The Fundamentals Behind 2019 Bitcoin Rally
By Lamium on Altcoin Academy
So far during 2019, bitcoin’s price has rocketed from Jan. $3000 level to Jun. $9000 level. As usual there’s not just one explanation to the rising asset price, instead, bull markets consist of multiple factors on the fundamental level. In this blog post, we explore some of the core factors behind bitcoin’s 2019 rally.
US-China Trade War
The “trade war” between the United States and China has escalated during the second quarter of 2019. The said trade war does not only involve basic goods between the nations but additionally technology. National (fiat) currencies are also involved in the flux.
US President Donald Trump announced a tariff increase on $200 billion of annual Chinese imports, from 10% to 25% on May 5th. In response, Beijing announced its own series of retaliatory tariffs on US goods.
Developing trade war will have an increasing effect on global macro-level trade. As the US and China combined represent more than $35 billion in annual GDP, tariffs and restrictions will radiate to virtually every economy on a global scale.
When exploring the chart above, we can see that global equities were already hit hard amid growing uncertainty. S&P 500 index fell -6,4%, while Nasdaq Composite dropped -8,7% during May 2019.
Halving
Bitcoin’s next halving is expected to take place on May 2020. Since bitcoins creation in 2009, there have been two halvings, the first halving occurred November 28th, 2012 and the second halving on July 9th, 2016.
Some 12 months after the first bitcoin halving event on November 2012, the bitcoin price reached what was then an all-time high of $1K. The 2016 halving contributed to 2017’s bull run which peaked in December 2017 with the price of one bitcoin reaching an astonishing $20K.
Growing Global Uncertainty
Monthly global economic uncertainty index has been spiking towards 2019. Unsustainable monetary politics, geopolitical risks, and environmental factors are escalating the uncertainty sentiment globally.
Institutional Investors
When checking wallet data between 8/2018 and 2019 (Diar), we can see clear growth among retail segment, bitcoin addresses holding between 0,01 100 BTC. 1–10K sized holdings have also seen dramatic growth. The trend is clear, retail investor sentiment is steadily growing, institutional investors are accumulating while the exchange holding is seeing a massive decline.
Grayscale Investments LLC reported that institutional investors continued to account for the majority of the company’s inflows, accounting for 73% of new investments. Additionally, the majority of these allocations were conducted by hedge funds.
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