The increase of the mining community, the favorable regulations, and the disagreements in the use of fiat money give to cryptocurrencies the opportunity to raise their prices
By the end of 2018, Bitcoin experienced a strong drop that alerted some users, but it managed to recover from this decline during the first quarter of 2019. After falling to less than USD 6,000 last November, the price of the most popular cryptocurrency achieved this year USD 8,040 in Bitfinex, one of the largest digital exchange platforms based in Taiwan.
To date, cryptocurrency markets are traded laterally and most of the 20 principal assets by capitalization are listed at a loss, according to data from CoinMarketCap. But this scenario could change.
At the close of this edition, Bitcoin (BTC) quoted at USD 7,878, with a drop of 0.82% in the last 24 hours. Ether (ETH), the second cryptocurrency most marketed, fell 0.85% during the day and was quoted at USD 242.97. In the last seven days, this altcoin has fallen around 0.38%. Ripple (XRP), the third cryptocurrency in market capitalization, fell 1.44% in only one day, and 3.15% in the last seven days.
Due to these movements, it is inevitable to remember what some analysts said at the end of 2018. Some of them predicted that Bitcoin would be quoted at USD 36,000 by the end of 2019, whilst others believe that the trend will continue to fall.
The security company Kaspersky Lab considers that there is a direct relationship between the price of cryptocurrencies and the interest of users, who would be interested in investing or not in these assets after seeing their prices. The company ensures that, once the audience interested in cryptocurrencies reaches its limit, “the price will not go higher”.
Why is the Price of Bitcoin Increasing?
During 2018, Bitcoin and other cryptocurrency prices were expected to return to the levels they reached at the end of 2017 when BTC reached almost USD 20,000. However, some analysts explain that the fall in prices is normal and that the price of digital assets will recover this year to rise further in 2020.
In May 2018, analyst Thomas H. Lee, Head of Research at Fundstrat Global Advisors, predicted that Bitcoin would reach USD 36,000 by the end of 2019. His considerations are not made randomly. The expert is based on the probable growth of the mining infrastructure in the course of this year, a fact that, according to Coinshares, seems to materialize. As recently announced by this research company, 74% of mining activities are being conducted with renewable energies and this would lead to an increase in activity.
The “trade war” between the United States and China could also shoot up BTC prices, according to analyst Oliver Isaacs, who believes that cryptoactives will reach USD 25,000 by the end of 2019. “There are multiple factors behind the recent resurgence. There are geopolitical, technological and regulatory factors. The effect of the trade war between the United States and China has led to a sudden interest in Bitcoin as a way for investments”, he said.
In the But one of the most accurate opinions is the one of Mike Novogratz, Founder, and CEO of cryptocurrency merchant bank Galaxy Digital, who said that by the second quarter of 2019 there would be another Bitcoin rally that could break the USD 10,000 barrier.
For Novogratz, the increase would be driven by institutional investors, because the institutions would present FOMO (Fear of Missing Out or fear of being left out of technological advances).
Example of this is the Square payment company, which earlier this week began to allow certain customers to buy and sell Bitcoin. In addition, Nasdaq, the second largest stock exchange in the world, revealed its plans to launch an institutional-level crypto-price product.
Building a New “Floor”
The stability of the market (which presents falls, but also rises) could mean a new floor in the quotations of Bitcoin and the rest of the cryptocurrencies. Most analysts agree that cryptocurrencies and blockchain technology are already part of reality and their influence on finance is inevitable.
According to the Professor of Monetary and Financial Economics at the Complutense University of Madrid, Pedro Durá, the price would depend on the expectations on the use of this asset, the positive regulation in different countries, the behavior of traditional currencies, and the evolution of other cryptocurrencies.
The use of renewable energy to mine would be the surprise element that would encourage the growth of the mining community and, probably, the stability of prices worldwide. The result would depend on the combination of these factors.
The road continues changing. The next six months of the year would be decisive to know a little better how would be the behavior of these digital assets in 2020 and in the near future.
By María Rodríguez