Return Of The Bitcoin Bulls
A Summary Of The Potential Causes
The rising Bitcoin pandemic that caused worldwide hysteria in 2017 was followed by a sour year-long bear market that saw 80%+ drops across the entire market. Having crashed from $19,500 down to just $3,200, the non-believers deemed this the death of Bitcoin.
Despite this, 2019 has seen a drastic change in sentiment, and Bitcoin has re-emerged as one of the best-performing assets of the year — climbing 100%+ in just a few months.
What has caused the sudden rise? Here is a brief summary of all the possible reasons behind the rapid growth.
Technical Indicators
Many don’t believe that technical analysis works with crypto markets as the uncharted and unregulated terrain makes it challenging to compare with traditional patterns. However, a range of long-term technical indicators foreshadowed a market bottom and approaching bull run.
In late February, Bitcoin’s 50-week moving average dropped below the 100-week moving average to confirm a bearish crossover — an event that last occurred in April 2015. In March, the money flow index (MFI) bottomed and begun rising, an indicator of increased buying pressure; and on top of this, the moving average convergence divergence (MACD) turned bullish.
After the highly volatile market remained dormant around the $3–4k mark for so long, a breakout was inevitable.
Mining Rewards Halvening
There will only ever be 21 million Bitcoin in existence and 85% of these are already in circulation. Every time a miner adds a new block to the blockchain, they are rewarded in Bitcoin for the computational workload — this reward is Satoshi’s way of distributing new coins into the economy.
In order to keep inflation in check, the block reward is cut in half roughly every four years (210k blocks) in an event known as the “halvening”. Miners are currently rewarded with 12.5 BTC per block mined, but in almost exactly one year (May 2020), this will drop to just 6.25 BTC per block.
Historical data has indicated that this is cause for a rise in value, and the bullish trend appears to emerge roughly a year prior to the event (aka. now). The reason being the significant increase in scarcity. At the moment, miners could sell roughly 54,000 BTC a month, and this greatly suppresses the price; in one year’s time they will only be able to sell 27,000 BTC a month, and this dramatic reduction in supply causes increased demand.
Trade Wars
In 2018, Donald Trump imposed three rounds of tariffs on more than $250Bn worth of Chinese goods. Beijing retaliated with tariffs on $110Bn worth of U.S. goods, accusing the U.S. of starting “the largest trade war in economic history”.
After trade talks in Washington held in May 2019 failed to resolve matters, the trade war rapidly escalated. Trump and Xi have both raised tariffs up to 25%, and Trump threatens to add further tariffs on another $300Bn worth of Chinese imports.
In light of the news, stocks have plummeted, and the Yuan has fallen 2% against the dollar. Some fear President Xi Jinping will devalue the currency as a weaker currency relative to the U.S. can help encourage exports despite the tariffs.
Chinese investors have been diversifying their portfolio in order to combat the uncertainty, and the non-sovereign asset, Bitcoin, has been an appealing option.
Tether
Stablecoins often act as a safe-haven for crypto enthusiasts when the volatile market takes a downturn. The most widely recognized stablecoin and top 10 coin, USDT, has been under great scrutiny this year.
Tether has long claimed to have $1 in reserve for every unit of stablecoin issued, however, on March 14th the company changed the backing claims to include loans to affiliated companies. Bitfinex, one of the largest cryptocurrency exchanges, has been accused of using Tether’s funds to cover-up $850M in funds tied up elsewhere.
In April, Tether Limited’s lawyer claimed that each Tether was backed by just $0.74 in cash and cash equivalents — something many has likened to the fractional reserve banking system that cryptocurrencies were originally intended to avoid.
The news surrounding Tether’s insufficient backing, and the realization that customer assets on exchanges were likely insufficiently backed also, caused a mass sell-off. This money appeared to outflow into the most reputable cryptocurrency in the industry, Bitcoin, causing a rise in value.
Institutional Money
Crypto enthusiasts have long been waiting for large-scale institutions to enter the market and it appears this may be happening.
- The Samsung S10 arrived and includes a ‘Samsung Blockchain Wallet’ that supports Ethereum and all Ethereum-derived tokens.
- It was revealed that Facebook Inc. is working on a stablecoin that will let users transfer money on its WhatsApp messaging App.
- The American multinational investment bank, JP Morgan, revealed the development of US bank-backed cryptocurrency (JPM Coin).
- Microsoft announced they are looking to build a decentralized identity (DID) network on top of the Bitcoin Blockchain.
- Twitter CEO, Jack Dorsey, has been preaching his support for the new digital currency and his finance company, Square, has reported record Bitcoin sales worth $65.5M in Q1.
- The cryptocurrency exchange, Bakkt, built by the owner of the New York Stock Exchange (ICE), announced plans to begin testing for Bitcoin futures trading.
- Flexa launched its mobile app, SPEDN, and achieved far-reaching press coverage. Their app allows users to spend Bitcoin at a list of retailers including Starbucks and Wholefoods.
There is a wide range of reasons as to why Bitcoin has risen back to life (including a great deal of FOMO), and many are wondering whether the bullish trend will continue or meet a sharp correction.
Plutus — Building Throughout
Whilst many remain fixated on the value of their favourite cryptocurrencies, Plutus has been building a breakthrough app for crypto enthusiasts.
Plutus is an incredibly secure crypto finance app — it possesses many of the same functionalities as mobile banking, but also incorporates cryptocurrencies in an easy-to-use manner.
The app allows you to…
• Access and manage your fiat
• Access your crypto from the same interface
• Freely and securely exchange between the two asset types
• Top up your Plutus Debit Card (with fiat or converted crypto) and spend anywhere
• Earn blockchain-based tokens in the process
The ability to manage both fiat and crypto from a single app is long overdue, and the user interface is highly intuitive so technical newbies can quickly accustom themselves with cryptocurrency technology.
The built-in decentralized exchange (PlutusDEX) is also incredibly user-friendly and offers impeccable security. Users can top-up their Plutus Debit Card with money converted from cryptocurrency via the PlutusDEX and spend anywhere in the world — providing a real-life use-case for the digital assets.
You can find out more on the website here.
