What caused crypto’s latest surge, and could Bitcoin really reach $20,000 again this year?
The year has started well for Bitcoin.
As I type, Bitcoin’s just topped $8,000 for the first time in 10 months. But it’s not so much the current price that’s got people excited… it’s what that price represents.
For the first time in a long time, optimism is back in crypto. People are talking about a new bull run, new all-time highs and what they plan to spend their profits on.
A couple of months ago — hell, a couple of weeks ago — the idea of Bitcoin besting its all-time high of near $20,000 would have been unthinkable. Today… well, that’s probably the question that brought you here.
So in this article I’m going to look at why hope has returned to crypto, what it means for those of us involved in it, and what we can expect from Bitcoin in the next six to 12 months.
Hope has returned to Bitcoin
Christmas 2017 signalled the beginning of the end for Bitcoin’s biggest ever bull run. So it’s almost poetic that Christmas 2019 began its next.
This was when Bitcoin first bounced off its lows with any real trading volume.
On the 15 thof December Bitcoin hit its lowest level since August 2017. But unlike all the other lows Bitcoin had hit in the months before, this one was different. When it bounced off this low, it did so with force.
Over the next nine days it rallied over 30%, with trading volume rarely seen in the six months leading up to it.
The bottom was in. People just didn’t know it yet.
Over the next three months Bitcoin’s price bobbed around the $4,000 mark, while its trading volume steadily increased.
There was talk among the cryptosphere that this could be it. The bear market that had slayed so many might finally be over. But no one wanted to say it too loud just yet.
Confirmation, real confirmation, came right after April fool’s day, of all days.
On the 2 ndof April Bitcoin jumped around 15%, to $4,770, and did so with more than double the trading volume it had built up to since December.
“Alexa! Play Bulls on Parade”
It was the confirmation we needed. The Bear market was over. The reversal had happened.
But were we really back in bull market territory?
This was the key question for those still interested in crypto. The ones who’d stayed active in the space through the entire bear market…
The ones who’d “held strong” in the face of shame and ridicule…
The ones who truly believed this technology was destined to change the world…
And the ones who hoped against hope the decision to put their money where their mouths were would pay off in the end.
They got their answer less than one month later.
At the end of April Bitcoin began its first real breakout since the halcyon days of 2017. I am writing this piece on the 13th of May, the day Bitcoin broke $8,000 for the first time since last July.
But as I said at the beginning. It’s not that number that’s important, it’s what it means. And what it means is the bulls are back in town.
Craig Wright takes a second swing at crypto prices and knocks himself out for the count
The main reason we can say the bull market is back is not because of good news, but because of bad news.
There’s been a whole lot of bad news in crypto over the last month or so. And yet, despite that (or as I’ll soon show you maybe because of it) Bitcoin’s price has continued to climb.
In mid-April Craig Wright, a megalomaniacal billionaire with a chip on his shoulder, announced he was suing the crypto twitter personality Hodlonaut, and all-hell broke loose.
Wright has always maintained that he is, in fact, Satoshi Nakamoto — the creator of bitcoin. But he failed to provide any real evidence of that fact.
Hodlonaut used, and possibly created, the #CraigWrightIsAFraud hashtag on Twitter, and repeatedly called out Wright.
So Wright decided to suing Hodlonaut for defamation. But the problem was, he didn’t know who Hodlonaut really was. So he set up a bounty to dox them.
Doxing is basically the internet equivalent of a lynching. A person’s name, address, email address, phone number, place of work, social security number, etc. are hacked and posted online.
I’m fairly sure it’s illegal. But that didn’t stop Craig Wright.
It’s worth noting Wright didn’t only send these lawsuit letters to Hodlonaut. He sent them to many prominent crypto personalities, including the co-founder, lead developer and spiritual leader of Ethereum, Vitalik Buterin.
When all this became public the world of crypto was up in arms. And its major players decided to act.
CZ, the founder of Binance, announced his exchange — the largest in the world — would be delisting Wright’s coin, Bitcoin Cash SV. Shortly after this, Kraken — another major exchange — put it to a vote and asked its users if it should do the same. As you may expect, its users voted yes.
Bitcoin Cash SV (which stands for “Satoshi’s vision”, you know because Craig Wright is Satoshi) was exiled. And Wright was set to lose a whole lot of money.
It’s worth taking a second to explain why the crypto community tends to despise Craig Wright — aside from the suing and the constant proclamations (without providing real proof) that he is Satoshi Nakamoto.
Back in November, Bitcoin Cash (already a fork of Bitcoin) had another fork. It was Roger Ver’s “Bitcoin Cash ABC” vs Craig Wright’s “Bitcoin Cash SV”.
(I’m really sorry about these ridiculous names. Just bear with me.)
