After the world’s biggest crypto currency stuttered recently, the price on Thursday was again above 12,000 dollars for a time. Since the beginning of the year, the digital currency has tripled in value. And there are reasons for it, many believe it will be the main currency for gambling in the future.
The main reason for the surge of Bitcoin and other crypto currencies in June was the announcement of the online network Facebook and other companies to create a global digital currency called “Libra“.
At the beginning of the week, the Bitcoin was in a short-term downward trend and fell below the important 10,000 dollar mark again. Market observers saw profit taking as the reason. If no follow-up purchases follow, there is a danger of a downward spiral, said Bitcoin analyst Timo Emden.
The danger seems to be averted at first. On Wednesday the selling pressure in the crypto currency market already eased. The price of the Bitcoin climbed temporarily again to 11,400 dollars. On Thursday, the price on the Bitstamp trading platform rose to 12,061 dollars before falling back somewhat. Nevertheless, the crypto currency can at least make up some lost ground.
But there is still a long way to go before it reaches its highs. A week ago the Bitcoin had reached the highest level of the year at 13,880 dollars. Nevertheless, the crypto currency seems to be back. After the rather meagre prices at the end of last year and the beginning of this year, the Bitcoin rose rapidly again since the beginning of April. But what are the price drivers?
New “asset class”?
First of all, there is a lot of speculation about the new “asset class” crypto currencies. Bitcoin has been profiting for some time from the growing interest of institutional investors. The US fund company Fidelity, for example, one of the largest private money managers in the world, recently announced that it would make the Bitcoin available to precisely these customers. Previously, brokers such as ETrade and Robinhood had announced similar plans. Futures, i.e. futures contracts on Bitcoin, are already on offer at several US futures exchanges.
And the “asset class” could be interesting for investors especially in times of trade wars and fears of recession. The prospect also supports a looser monetary policy on the part of large central banks. The argument is, similar to the gold price, that interest-free investments would become more attractive with falling interest rates.
Fears of recession boost share price
“A look back at the development of Bitcoin reveals that it has always risen to new heights when the traditional financial markets were in crisis,” write the analysts from online broker Lynx.
The Brexit decision, the continuing slump in interest rates in the EU and the ever more popular national political currents throughout Europe have led to increasing Euro skepticism – and thus played into the hands of the new crypto currencies in recent years.
For Lynx market expert Sascha Sadowski, the current upswing is a clear sign that the markets are arming themselves for a recession: So far, gold has played the role of a safe haven in such situations, but the price of the precious metal has now reached a level at which alternatives are also becoming increasingly interesting.
Bitcoin as a digital currency
- The large US bank JPMorgan is also planning its own digital currency, albeit only for internal use.
- The JPM Coin is to become a bank’s own clearing tool for the JPMorgan network, accelerating payments and simplifying transactions.
- These initiatives also basically support the crypto currencies already traded, because they tend to strengthen the acceptance of digital currencies and represent a further step towards the established financial markets.
What happens next?
In the wake of the many headlines surrounding Fidelity and Facebook’s “Libra”, another little-known price driver is almost drowning: The countdown for the next “Bitcoin Halving”. In May 2020, the “coin reward”, i.e. the amount of bit coins that the miner receives as a reward per blockchain block, will be halved – from currently 12.5 to 6.25 bit coins. This will depress the Bitcoin offer. The prospect of this is already boosting the Bitcoin price.
But beware, crypto fans! The ongoing price recovery could also be merely a technical counter-movement. “For a continuation of the Rally it requires the recapture of the 12,000 mark , stresses Timo Emden of the analysis house Emden Research. For the time being, only one thing remains certain: the roller coaster will continue to run.