Crypto Daily: 5 Reasons Why Bitcoin Will Not Grow Anytime Soon
The cryptocurrency market has changed quite a lot in the past four years. Projets like Ethereum, Maker, Basic Attention Token, and many others have become valuable cryptocurrencies. The bubble of ICOs and IEOs burst, purging the market from projects without a clear value proposition. As for Bitcoin, well, it reached a historic peak of $20,000 and embarked itself on a bearish trend from which we still haven’t recovered.
Market players are expecting that the Bitcoin Halving 2020 will unleash a new bull run, like those observed in 2012 and 2016. And while that might happen, it will not happen overnight. Wondering why? Good question… Here are five reasons why Bitcoin will not grow in the nearest future:
1. Widely Anticipated Halving
Since the beginning of 2020, all eyes focused on the Bitcoin Halving. For five months, speculation built up until May 12. Logically, a reduction in the block reward should have greatly increased the price of BTC, at least to last year’s peak. But that wasn’t the case. The community understood that Bitcoin’s previous performance indicated an immediate drop following the halving, and decided to close long positions ahead of it. Profit-taking intensified on May 10–11.
2. Financial Markets March Drop
This isn’t exactly a great year for financial markets. First, the trade war between Washington and Beijing. Then, Russia’s unexpected exit from OPEC. And topping off the cake: the coronavirus outbreak.
The trade war pressured US companies that rely on Chinese manufacturing. The damaged relation between these two commercial superpowers also impacted international trade.
On the commodities side, unable to reach an agreement with other OPEC partners, Russia pulled out from the organization and initiated a price war with the Saudi counterpart. The ultimate goal of Russia is to fight the American shale oil producers.
By the end of April, the price for West Texas Intermediate (WTI) crude declined to an unimaginable — $37.63 a barrel, marking a historic record. The fall was triggered by concerns over demand amid the COVID crisis.
In the light of these events, many companies in traditional and manufacturing sectors missed revenue targets, and the value of global markets sank by 40%.
So, how this all played out for Bitcoin? In only one day, the price of Satoshi’s cryptocurrency plunged by 60%, falling from $ 9,000 to $ 3,800. Behind that price action were massive cash outs needed to prevent the liquidation of positions in the stock market.
That drop allowed whales to re-enter the market at very competitive levels and securing 100% returns even before the halving. Without the drop, Bitcoin could be trading above $10,000 these days.
3. Economic Recession
Millions have already lost their jobs in 2020 as a result of the COVID-19 outbreak. And the count is only expected to grow in the months to come. With so many people under financial pressure, cryptocurrency investments are likely to reduce. No income, no investments. Plus, the recession could push investors to cash out their assets.
Countries suffering from hyperinflation could still benefit from Bitcoin as a way to preserve the value of their savings.
4. Telegram’s TON Disappointment
Telegram CEO Pavel Durov announced on May 12 that the Telegram Open Network (TON) project is off the table. The announcement is a result of failed negotiations with the U.S. Securities and Exchange Commission, which banned Durov to issue Gram tokens back in 2019.
“I am writing this post to officially announce that Telegram’s active involvement with TON is over. You may see — or may have already seen — sites using my name or the Telegram brand or the ‘TON’ abbreviation to promote their projects. Don’t trust them with your money or data,” Durov wrote on his official Telegram channel.
The project, which had already raised $1.7 billion, was expected to promote the mass adoption of cryptocurrencies by allowing the Gram token to move across the 400-million-user Telegram messenger.
5. Ethereum’s Delayed Update
Another shock for the community was the delay of Ethereum’s transition to the Proof-of-Stake algorithm. Initially, the update was scheduled for July 2020.
Vitalik Buterin said on Twitter that the event should be expected closer to the end of 2020. ETH took a hit after the announcement, which could lead to further losses in the near future.
In a nutshell
Regardless of how much we want Bitcoin to grow, it will not happen overnight. At the moment, there are plenty of negative fundamental events connected to the cryptocurrency market. As outlined in our previous reports, our analysis points to a BTC price decline.
Disclaimer: You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Cryptocurrencies are risky and may not be suitable for all investors. Ensure you understand the risks involved as you may lose all your invested capital. The past performance of cryptocurrencies is not a reliable indicator of future results.
