Cryptocurrency experts are divided into two schools, one on the other's view that the increase in bitcoin this year is due to special factors, one side thinks this is just a fluctuation. But many people agree on one thing: the upcoming bitcoin halving event.
Bitcoin has risen in nearly half this year, to more than $ 10,000, for the first time since October 2019. On February 11, bitcoin hit its 5-month high.
The 11-year history of the digital currency has been flooded with waves of extreme increase and decrease by the same rate. In late 2017, the price of bitcoin increased 3.5 times in just 35 days to reach nearly $ 20,000. Then bitcoin dropped 70% in 7 weeks.
Because the unusual and inexplicable volatility is the main reason bitcoin has difficulty playing the role of a currency.
During this period, some market participants pointed to the presence of factors that had never occurred before. The mysterious technology factor, expectation of public acceptance and macroeconomic trends are causing the market to reconsider the real value of bitcoin.
"You can argue that new pricing is emerging," said Russ Mold, chief investment officer at AJ Bell, a $ 71 billion asset management brokerage firm.
For the most part in fundamental analysis, many pointed to the increasing demand for bitcoin before "halving" (a 50% reduction in block rewards in May). This event is one of the few events in the past that have a fundamental effect on prices.
After the previous two halving sessions, November 2012 and July 2016, bitcoin increased by about 80% and 400% respectively. The exact rate for the increase due to Halving's cause is still unknown.
"This is a rare factor observed when you look at previous events, in each case there is a relatively significant and noticeable increase in the value of bitcoin," according to Windsor Holden Payment consulting specializing in tracking cryptocurrency and blockchain.
See also: What is Bitcoin Halving? How will it affect Bitcoin? (2020)
Others, however, suspect that the recent price hike is more sustainable than previous booms.
"The recent bull run is driven by a bull cycle we see every two to three years," said Michel Rauchs, author of several Cambridge University studies on digital currencies and blockchain technology.
“We have these little bubbles and it spreads from bitcoin to other currencies. That prophecy has come true. ”
The coins tend to correlate with bitcoin also increased sharply this year. Ethereum more than doubled; Ripple's XRP has increased by over 75%.
Other factors were also pointed to the rise in bitcoin's price: demand for assets did not correlate with the main market after the US assassination of Iranian military leadership last month was also questioned.
The "safety" of bitcoin is not yet clear. Bitcoin has also been steadily declining in times of geopolitical tensions in recent years.
The loosening central bank policy is also the reason investors are betting on risky assets but this is also hard to prove. Bitcoin has also dropped in the past loosening of currencies.
Many also predict that cryptocurrencies will become popular, as countries' central banks are starting to study cryptocurrencies following Facebook's efforts to launch Libra. Some countries like China and their central banks are approaching the issue of their own currencies.
And recently on February 11, Fed Chairman Jerome Powell told lawmakers that the Fed is "working hard" on the issue, while they have yet to make a decision about the digital dollar.
"Central bank interest rates are also an issue that affects the rise of bitcoin," said Rauchs.
According to him, people tend to mix things up and equate these ideas when they are fundamentally different. However, in the short term, digital currency investors are Reuters The interview said that the amount of bitcoin supply will affect most investors.