The price of Bitcoin has jumped 200% since the beginning of 2019, and the latest increase has once again vindicated those who believe in its long-term future. There are both technical and fundamental reasons why price has appreciated so quickly in recent months. Let’s take a look at why Bitcoin is in such demand right now and if the upward trend can continue.
Supply Will Be Halved In 2020
Every four years, the supply of new Bitcoins into the market is halved. Currently, those who are the first to validate a new transaction are given 12.5 coins. However, in 2020, that will be cut in half to 6.25, and this is done in an effort to limit inflation.
As there will be fewer coins available for purchase, the value of each coin should increase. It is also important to note that as fewer coins are dispersed, there will be fewer people mining those coins. Therefore, it may lead to an increase of buyers, which could work to push the price of Bitcoin higher over time.
Bitcoin Could Be the New Gold
Bitcoin is sometimes referred to as digital gold because of its scarcity. Therefore, it can act as a hedge during situations such as the U.S-China trade war that cause high levels of economic uncertainty. Many say that the price of Bitcoin has risen recently because people are shifting their portfolios away from stocks, bonds and other traditional asset classes.
Facebook Could Pushing Prices Higher
It is possible that Facebook’s Libra project could be encouraging investors to put more of their money into Bitcoin. The fact that Facebook is thinking about creating its own currency lends some legitimacy to cryptocurrency as well as the technology used to create it. If there is less skepticism about the future of Bitcoin and similar currencies, it stands to reason that investors would be more interested in buying it.
There Were Technical Reasons to Believe the Worst Was Over
Technically speaking, Bitcoin has reached a key level of support in the first quarter of 2019. At that time, its moving average over the past 50 weeks had crossed below its moving average for the past 100 weeks. Generally speaking, that means that the move to the downside had been almost completed. While there is no way to call tops or bottoms in any market, it was more likely than not that the price of Bitcoin was going to increase as opposed to moving further to the downside.
Will the Trend Continue?
It is impossible to predict whether Bitcoin will be able to match its high of $19,000 a coin reached in 2017. While some investors are committed to holding onto their coins for the long-term, others may not like the price volatility that comes with it. Furthermore, there are issues with transparency and what happens to coins that are held in wallets or in exchanges that stop functioning properly. Those could keep Bitcoin from breaking out above its all-time highs in the near future.
Bitcoin has typically been one of the most controversial assets that a person can buy or sell. While some see it as the tool people will use to conduct business in the future, others see buying Bitcoin as little more than gambling. However, there is no denying that there is legitimate demand for the coin and that it will likely stick around for the long-term.