What Buying Signals Should Investors See as a Sign of Bitcoin Recovering After a Year-Plus Long Bear Market?
Bitcoin (BTC) is currently trying to leave the bear market in which it has been traded during the last year. Since December 2017, Bitcoin is being traded in a downtrend.
Nonetheless, there are some experts that believe that the bearish period could be ending. There are five factors that could be very bullish for Bitcoin in the future and that could help the most popular digital asset to recover from its lowest point.
Institutional Investors Entering The Space
There are several firms that are starting to create the necessary infrastructure for institutional investors to enter the market. Two of these firms building infrastructure for mainstream investors are the Intercontinental Exchange (ICE) with the Bakkt platform and Fidelity Investments with Fidelity Digital Assets.
Bakkt will be providing physically-settled Bitcoin futures contracts. The ICE is the parent company of the New York Stock Exchange (NYSE) and it has experience in this area of the financial world. Thus, having such a recognized financial company investing in infrastructure for the crypto space, is clearly bullish.
Fidelity Digital Assets is a subsidiary of Fidelity Investments that provides crypto trade execution and storage services as well. One of the main concerns that the U.S. Securities and Exchange Commission (SEC) had about Bitcoin and digital assets is related to custody solutions.
At the same time, ErisX will be providing a regulated trading platform for Bitcoin, Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). It is worth mentioning that Nasdaq and VanEck are also working side by side in order to provide users with crypto futures trading.
Bitcoin Halving Is 1 Year Away
Another important thing that is going to shape Bitcoin's future is related to its having. Bitcoin’s next block reward is expected to happen as soon as in May 2020. The reward for miners will drop from 12.5 BTC down to 6.25 BTC per block. Thus, the new issuance of Bitcoin will be reduced. This is expected to have a positive impact on the Bitcoin price.
With a lower issuance of Bitcoin and an increased demand for the digital asset, the price of this virtual currency could reach new highs in the future.
During the next bull run in the market, the price of the digital asset could eventually skyrocket even more than in 2017.
The Longest Bear Market In History
This has been the longest bear market in Bitcoin’s history, which has created a negative sentiment in the whole industry.
Some individuals believe that the bottom of the current bear trend occurred back in December when Bitcoin reached $3,200. This could mean that in the short term, Bitcoin could start growing once again rather than falling.
There are also some analysts that show that Bitcoin has already bounced from the weekly 200 moving average twice. This shows that Bitcoin found a bottom in the market as well.
Scaling Improvements With The Lightning Network
One of the main issues that affected Bitcoin back in 2017 and the beginning of 2018 is related to the congestion of the network.
Due to the fact that thousands of transactions wanted to be processed per minute, miners were only processing the transactions with the highest fees. Because of this situation individuals that wanted to make a Bitcoin transaction had to wait long periods of time or pay very large fees.
There have been implemented different solutions to solve this issue. One of them is known as Segregated Witness (SegWit). SegWit reduces the transaction size and allows each 1 MB block to include a larger number of transactions. Thus, it is possible to reduce congestion in the Bitcoin network.
Moreover, Bitcoin developers are currently working on the Lightning Network (LN), which is expected to be the ultimate scaling solution for Bitcoin.
With it, it is possible for users to send transactions in BTC without paying for high fees and they would be processed in just a few seconds. The main difference between standard Bitcoin transactions and LN transactions is that the latter will not be processed by the main Bitcoin network. Instead, they will all be processed by the LN, which is an off-chain scaling solution.
Another important feature of the LN is that it allows users to make micropayments, something that is currently impossible on the main Bitcoin network.
Bitcoin Hash Rate Growing
Bitcoin’s hash rate is also growing, which will make the network more secure than before. During the last few months, the Bitcoin network hash rate has been steadily growing, allowing the network to be much more secure than before. If we compare the hash rate that the market currently has with a few years ago, the evolution has been notorious.
All these factors will play an important role in helping Bitcoin’s price to grow in the future. At the time of writing this article, Bitcoin is being traded close to $4,022 and it has a market capitalization of $70.83 billion according to data provided by CoinMarketCap.