The price of a bitcoin reached above US$450 per coin last week, before consolidating very near $450 today. This is the second highest peak of the year, and is only a dozen dollars short of the all-year high on January 7th.
This latest up trend has steadily progressed since the first week of March, and you can find speculation as to why all over the web. Bloomberg TV had a very bullish spot about it Friday, where Gil Luria from Wedbush Securities attributed the move to a growing popularity of bitcoin itself, as opposed to the recent rise of blockchain announcements.
Bitcoin is “about to soar,” suggests an article on the infamous trader’s blog ZeroHedge. “I believe the market participants that price Bitcoin use technical analysis because it is easy and fundamental analysis is difficult,” Zerohedge predicted. “Bitcoin prices will move higher for the rest of 2016.”
Daniel Masters, former JPMorgan trader and the director of the Global Advisors Bitcoin Investment Fund (GABI), also suggests that Bitcoin’s price will rise throughout the next couple of months.
While the driving forces behind any Bitcoin rally are hard to ascertain, it’s also hard to deny that Bitcoin has had a lot of infrastructure growth lately. OpenBazaar launched at the beginning of this month, while Bitcoin’s Segregated Witnesses patch, which will help alleviate bitcoin’s scaling problem, reached a major milestone last week.
Andreas Antonopoulus recently explained that bitcoin mining hardware has now reached a technological limit, which may ease mining Mining centralization concerns. Ubiquitous access to top of the line mining equipment would allow far more people to run bitcoin mining farms profitably.
Bullish VC investments into bitcoin companies continue to fund endeavors, from Life.SREDA, Money Partners Group and Overstock, to name a few. Meanwhile, merchant adoption is also quietly on the rise.
The video game behemoth Valve Corporation recently announced it would be accepting bitcoin for all purchases across their popular Steam platform, which has in excess of 125M users.
Alongside these recent announcements, there is an upcoming event that may provide a more compelling reason for bitcoin’s price: The upcoming adjustment to Bitcoin’s mining payout, referred to as the halving or halvening.
Every four years, Bitcoin’s algorithm automatically halves the number of bitcoins it rewards to miners. While begrudged by the bitcoin miners who will get paid less for their investment, it’s become a celebrated occasion for many parties throughout the community.
At some point in July we’ll experience the second bitcoin halving, when the reward will go from 25 bitcoins per solved block down to 12.5. The Bitcoin protocol is designed in this way to imitate the limited issuance of a scarce currency, mimicking how gold is brought into circulation.
Many believe that the halving will help the price of a bitcoin, and it’s a simple matter of supply and demand. With only half as many bitcoins coming into the world, it’s technically twice as hard to get your hands on a new one.
The price should then go up, to reflect market scarcity. While previous halvings, in both Bitcoin and Litecoin, show that very little happens on the day of the reward adjustment, the price has always increased in advance.
Prior to Bitcoin’s first halving, on November 28th 2012, the price went from a flat US$5 per bitcoin to a plateau of $13, almost tripling the worth of the cryptocurrency in six months.
The timing of the rise would have seemed pretty straightforward if the price had stayed in that new neighborhood, but the price of bitcoin was spiking at $259 a couple of months later. While speculation on the cause is rampant, Greece was rumored to be looking at an exit from the Euro, the Cyprus government picked that time to confiscate cash directly from its’ peoples bank accounts, and several large investors started paying attention to the industry due to advice from Xapo CEO, Wences Casares.
Last years Litecoin halving on August 25th was also preceded by a price spike. Litecoin went from US$2 to more than $8 at the peak, before crashing back to the $3 range, where it remains today.
Given the history and economic theory, the past few months may have already been part of the build-up towards the event, and we may see another two to three months of this bull market in some form.