In the midst of global uncertainty, Bitcoin trading has gathered steam as investors seek profitable opportunities in depressed economic times. The foremost cryptocurrency shed 50% of its value in mid-March as the global coronavirus pandemic triggered a selloff across all financial assets. Since then though, Bitcoin has posted impressive gains and provided a solid avenue for investors to pick out lucrative opportunities as uncertainty grips the global economy.
The Light at the End of the Tunnel
Global equity markets across the world have shed more than 25% since the start of the year. In March, it seemed as though Bitcoin would suffer the same fate as the top crypto coin plunged to yearly lows of just below $4,000. A recovery followed soon after, and in the first week of April, Bitcoin surged by over 17%, effectively outperforming all other traditional markets during the coronavirus pandemic. Bitcoin is now more or less unchanged for the year, but it is the overall demand level that is giving investors hope going forward.
There are many positive underlying factors for Bitcoin, but the latest surge has evoked memories of the dream run of 2017 that saw the coin surge from around $1,000 in January to an all-time high of just below $20,000 by December of that year. There is no doubt that the industry is attracting institutional money during the crisis, but in 2017 it was the retail market that drove prices to incredible heights. All indicators are currently pointing to a similar event happening this time again.
In 2017, as Bitcoin prices jumped by the day, the investing public sought to join the party in a classic FOMO (fear of missing out) fashion. This fuelled demand and drove prices higher until smart money started cashing out. It is the same organic demand that is now seen across the industry. Crypto exchanges and peer-to-peer trading sites have reported a surge in new user signups and deposits. Trading volumes have also leapt to near all-time highs.
This is a signal that the mass public is seeking to protect itself, at the very least, or to pursue a potential, lucrative opportunity at best. Governments across the world have already implemented some measures to cushion the economy from coronavirus-inspired threats. In the US for instance, a record $2-trillion economic relief package has been signed off, which puts in focus the highly centralised nature of the current fiat system. Seemingly in protest, investors now view the supply-capped digital currency, that is Bitcoin, as a solid safe haven in a crisis with no end in sight.
There have also been major events in the crypto scene that point to a strong industry. The highlight has been the acquisition of CoinMarketCap (a crypto data aggregator firm) by Binance, one of the top global crypto exchanges. In a depressed economy with no major M&A deals, the $400 million Binance’s acquisition has no doubt caught the attention of investors. CoinMarketCap is a crypto traffic mammoth and the buyout by Binance is a big bet by the top exchange that retail money will be the biggest driver of demand in cryptocurrencies, even as institutional money keeps pouring in.
The Future is Bright
Overall, both new and old crypto investors are incredibly bullish on Bitcoin. A major near-term event boosting investor confidence is the Bitcoin halving scheduled for next month. The halving will see the reward for mining new coins halved, a factor that will limit supply going forward, and consequently, it will boost demand. Beyond that, medium- and long-term fundamentals are also encouraging. There are already headlines of a digital dollar hitting the wires but in Europe, the ECB (European Central Bank) has already delivered a blueprint on how digital currencies can be integrated into the mainstream financial system. The initial dream for Bitcoin was to ‘free’ users from the centralised monetary system, but it can only be positive when governments and institutions are now ready to embrace it.
The Final Word
As markets across the globe are depressed, the price action in Bitcoin and other cryptocurrencies suggests that there may still be lucrative opportunities out there. Still, extreme bullish sentiment is never healthy in any market as it may imply unhealthy overconfidence and greed among investors. Nonetheless, Bitcoin investors have shown that they are ready to weather any storm and even back the coin heavily in troughs and maintain patience in peaks.