How far can Bitcoin go after crossing $7000?
The price of Bitcoin reached over $7000 on Tuesday morning, setting off predictions that it could go higher as next month’s halving event nears.
The price was still holding at $7,252.33 on the Coindesk Index as of the time of writing this report. The index also shows that bitcoin has grown by nearly 2 percent on a year-to-date basis as of Tuesday. As insignificant as that may seem, it has outperformed many stocks. So far in 2020, the S&P 500 is in the red over 16 percent, the Nikkei 225 is down almost 20 percent and the FTSE is down almost 25 percent.
The Nigerian stock market in April has lost 1.76 percent of its value, compounding its woes since the coronavirus pandemic began.
Marius Reitz, General Manager for Africa, Luno, in a note to BusinessDay, said that while the world’s most valuable cryptocurrency may have broken through what is seen as a psychological barrier, maintaining the level is very important for other cryptocurrencies. The Luno global exchange is home to over 3.5 million users who buy and sell cryptocurrencies such as Bitcoin, Ethereum, XRP, and Bitcoin Cash (BCH).
Investors’ activities also pushed up demand and reflected in the price of other coins such as Ethereum ($167); XRP ($0.196); and BCH ($264).
“There are a number of indicators which could lead to the Bitcoin price continuing to rise,” Reitz said. “Trading volumes are much lower than we have recently seen but the futures market in Bitcoin has stabilised and back to expected levels. With the price increase, miners are returning and finally, investors will see that cryptocurrencies can rebuild value more quickly than other asset classes.”
The market has every reason to be optimistic. For one, Bitcoin Halving is less than 36 days away.
Bitcoin halving refers to a process of reducing the rate at which new cryptocurrency units are generated. For instance, the halving in May would see the block reward fall from 12.5 to 6.25 bitcoins. Essentially, halving ensures that miners have to spend more time to mine each bitcoin. Invariably, the miners would likely push up the price of the cryptocurrency to compensate for the extra effort.
The halving in May – when the number of blocks hits 630,000 – is likely to significantly change the value of Bitcoin. Experts also say that it would increase demand for the cryptocurrency by further restricting supply.
While Bitcoin is fast approaching the much-awaited halving event, the halving of its main forks has started. On Wednesday BCH reduced its block reward. The night before the halving, the price jumped 7.7 percent on the CoinmarketCap. The BCH/BTC ratio also increased, hitting the highest level since March 7.
Bitcoin SV (BSV) will also experience halving later this week.
Vetle Andreas Hussars Lunde an expert at Arcane Research expects some miners to switch over to mining bitcoin following the halving of the mining reward on BCH and BSV. This will happen, they said, as the profitability of mining bitcoin will be higher, compared to mining BCH or BSV, all else equal.
“Mining is a competitive market. The marginal return on mining bitcoin, BCH and BSV should, therefore, be equal prior to the halving. When rewards are cut in half for BCH and BSV, the profitability of mining those coins are also cut in half, forcing a shift in the market,” Lunde said.