While Bitcoin (BTC) started the year at a modest $3,800, it reached its highest level in 12 months at the end of June, just a bit above $13,850. After a 264% increase, prices lost ground, dropping to $9,075 in mid-July.
While some market participants believed that Bitcoin would eventually fall to $6,000, financial analyst Timothy Peterson declared that Bitcoin will never drop to $6,000 again (or that if it does, we should buy a lot of Bitcoins). At the time of writing, Bitcoin is hovering around the $10,000 level, at about $10,690 following a recent bullish move started on July 30th.
These price changes presented many great short-term trading opportunities for traders looking to take advantage of market volatility without owning the coins, such as via reliable and regulated CFD brokers like easyMarkets. As the BTC price has always followed a tumultuous path, many investors now wonder if prices could hit $20,000 again by the end of the year.
Now that the $10,000 barrier has been cleared, if Bitcoin bulls retain control, they will likely push prices towards the $13,000 and $15,000 levels, eventually pushing prices even higher than $20,000 to hit new highs. After all, what’s different from the last time Bitcoin reached this level in 2017 is the developments in the crypto-industry.
New actors in the crypto space
Now, many financial institutions and big international companies like Fidelity, JP Morgan and Facebook are entering the crypto-sphere with an increasing number of projects. These companies are offering services for investment in digital assets, creating news ways to accelerate large corporate payments, and launching a new stable coin via their own cryptocurrencies. Other big tech companies are starting to accept Bitcoins as a payment method, such as AT&T, Microsoft and Amazon via Purse.
“$20,000 is a conservative prediction for Bitcoin price in 2019, as I said last year. […] The rally won’t stop here, because more institutional investors are coming into the market and the 2020 halving effect starts to take place. We are thrilled to witness such bullish trend and I look forward to a new high the Bitcoin deserves” declared Andy Cheung - Head of operations at OKEx cryptocurrency exchange.
US-China trade tensions & Accommodative American monetary policy
Bitcoin is increasingly considered to be an investment option that is resistant to geopolitical risk, as well as a way to diversify investment portfolios, in a similar way to Gold. Despite its high volatility, Bitcoin has attracted many investors in recent months. Like Gold, Bitcoin has risen strongly since June, on the back of the lack of confidence in the current and future global economic outlook, with trade tensions between the United States and China, Brexit and fears of weaker than expected upcoming growth.
In response to the US economic slowdown, as well as uncertainties related to trade tensions with China and low inflation, the Fed decided last week to lower its interest rates for the first time since 2008. Fed Funds are now in the range of 2 to 2.25%. This rate cut is the first since the creation and launch of Bitcoin in 2009.
For some analysts, Fed interest rate changes are affecting the price of Bitcoin. A decrease in Fed Funds rates is therefore generally a good sign for the price of the first crypto-currency. When a central bank lowers its interest rates, it reduces the yield of its currency. Thus, such a situation weighs on the currency's international appeal and reduces its purchasing power. Since the return on investment made on this currency will be less attractive, investors may look to other currencies or investment vehicles such as Bitcoin, whose "monetary policy" is known in advance. Indeed, every 4 years the money supply is reduced by half (halving). As the Fed is expected to implement more quantitative easing measures in the future, the attractiveness of Bitcoin as a store of value could increase and support its price.
As the inflow of retail investors keeps growing, and as the early institutional investment services for cryptos is increasing (Bakkt, TD Ameritrade, Fidelity Investments), conditions may soon be ripe for Bitcoin to go beyond the $20,000 barrier and reach a new historic high.