According to Bloomberg analysts, the price of Bitcoin will increase this year as it has experienced the lowest relative volatility. The price appreciation is firming on a stand-alone basis compared to the broader crypto market.
Bitcoin appears to be converging over the $10,000 resistance, an indication of its relative appreciation compared to the market. If the surge in price continues, Bitcoin can pull the crypto market along, especially with the unparalleled central bank easing.
Can history repeat itself?
The analysts say Bitcoin is mirroring the 2016 return to its previous peak. Bitcoin’s second halving was witnessed in 2016 and the third year after a significant peak. 2020 is therefore the third year after the 2017 parabolic rally and the year of another halving. In 2014, there was a 60% decline in price but Bitcoin matched the high price of 2013 by the end of 2016. The prognostication claims that Bitcoin will approach the record high of about $20,000 this year, following the 2016 trend.
Some of the factors that can contribute to the appreciation of Bitcoin’s price are maturation, greater depth, and more exposure via futures. These factors will suppress the volatility of Bitcoin, ensuring that the price keeps increasing. Additionally, the trend can be affected by a roll-over of the stock market, pushing the price of BTC over the $10000 mark.
Bitcoin gaining upper hand
The pandemic effects are accelerating Bitcoin’s maturity by supporting a price appreciation for the crypto. This is due to the historic declines in equities and the world’s most significant commodities such as crude oil and stocks. The March swoon provided a base for higher prices for Bitcoin, as it was a key test that Bitcoin easily passed. The historical volatility readings of Bitcoin indicate that the crypto has experienced the lowest ever 260-day volatility measures. This is not the case for the stock market, which has been very volatile especially during these times.
In addition, Bitcoin is expected to continue appreciating compared to crude oil. According to the Bloomberg analysts, the 260-day volatility measure of Bitcoin is about 0.6× that of crude oil.
About three years ago when Bitcoin was at its peak, this volatility measure was about 3.5×. Bitcoin is also less hazardous compared to crude oil, hence it takes the upper hand and the likelihood of a price increase are in its favor.
The favorable trends in Bitcoin futures are also supportive of an increase in price. These futures are a representation of the maturation towards mainstream of assets. An increment of the futures open interest in Bitcoin can ensure a steady price premium, reducing volatility, and increasing demand.