The price for a single Bitcoin is now floating around the $8k mark, with the recent trends seeing dramatic increases of around 55% in the last month alone. It looks like 2019 will be a good year of recovery for the coin and its alt brothers and sisters, with the price almost doubling since the troughs at the start of the year. Bullish predictions suggest that this is only the beginning.
Another Bull, Another Bear?
A search for Bitcoin in the online media can be quite revealing. The sentiments tend to reflect the current trends of the price. In a way then, this tells us nothing. In another way, the media riff-raff represents, and influences, the shifting mentality of the masses.
Let us not forget that, for better or worse, much of the Bitcoin Boom of late 2017 was the result of FOMO (fear of missing out), driven by an overwhelming and oft misguided optimism that was sure to result in a massive market correction. There was more to the story, but this is certainly one angle. A market driven by fickle forces is almost sure to see corrections.
After peaking at near $19k, the price drop began, and the bear run continued until recent months. Many alt coins saw a worse fate, their values dropping close to zero. So, as Bitcoin continues its journey, likely into its next Bull market, can we expect the same again?
It all depends who you speak to and, as we have all (hopefully) learned, nobody yet holds the key understanding of how this market will go, and nobody can know for sure. Yet there are certain events outside of sentiment alone that influence the market, and these become more relevant as the market matures.
The next Bitcoin halving is just under a year away. This event is programmed into the blockchain so that for every 210,000 blocks mined, the number of Bitcoins awarded per block is halved. Once this occurs, miners will receive 6.25 BTC rather than 12.5 BTC. Effectively, it becomes harder to mine a Bitcoin.
This should increase the price of Bitcoin, as it becomes more scarce and more valuable in terms of the effort and energy required to mine it. Halvings also tend to lead to hoardings, as both casual and serious investors anticipate the event. This creates a supply cut, and therefore a price increase and an increased FOMO.
Previous halvings have matched up very well with price trends. The first was in November 2012, and 12 months later the price reached an all-time high of $1,000. The second was in 2016, and by December 2017 the price had boomed dramatically to $19,000. If history is anything to go by, the third should jump exponentially higher.
Yet this doesn’t really tell us whether a similar Bear correction could occur. I can’t answer that question, but there are a couple of obvious differences in the condition of the cryptocurrency industry this time around.
Increased Adoption and Institutional Investment
The first is adoption. According to a recent HBUS survey, 20% of Americans asked had invested in cryptocurrency, and nearly three-quarters were aware of the technology and its potentials. The more users get on board, the more viable the currency becomes in terms of its applications.
On the other end is company and retail adoption, which provide the user with something to actually spend their Bitcoin on. Online retail and online gaming are two sectors with a high adoption rate. Online store Overlook.com was an early adopter, while cryptocurrency is regularly used as a token for trading in-game items and currency.
Casino and poker games have also arisen. Major companies such as PokerStars still offer solid banking options, including no fee for direct bank transfers, yet cryptocurrency payments could potentially offer the benefits of instant transactions.
In terms of retail, Bitcoin is gaining a lot of ground. Football club St Benfica have started allowing fans to purchase game tickets and merchandise with cryptocurrencies, while companies such as Cheap Air, tech giants Microsoft and Avnet, and more recently Starbucks have all started accepting crypto payments. Usually, these payments are instantly converted to USD, but it’s still a step forward for the end user.
The other factor to consider if Bitcoin hits another Bull run is that this will be the first boom in which large financial institutions and investment firms play a part. This should bring in much more investment capital, potentially generating price increase.
It will be an interesting few months, and an even more interesting year for Bitcoin in the run-up to its price halving. With more end users, retailers and investment firms involved, the market is arguably gaining more solid ground. Will we see a repeat of 2016, or will adoption create more stability this time around?