Bitcoin at a fork of its road: Would cryptocurrency bubble burst?

Author : Iryna Shostak

Source : 112 Ukraine

On the night of November 25, trading in the global cryptocurrency market provoked an almost record jump in bitcoin - the rate reached $ 19.400
23:29, 3 December 2020

On the night of November 25, trading in the global cryptocurrency market provoked an almost record jump in bitcoin - the rate reached $ 19.400. A little more and the "cue ball" will be able to break its record in December 2017, when its price exceeded 20 thousand dollars. However, expert forecasts regarding the future of BTC are ambiguous.

The last months of autumn were decisive for Bitcoin: they inscribed 2020 as one of the most dynamic years in its long history. So, back in mid-October, the most famous and popular currency in the world exceeded $ 13.100. And a few days ago, bitcoin made a sharp leap, rapidly surpassing the mark of 19 thousand dollars (in two weeks the cost of Bitcoin increased by 25%, and in a year - by all 160%). The network jokes that only Tesla shares are probably growing faster (capitalization of Elon Musk's company approached $ 500 billion).

At the time of this writing, Bitcoin is holding at around $ 17,000.

Why BTC value fluctuates

The cryptocurrency market is characterized by extremely high volatility - rate fluctuations. So, bitcoin, which has swung to its maximum mark, can soon easily get into the "cryptocurrency winter", as it happened 2 years ago. Then the cost of the "cue ball" from the historical 20.1 thousand dollars in December 2017 fell to 3 thousand 208 dollars in December 2018.

Such "swings" are absolutely familiar to most market participants, but since in 2020, a protracted global financial crisis was added to the volatility of the crypto exchange rate, rumors circulated on the network that the digital currency was again awaiting a freeze, which would eventually bring the history of bitcoin a period of calm. But things didn’t happen as expected.

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Starting from a stable golden mean between the "swing" of previous years (the digital coin reached the $ 10,000 mark), a month later bitcoin fell below $ 5,000 - it was then that there was talk of a new round in its history - about the "cryptocurrency winter." But while the markets were recovering, the "cue ball" slowly began to grow, again being in the range of 9,000-9,500 dollars from the end of June to the end of July. And already in August, for the first time since 2019, a digital coin crossed $ 12,000. September passed without much volatility - the BTC rate kept around $ 10-11,000.

The first thing that comes to mind is that this time the rise in the bitcoin rate was provoked by the halving that took place six months ago, that is, a decrease in the reward for mining a block. Historically, halving has really pushed cryptocurrency growth, but this time the underlying reasons were different, says Coin Metrics co-founder Nick Carter.

A pandemic, instability of the global economy, elections in the United States, the influence of large market players, relations between the United States and China, the third wave of the coronavirus, PayPal's decision to launch a Bitcoin transaction on its platform - these and several dozen other factors, according to various experts, led to a similar leap in digital coins. Let's analyze the most probable ones.

The founder of the cryptocurrency exchange, Mikhail Chobonyan calls the instability of the global economy the first probable reason for such a jump – in 2020 all countries of the world, except China, might show negative growth. And since BTC has established itself among certain segments of the population (IT specialists, financially savvy people) as a kind of digital gold, investing in a crypt is a good alternative to hedge the risks

“We saw the first signs when in the United States in the spring they began to issue money simply because they started having problems with the economy. We saw that a large amount of these issued funds, about $ 2,000 per person, went into cryptocurrencies. Additional demand and generates a rise in prices," the expert adds.

The influence of a large player as one of the reasons for the jump in the bitcoin rate is also called by the managing partner of the investment company HUG'S Eric Nyman. In his interpretation, the trend is set by China: since the Chinese economy is recovering quite well, there is money there, and part of this money goes to buy bitcoin.

Related: Ukraine’s Energy Ministry suggests using excess nuclear power for cryptocurrency mining

The expert also underlines the influence on this process, relatively speaking, of the "gray" financial system – the more rigidly you work in the legal financial system, the higher the demand for bitcoin.

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Vladyslav Andryushchenko, CEO of the Alter law firm, reflects on a similar plane, noting that the purchase in China could be associated with trends: the cue ball could be bought in connection with some events, which caused the growth.

"There is also a tendency that China has enough cryptocurrency players that sometimes affect the price of bitcoin – they can buy or sell it (they understand that it will fall or rise and that they can win even more money)," Andryushchenko explains.

