovery: Bitcoin (BTC) could reach $ 100,000. No asset undergoes repeated parabolic hypergrowth. The BTC is now in the fourth growth cycle, says Brandt.
Bitcoin aims at a goal of US $ 100,000. $ btcusd is going through its fourth parabolic phase since 2010. No other market in my 45 years of trading has been parabolic on a log chart in this way. Bitcoin is a market like no other. pic.twitter.com/wE4j3riMgI
– Peter Brandt (@PeterLBrandt) June 22, 2019
Yoni Assia, CEO of brokerage eToro, also points to the Libra effect, the launch of the cryptomunt and blockchain Libra by technology giant Facebook and the Libra Association.
#BitcoinIsBack at $ 10K this is a very significant psychological price level
It seems that the #LibraEffect wake up people for good age #Bitcoin
Many people (including me) tell themselves "I should have bought more than $ 5,000" … pic.twitter.com/EB5YGKCZJv
– Yoni Assia (@yoniassia) June 22, 2019
It's the institutions, idiots!
In 2017, the rally was largely explained by individuals who invested heavily in startups, also called Initial Coin Offerings (ICOs). This hype will almost disappear in 2019 (although hundreds of millions are still being collected via ICOs, IEOs and IDOs, ed.)
But the institutions themselves may also suffer from FOMO. If this fund invests the new "hot" asset, another fund does not want to be left behind.
Parties such as CME, Bakkt, Fidelity and TDAmeritrade compete with each other and with cryptographic companies like Coinbase, Circle and Kraken to attract institutional money. They have created regulated platforms to negotiate more securely on these "exotic" assets and take care of their administration and insurance.
Google Trends shows that by 2019, the public will largely let you down and that are the professional parts that (mostly) run the current rally.
This means that FOMO has not even started among retail customers, so we can safely complete.
The CME futures platform in Chicago is very busy. On June 17, there were 5,311 futures forward contracts with a total value of 26,555 bitcoins (BTC). Approximately $ 250 million.
CME Bitcoin Futures (BTC) shows growing signs of institutional interest. BTC's open interest increased in a record 643 contracts in a single day, setting a new all-time high or 5,311 contracts on June 17 (26.5555 bitcoin equivalent, ~ $ 250M notional value). https://t.co/I6A3jD6Iq3 pic.twitter.com/ljz6EbvK79
– CMEGroup (@CMEGroup) June 18, 2019
An investor such as Grayscale has also introduced a premium on the price of bitcoin and the exchange of derivatives. BitMEX also registers a new volume record (on a Saturday).
Congratulations to bitcoin merchants.
We just put in the day of the highest volume @BitMEXdotcomStory
– Joe McCann (@joemccann) June 23, 2019
2. The underlying bitcoin values look better than in 2017
The hasco rate of the bitcoin network registered a new record high of 65,000,000 TH / s last Friday. That means the bitcoins network has become even more secure.
All the underlying values show that bitcoin is being used more and more: as a means of exchange on a stock exchange, but also as a means of payment or accumulation. In contrast to the end of 2017, transaction rates remain within limits.
This can be explained by the optimization with SegWit and an off-chain solution, such as the Lightning Network, which gains strength in the bitcoin developer community.
3. Miner's Rewards Half Bitcoin
It appears that the reduction of bitcoins will occur somewhere in May 2020. As soon as a miner "finds" a block, it gets 6.25 BTC instead of the current 12.5 BTC. This reduces the number of BTCs coming on the market. Mining pools (in part) sell their shares to resellers.
The past teaches that such a mathematical event leads to a price effect. In the previous half, in the summer of 2016, the price of bitcoin rose from the summer of 2015 to half.
But here too history is no guarantee for the future.
The analyst PlanB often bases its analysis on the next event.
Yes, this tweet was January 9, 2 months before the stock flow was published. I really think the markets are in front of the half. The front running would be in line with the Efficient Market Hypothesis: if you believe S2F and BTC will be $ 50k in May 2020, why wait? Https: //t.co/Uaow6ClmXd
– Plan₿ (@ 100 trillionUSD) June 22, 2019
4. The large economic picture
Bitcoin once emerged as a challenger to financial power but can not escape the global economy. What is special is that a growing number of investors are maintaining their bitcoin ("hodl" in jargon) and by definition, it is not selling, whatever the price.
This makes bitcoin the definitive bottling agent, a function that precious metals usually meet as soon as the engine of the global economy fails. Bitcoin is a haven in hyperinflationary countries.
In the year 2019, the economy is also struggling again after a few years of prosperity. Mario Draghi, president of the European Central Bank, wants to re-press the interest button and lower interest rates. The US Federal Reserve is getting off the interest rate button for now.
According to Anthony "Pomp" Pompliano, a partner in the Morgan Creek investment fund, is good news for bitcoin. Bitcoin is becoming scarcer and "normal" currencies are more subject to inflation once they are printed again.
European Central Bank President Mario Draghi only hinted at new cuts in interest rates and more EQ.
Add the bitcoin from May 2020 and you'll have the perfect storm.
Make BTC more scarce.
Bitcoin long, short the bankers!
– Pump ? (@Pompliano) June 18, 2019
In summary, what factors play a role in this price increase and what makes the price likely to exceed $ 20,000 over the next few years?
- the "unique" parabolic cycles of growth
- plus interest and FOMO between hedge and pension funds
- strengthening the underlying values of bitcon and its blockchain network
- inflation under existing scarcity of central currency and bitcoin
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Journalist, founder / editor-in-chief of Bitcoin Magazine Benelux. His 2 minutes of fame: his interview KinkFM ("Dutch radio") with Amy Winehouse, recorded in the Oscar-winning documentary "Amy."