Before this period of Bitcoin price surge, there had been a year of a significant market pullback. Bitcoin seemed to be crashing before something caused it to take a rebound. This article will explain some of the reasons why Bitcoin has climbed slowly from below $4000 to trade over $8000 in less than three months.
There is something called the law of cause and effect or the Aristotelian principle of causality. This law states that for something to happen, there must be a cause. Nothing happens by accident. This principle applies in almost all aspect of life including the world of investment. Based on this law, we can say that the recent price surge of Bitcoin can be linked to the dominant interplay of one or more of the determinants of the Bitcoin price.
The truth is that the recent positive run of bitcoin does not have a specific catalyst. Regardless of these unclear reasons for the market bull run, experts in the cryptocurrency industry are certain on the fact that the bitcoin mining reward halving which is scheduled to take place in 2020 is the sole possible reason why the price is coming to life.
Bitcoin reward halving is an occasional action that occurs after every 210,000 blocks are mined. Looking at the history of Bitcoin mining reward halving, there is a period of insane price surge that follows this event. A typical example is the famous rise of Bitcoin to record its previous all-time high of $1000 after the 2012 halving.
Another Bitcoin halving happened in 2016 which led to another market boom in 2017 where Bitcoin recorded an all-time high price of $20k. The possibility of another bull run after the event has attracted many investors into the market with big whales taking their roles.
The next halving will definitely send the Bitcoin price high and this is why.
Bitcoin mining reward being slashed to halve (6.25) of its current value (12.5) with an unchanging mining power will be a big disadvantage to miners. This will leave miners with the option of increasing the transaction fee. However, this action can also push the demand of the cryptocurrency to the alternate ones. In this case, miners who use power above the average cost will leave the market for those with cheaper or free power.
In economics, less reward is usually followed by lower inflation, and lower inflation may cause the value of the cryptocurrency to spike. This analysis has made a number of experts to predict a price spike in 2020 making enthusiasts to buy or hold their digital asset. It is also important to understand that the halving pump tradition usually starts a year before the time, and this could be a period of the continuous price surge.
Three Lessons to Note in the recent price surge.
1. Not all Bitcoin price surge has a spreading effect on the altcoins.
2. The price of Bitcoin is due to the interplay of multiple factors. Government regulations are still not favorable to bitcoin. However, the halving event can single-handedly drag Bitcoin price slowly to the top.
3. Bitcoin should never be ruled out. Following the long market pullback, Bitcoin was said to have failed as others even presumed it was on the way to crash. However, it took a rebound as it has been doing over and over in its price history.