Which of the countries really managed to turn the course of the history of the development of the course of the most popular digital coin in 2020 is not known exactly. But one way or another, many experts agree on one thing: the growth of the rate was really significantly influenced by the announcement of the largest debit electronic payment system PayPal about the use of cryptocurrency.

On October 21, 2020, PayPal has the ability to buy and sell crypto. It was then that in just a day, bitcoin rose by 4.19%. At that time, it was the peak cost for the entire incomplete 2020 - almost $ 13,200 dollars.

"This is exactly the event that led to the huge growth of bitcoin, because trust is growing in it, and trust is based on cooperation with such large companies as PayPal," says lawyer Vladyslav Andryushchenko.

BTC price in the near future

Since the cryptocurrency market, and any other investment market, is unstable, experts do not undertake to declare that the current trend will become a kind of regularity for Bitcoin. However, we managed to find out some predictions.

Related: People's Bank of China to release its own cryptocurrency soon

"PayPal provides relatively very good support and demand for crypto. Looking ahead, I will say that the fact that PayPal (a law-abiding company subject to the American regulator) included it in the payment system suggests that bitcoin has survived. Most likely, it will continue to rise in price. However, this path will clearly be undulating," says Eric Nyman.

Most experts are sure that a slight decrease in the price is worth expecting (the interview took place at a time when the cost of bitcoin was holding at $ 19,000). After its decline, there are two options for the outcome.

In the first, the exchange rate is expected to stabilize with a further recovery of the upward trend. In particular, the analyst of the Amsterdam stock exchange Michael van de Poppe believes that as long as bitcoin is in the range of 15.8-16.3 thousand dollars, one can count on the resumption of growth. But if bitcoin begins to sink more significantly, in the future, even more significant drop in the rate is likely to occur - to 13,800-14,200 dollars. In fact, the cue ball is at a fork.

As for the second option, analysts agree that after a slight correction of the exchange rate, an increase of 2,000-3,000 dollars is possible, and maybe much more. In the near future, a jump in the rate of the cryptocurrency is possible, and in the future, Bitcoin may expect a fall.

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One way or another, experts advise not to forget to hedge risks, since no one knows how the market will actually behave. In general, they agree that, no matter how the crypt behaves now, in the long term, bitcoin will only rise in price. In part, this will be facilitated by the upcoming legalization of cryptocurrencies, which is actively discussed in expert circles.

Is it worth investing in BTC?

Since there is no clear understanding of what awaits cryptocurrency, experts urge to be very careful with investments.

“Before investing in cryptocurrency, carrying money for a deposit to banks or buying apartments, you need to do a lot of homework,” emphasizes Mykhailo Chobonyan, founder of the cryptocurrency exchange.

Chobonyan advises diversifying investments without focusing on BTC alone. In general, bitcoin is a good hedging option, since it does not depend on any country today.

Related: Ukraine's Parliament to introduce taxes on some operations with crypto-currency

"Bitcoin will not burst, although it may fall. Now there is talk that the European Bank or the European Financial Institute want to legalize the concept of cryptocurrencies, the market, and the turnover of cryptocurrencies. This policy may affect the rise or fall, or as a result of its implementation, Bitcoin will finally gain a foothold," says Vladyslav Andryushchenko, CEO of the law firm Alter.

Eric Nyman, the managing partner of the investment company HUG'S, shares the opinion that bitcoin is not in danger of sudden oblivion.

“In response to any crisis and any coronavirus, central banks continue to print money. In the next few years, they will still print trillions of dollars and euros, and even if a small part of them goes into Bitcoin, this will support its growth,” the expert notes.

Chobonyan suggests that next year, probably, we will see the emergence of national cryptocurrencies - the Chinese (People's Bank of China), the "first swallows" of the American digital dollar, or prototypes of the digital euro. Also, most likely, there are also a number of European countries that are not members of the European Union (for example, Sweden). In his opinion, control over the turnover and purchase and sale of cryptocurrency will be tightened. In general, states will fight decentralized cryptocurrencies.

“I think that this war will begin at the end of next year, unless, of course, there is a “black swan” in the form of the third wave of a pandemic, quarantine or the collapse of a large state. So, if global cataclysms do not happen, then we should expect this war and attempts by the state to control everything and everyone,” said the founder of the cryptocurrency exchange.

Related: Ukrainian anonymous cryptocurrency Karbo enters TOP-10 of world, - mass media


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