Each of these arrogant billionaires thought their idea for Bitcoin Cash (and Bitcoin in general) was the right one.
So the project forked and the two sides went to war. They bought up computer power and set it against each other. They spent millions buying, selling and dumping coins and tanked the entire crypto market.
This was back in November 2018. And it caused Bitcoin — the real bitcoin — to drop from $6,300, all the way to $3,200 over the next month or so, taking the entire crypto market down with it.
Which then brings us back to the 15 thof December, in a nice sort of circular narrative.
The fact that Craig Wright was on another rampage should have been bad news for Bitcoin prices. But it wasn’t. The price continued to rise. This was another clear sign the rally could be real.
Even the ugly truth about Tether (which everyone really knew anyway) couldn’t keep Bitcoin’s price down
After defeating Craig Wright, Bitcoin now had to face the final boss…
The one that had been waiting in the background all along, even throughout the 2017 bull run: Tether.
Tether was crypto’s first stablecoin. I will cover stablecoins in more detail in a coming article. But for now let’s just say that a stablecoin is a crypto that’s pegged to a “real” currency, usually the US dollar.
One Tether is worth $1. It represents $1 held in a vault somewhere by its creators, iFinex Inc.
At least, that’s what we’re supposed to believe. But no one really does. There have been no official audits, and iFinex is not regulated by any country you’re likely to trust.
Tether has been a hot topic in the cryptosphere for as long as I can remember. The general consensus is that it’s shady as hell. But people still use it, because it serves an important purpose.
It’s also credited with fuelling a lot of Bitcoin’s parabolic run to near $20,000 in late 2017.
The story goes that growth was only achieved because iFinex was printing Tether out of thin air, which was then used to buy Bitcoin.
Everyone used to joke… in that kind of way where you have to make it into a joke because the reality is too scary to comprehend… that when the truth came out about Tether, the entire world of crypto was done. Like really done. Razed to the ground kind of done.
So when news emerged on the 25 thof April that The New York Attorney General’s office was filing against Tether, the crypto community thought this was it. The end. And just after that glimmer of hope, too.
But after a brief drop in price, something strange happened. Bitcoin’s price went up. And it continued to go up. Up above where it had been before the news broke.
There are two ways to look at this development.
1. We are now in an undeniable bull run that even Tether revelations can’t bring down.
2. iFinex, which owns major exchange Bitfinex, and users who hold Tether are cashing out and buying Bitcoin with their Tether reserves before Tether implodes.
In truth it’s likely a combination of both. But the fact that even Tether’s tribulations aren’t tanking the market is a testament to how strong it is right now.
The world’s biggest Bitcoin exchange gets hacked and Bitcoin’s price… goes up
No sooner did heads stop reeling over Tether’s demise than news emerged that crypto’s biggest exchange, Binance, had been hacked.
Talk about not being able to catch a break.
In the second week of May, hackers made off with 7,000 Bitcoin from Binance, worth around $40 million at the time.
A hack on a major exchange, or in this case the major exchange, is usually very bad news for Bitcoin.
Afterall, we’re still dealing with the aftereffects of Mt Gox. And that happened way back in 2014 — an eternity in crypto.
So you’d expect prices to capitulate, right?
Well, the thing about crypto is, it never does what people think it’s going to. This hack barely touched prices.
The reason — or at least the reason many are attributing to it — is because Binance plans for events such as this. It puts 10% of its profits into a Secure Assert Fund for Users (SAFU).
As soon as the hack was announced CZ also announced that no users would be affected. All hacked funds were being reimbursed from the SAFU.
It also helps that only Binance’s hot wallets — the ones that provide liquidity for the exchange — were hacked and its assets in cold storage were unaffected.
Still. You’d expect news like this to at least put a big dent in Bitcoin’s price. But it didn’t. Perhaps positive sentiment is now so strong that events like this have no effect.
Or perhaps, there’s something more going on.
I guess we’ll find out in due time.
If Bitcoin breaks $20,000 within the next 12 months, this will be why
But it hasn’t all been bad news. There are some genuine reasons for Bitcoin’s latest breakout and the start of the next major bull run.
The most notable of these is “the halvening”.
Roughly every four years, Bitcoins block rewards halve. This means that the rate Bitcoin’s supply is expanding halves, too.
This is the way Satoshi Nakamoto designed it.
There will only ever be 21 million bitcoin in existence. More than 80% of this 21 million have already been mined. But the final 20% or so will take until around 2040.
Given the basic rules of supply and demand, we know that if demand stays constant while supply drops by half, prices should rise — significantly.
Well, the next halvening is almost exactly one year away. It will happen in May 2020. In the run up to this halvening, many are predicting Bitcoin prices will go parabolic.
