Bitcoin Bulls are in Hiding But These Handful of Driving Forces Could Put the Bears at Bay for Good
Bitcoin (BTC) has been traded in a downtrend over the last months. Since Bitcoin reached its record high in December 2017, the digital currency has lost more than 80% of its value and many other digital assets followed behind. Now, enthusiasts and investors are waiting for Bitcoin to start growing once again. There are some factors that seem to be pointing to recovery for Bitcoin in the near future.
Bitcoin Could Soon Start To Recover
The most popular digital currency in the market has been embraced by retail traders and investors, but institutions and larger buyers remained on the sides of the market. One of the reasons why these firms and companies did not enter the market is related to the fact that the infrastructure is not yet ready for it.
Crypto exchanges and companies have been focusing on retail investors rather than larger firms and traditional investors. This has created difficulties for institutions to enter the market since there was no platform specifically designed for their needs. They need to follow rigorous standards and be sure that their funds will be properly stored.
Nonetheless, there are some companies that are starting to develop platforms for institutions. Two of these firms are the Intercontinental Exchange (ICE) and Fidelity Digital Assets. The ICE is working on Bakkt, which will be providing physically-settled daily Bitcoin futures contracts. The ICE is the parent company of the New York Stock Exchange (NYSE) and has experience in traditional markets. This is something that should increase trust companies have in this platform. Bakkt is also working with Starbucks and Microsoft.
Meanwhile, Fidelity has launched Fidelity Digital Assets, lead by Tom Jessop. According to him, the service is already operational for a few selected companies. The intention is to release the whole solution to the market in the near future.
In addition to these two firms, ErisX will also be providing a regulated trading platform for Bitcoin, Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH), some of the most popular digital assets in the market.
With increased participation from larger companies, it might be possible for Bitcoin to start increasing in price. Demand for the digital asset will clearly grow. This combined with an issuance reduction could drive the market to new highs.
In May 2020, Bitcoin is going to be experiencing a halving. That means that miners will receive 6.25 BTC instead of 12.5 BTC each time they find a new block. This would have a very positive impact on Bitcoin’s price that would start growing in the near future. If there is a larger demand from institutions and retail investors that entered the market during the last bull run and a lower issuance of new BTC, supply and demand should play an important role int he next bull run.
Additionally, Bitcoin has been in the longest bear market ever since it was created. Bitcoin dropped more than 80% since its all-time high after more than an entire year in a downtrend. There are some technical analysts that believe that Bitcoin has already bottomed since it has tested two times the weekly 200 moving average. This is a technical sign that Bitcoin has bottomed and that the bear market is over. We now have to wait and see whether this has really been the end of the bear market or not.
Scaling issues have been a hot topic for Bitcoin enthusiasts during the last years. Bitcoin faced some issues when it was close to its all-time high in December 2017. Due to the large number of transaction processed by the network, it was possible for a user to pay more than $50 for just processing a single transaction. At the same time, they could take long times to be approved by miners.
Because of this, Bitcoin developers started to work on different solutions that would help Bitcoin scale. One of the solutions implemented is Segregated Witness (SegWit). With it, transactions become smaller, allowing the 1 MB blocks to process a larger number of transactions. Moreover, developers started to work on the Lightning Network (LN) a second layer scaling solution that aims at processing thousands of transactions per second for very low fees. This will also allow users to process micropayments.
With this solution, larger transactions would still take place on-chain, but small and daily transactions would be performed on the Lightning Network. Until now, the LN has reached 7,615 nodes, 39,423 channels and a capacity of 1,048 BTC.
Another thing that users and investors should pay close attention to is the hash rate of the Bitcoin network. In August 2018, Bitcoin’s hash rate reached an all-time high of over 61 million TH/s. In December 2018, the hash rate dropped down 50% to 31 million TH/s. Now, the Bitcoin network has a hash rate of 47 million TH/s.
The drop experienced by the hash rate in December 2018 followed the price drop that made Bitcoin mining activities unprofitable for several miners. After the difficulty adjusted itself, miners entered the market once again and started to mine Bitcoin.
All these factors mentioned in the article show that Bitcoin is starting to leave behind the bear market that affected the entire network. Currently, each Bitcoin can be purchased for $4,027 and it has a market capitalization of $70.92 billion, according to CoinMarketCap.