The price of Bitcoin passed $11,000 on Monday, the highest it has reached in almost a year, and according to experts, there are more gains to come.
Reaching $11,203.90, a one-day rise of 12.73%, the Bitcoin price has now dropped slightly to $11,041.50 at the time of writing.
It follows the much anticipated Bitcoin halving event it May, where the amount generated from mining work was cut by half. However, the halving is unlikely to be the sole cause.
“Bitcoin has followed a similar cycle for many years, [and] many believe this is the start of the next multi-year bull market,” says Richard Simpson, chief business development officer at tap Global.
“The halving event in May reduced the daily new supply by half. A more short-term general rotation away from Alt coins and into BTC provided the fuel for the short-term spike.”
The paint has finally dried
For many experts, this surge has been long expected.
“The break-out has been long coming, after months of bumbling along in mid $9,000s, for Bitcoin investors, has been akin to watching paint dry,” explains Katharine Wooller, managing director, Dacxi, UK and Eire.
In particular, cryptocurrency has seen greater institutional support than ever before, which has undoubtedly helped the rising price.
“It has been a phenomenal year so far for crypto, building upwards pressure from unrelentingly good news; for example; Paypal’s announcement they will provide crypto services to their 325 million users, solid progress on Eth 2.0, and in the US the Office of the Comptroller of the Currency softening their position on crypto,” says Wooller.
However, despite the surging Bitcoin price, there is reason for caution.
“Bitcoin has been a beneficiary of increased adoption and more acceptance on the regulatory side, particularly out of the US. At the same time, while recent gains have been impressive, with Bitcoin pushing back above $10k, it’s important to recognise where we’re at technically and fundamentally,” says Joel Kruger, currency strategist at LMAX Group.
“Bitcoin is now overextended against the US Dollar, into a critical resistance zone ahead of its 2019 high. This comes at a time when the global outlook is increasingly uncertain and the prospect for another big downturn in stocks, much like was seen back in March, is very real. “
Is the Bitcoin price rise the start of a period of growth?
For some, the economic uncertainty is set to spark further growth in Bitcoin, as investors increasingly look to the cryptoasset as a safe haven from more exposed investments.
“Bitcoin is currently realising its reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe-haven asset, but Bitcoin – which shares its key characteristics of being a store of value and scarcity – could potentially knock gold from its long-held position in the future as the world becomes ever-more tech-driven,” says Nigel Green, CEO of deVere Group.
“Geopolitical issues, such as the US-China spat, will prompt many savvy investors to increase exposure to decentralised, non-sovereign, secure digital currencies, including Bitcoin, to shield them from the turbulence taking place in traditional markets.”
This is a view echoed by Dacxi’s Wooller, who also sees comparisons to the 2017 Bitcoin market, shortly before its all-time-high surge.
“As we get a real sense of just how bad the post-coronavirus economic reality looks, I expect to see retail and institutional investor alike jumping ship from traditional assets to reputable crypto,” she says.
“Certainly, recent announcements from the likes of JPMorgan and Standard Chartered suggest institutional interest in crypto is no passing fad.”
But while many see the economic situation potentially buoying Bitcoin, others believe it could pose a risk to the cryptocurrency’s price.
“Our view is that we still believe the markets are pulled on the one hand by the inflation hedge story driving Bitcoin higher while at the same time the global economy is suffering a massive demand shock with the potential to drive Bitcoin lower,” says Gavin Smith, CEO of Panxora.
However, the general sense is that there is a change in the wind, with a bull market rising to dominate over the coming months and – potentially – years.
“Short term, we could continue pushing higher quickly, or just as easily pull back to recent support, either scenario can be bullish. But really its anyone’s guess,” says tap Global’s Simpson.
“Medium term, many well-regarded models point to this being the start of a multi-year bull run, possibly concluding in around 18 months. Long term Bitcoin has and probably will continue to outperform every other asset class.”
The road to $20k: How high can Bitcoin go?
The surge has now led some to predict Bitcoin could climb as high at $20,000 by the end of the year, although not all agree with this sentiment.
Simpson, for example believes that while we “certainly could” see it hitting these giddy heights in 2020, “we could easily not”.
“I would probably guess at high’s this year below $20k, but with something much higher at some point next year,” he says.
This perception is echoed by Panxora’s Smith, who sees 2020 has still having “high volatility with a year-end of around $7,000, with a drive higher to new highs in 2021”.
“We also believe that the inflation story will drive the longer-term dynamic for Bitcoin, so wouldn’t short this market, even while we believe there will be a short-term washout this year before the true rally takes hold,” he adds.
However, while LMAX Group’s Kruger also sees volatility being present, he sees a higher 2020 peak than Smith.
“We don’t believe Bitcoin is ready just yet to be fully appreciated as a store of value asset, which means that in the short term, Bitcoin will still be exposed to periods of risk off in traditional markets,” he says.
“At the same time, we believe any setbacks will continue to be very well supported on dips, with medium and longer-term players happy to step in and build exposure in anticipation of Bitcoin realising its potential as a store of value asset.
“This could set the stage for another healthy pullback over the coming months, before Bitcoin is bid back up and looks to close out the year on a strong note with a push towards $20k.”
For Wooller – and many others – meanwhile, all metaphorical bets are off.
“Personally, I am cautiously optimistic. 2020 has been a wrecking ball to economic theory – we have no precedent for a global pandemic in modern times and are thus are in unchartered territory,” says Wooller.
“At a very basic level, Bitcoin has never been harder to extract, and the total addressable market is ever growing. Nothing is impossible in crypto – it adapts and advances at breakneck speed – the industry sometimes feels like has its own time zone; and a bit like converting “dog years”, that a month in crypto is a like a year in any other.
“I have a sneaking suspicion that 2020 will be year that Bitcoin, as a concept, is validated.”