The last halvening arguably caused Bitcoin’s price to go up by around 50%. Back then, Bitcoin barely made the news. Today, it’s in the headlines constantly. So this time round things could get really crazy.
And that new interest in Bitcoin brings me to the next major factor in Bitcoin’s new bull market.
For the first time ever, institutional investors can now buy Bitcoin legitimately
Last summer, institutional money was “going to save crypto”.
At least, that was the narrative.
ICE, which owns the New York Stock Exchange, and a number of other major exchanges around the world was due to open Bakkt, it’s foray into crypto.
Bakkt was to offer custody solutions and a trusted exchange that institutions could use, on the books.
It was also going to offer physically-backed Bitcoin futures (which I’ll get to in a minute) and pave the way for a Bitcoin ETF.
A lot of hope was placed in Bakkt, which was to open for trading in November 2018.
Then it was delayed. Then it was delayed again. And again. And then, people just sort of stopped paying attention.
You’d get the occasional news story about Bakkt poaching a high-ranking Coinbase employee, or headhunting a major player for another institution. But news on when it was actually going to launch — for real — was scarce.
Bakkt is still due to launch at some point this year. But whether it does or not is another story.
As all this was going on, a number of other institutions tossed their hats into the ring.
The most notable of these is Fidelity.
Fidelity is a major player. It manages $2.5 trillion in assets. And it will be launching its own crypto custody service “within weeks”, according to a Bloomberg article published on the 6 thof May.
This could be the start of the fabled “institutional” wealth entering crypto.
And for an undertaking of this size, Fidelity is going to have to secure an awful lot of Bitcoin. So this could also be one of the key reasons for Bitcoin’s sustained rally.
Then, finally, we have the Bitcoin futures effect.
The CBOE’s Bitcoin futures experiment has drawn to a close, and that may prove to be very good news for Bitcoin prices
Commentators credit a many different things for bitcoin’s 2017 climb to $20,000.
Some of them credit Tether. Some of them credit the launch of Bitcoin futures. And others simply credit a massive fear of missing out.
But the futures crowd may be onto something. Futures brought a lot of new money and interest into Bitcoin.
However, because the Bitcoin market is unregulated, it also meant people could bet on Bitcoin being a certain price and then manipulate its price to hit that target.
The CBOE’s first Bitcoin futures contract expired on Friday the 18th of January. It coincided with a big drop in Bitcoin prices. As soon as the contract expired priced bounced.
Since then, many have seen Bitcoin futures as putting a cap on Bitcoin and keeping prices artificially low.
The fact that these futures contracts are cash-settled and not physically delivered means people can put money into them without ever touching Bitcoin. And this is seen as a big problem.
The promise of Bakkt, which I mentioned earlier, is its Bitcoin futures will be physically settled. People buying the futures will need to take delivery of actual Bitcoin.
This make is far less likely people will manipulate the price in such a way as to keep it artificially low.
If they actually have to take delivery of the Bitcoin in the end, it wouldn’t be in their interest to tank the price.
In summary: cash settled futures bad for Bitcoin. Physically settled futures good for Bitcoin.
And it just so happened that in March the CBOE announced it was ending its futures service.
You’ll have probably noted by now that this coincides nicely with Bitcoin’s latest run.
The last of the CBOE’s futures contracts expires in June. So perhaps we’ll see even more fireworks from then.
And this brings us back to my opening. And likely the reason you found yourself reading this article today.
What we can expect form Bitcoin’s price over the next 6 to 12 months
As you can see from what you’re read, there are a lot of factors at play here.
This is why crypto prices are so notoriously hard to predict. And why so many people get their predictions so wildly wrong.
But the reason you started reading this article is because you wanted to know if Bitcoin could break its $20,000 all-time high by the end of the year.
I’m guessing, if you’re even asking that question, you probably believe there’s a good chance it can.
After all, look at all that’s happened since the last bull run. Bitcoin, and crypto in general is in a much better place.
Institutions and Pension Funds are buying in. the halvening is upon us. The Tether fraud is finally out in the open. Regulators around the world are looking kindly on blockchain rather than trying to ban it. The public is more aware of what blockchain can do. Even film and TV shows are no longer pretending it’s all just magic internet money solely used to buy drugs online.
And that’s before we even get into the developments in other major cryptos like Ethereum, IOTA, VeChain, Monero and Ripple — which I’ll cover in detail in future articles.
In truth, I can’t tell you if Bitcoin will break $20,000 again this year. No one can. But given all that’s going on, I believe it’s a strong possibility.
And over a longer timeframe of three years or so, it’s a virtual certainty.
Of course, whether it holds its all-time high this time around is another matter entirely.
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Originally published on coinconfidential.com.