Posted by Fred Lake

Bitcoin Surges: Coming With Hope and Fears for Investors

Bitcoin Surges: Coming With Hope and Fears for Investors

A couple of days ago, there was an 18.57% leap in the price of bitcoin to an all-time high figure of $9,388.30. This is good news and hopes to people, amidst the tragedy of COVID-19  on the economy. This triggered an entire market capitalization increase to $35.3 billion, the highest since the 7th of March. 

Cryptocurrency also took a hit following the pandemic, which baffled a lot of investors who relied on it as an escape from economic trouble. 

In the third month, more than $26 billion disappeared from the crypto market in less than a day. Bitcoin also lost 10% leading to a 30% fall in international oil benchmark. This fall in prices of crypto in March disappointed many investors who relied on it. Other market players, however, saw things differently. Even though the market indicators were not favorable, they saw an opportunity for more purchases. 

This can be traced to one of the characteristics of digital currency – the volatility. This, however, is an opportunity for many long term investors. 

According to Jehan Chu, a veteran investor in blockchain startups and co-founder of kenetic Capital:

“For those who have long term investment horizons, bitcoin is absolutely a buy during these dips. We can expect more of this volatility sparked by macro health and financial shocks, but ultimately long term investments in the digital future and its key asset bitcoin will be a winning strategy,” he said.

Factors Responsible for the Rise 

The rise in the price of bitcoin came as a shock, and many people felt the cause could be traced to bitcoin halving and central bank monetary policy. The entire world is battling with the COVID-19 pandemic. In a bid to cushion the effect, almost every central bank over the world came up with a stimulus package. This is in an effort to reduce the impact of the shock from the virus and offer stability to the economy. 

There is also the fear of massive layoffs in many firms. This has triggered various forms of intervention funds in a bid to counter this. All these factors can be said to be responsible for the sudden rise in digital currencies. 

Vijay Ayyar, head of business development at crypto exchange Luno said

"My sense is that overall markets are not reflecting the reality on the ground though, but this is also the result of Fed in the U.S. being extremely clear that they will do anything to make sure there is economic stability. We could be seeing a lot of money flowing into equities and crypto as well, as a result of the new money printing," 

One of the factors that also contributed to the recent rise in bitcoin halving. This is a process in which the rewards that go to Bitcoin miners are divided into two. The current bitcoin miner’s reward stands at 12.5. This is slashed into two every year in a bid to reduce inflation and introduce some stability in the market performance. There is another halve taking place in May. This will place the value at 6.25, which will bring down the current inflation rate from 3.76% to 1.8%.

This halving on the way is one of the factors responsible for the surge in the price of bitcoin. Cofounder of slack – Matthew Dibb revealed that 

“While part of this rebound may be explained by a renewed ‘risk-on’ attitude of global investors, it is also clear that bulls have been triggered by the upcoming halving event and the anticipated appreciation in value in the wake of it. For those buying into bitcoin now, many see this as an opportunity to buy BTC at bargain-basement rates before a price pop post halving," 

It is evident that the price of bitcoin one way or the other is also a factor of the entire world’s economy. In other words, bitcoin and other cryptos cannot operate independently. 

Josh Rager, a crypto analyst, has warned that bitcoin is linked to the stock market. As a result, if equity suffers a loss, bitcoin could also take a hit. 

Many investors are, however, concerned if there is a possibility of a further fall in the price of bitcoin in response to market trends. Many governments all over the world are exhausting their bailout funds. The oil market is nursing its wound due to the pandemic. Should this pandemic remain for a while, there will be nothing for businesses to fall back on. The gain on cryptocurrency will come down again.

Fred Lake
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