The Bitcoin Bull Market: Here’s What’s Driving the Run.

04 Aug, 2020
The Bitcoin Bull Market: Here’s What’s Driving the Run.

If you follow digital currency news, you probably know that earlier this year, coin enthusiasts were waiting impatiently for Bitcoin (BTC) to once again top the $10,000 USD mark.  As the price hovered around $9,000 in January and February, social media lit up with much speculation: could BTC again hit that magic number of $10K?

But on March 12, Wall Street stocks plunged more than 10% and the price of Bitcoin plummeted to under $4,000 USD. Bitcoin investors were stunned.  Would this “Black Thursday” signal the start of a Bitcoin bear market?  Or would coin holders hold steady in their belief that the very first digital currency holds far more value than ever before?

The answers to those questions came on July 28 when BTC broke $11,000.

Looking back over the first two quarters of 2020, it’s clear that crypto is having a moment.  And not just because of the steadfast support of early adopting coin holders.  The mainstream is catching on and catching up as awareness grows of the power digital currencies have to transform the way money is defined and exchanged.

So what’s behind the Bitcoin Bull Market?  Here’s a brief look at some of the factors driving the current run.

Covid Pandemic. The impact of the pandemic on the global markets as well as people’s personal economic situation has created massive financial uncertainty.  People from all walks of life are grappling with how to manage their income, where to invest resources and how to protect against their futures in face of continued fiscal crises.  These changes are fueling new and renewed interest in Bitcoin.

“Since measures were announced by the Federal Reserve to introduce unlimited quantitative easing in an attempt to stem the downward spiral of global economies, many investors have turned to Bitcoin as a hedge against the depreciating dollar,” told Yoni Assia, CEO of eToro to CoinJournal in June.

Even as the stock markets continue to make gains, investors remain nervous that these traditional exchanges could suffer more losses as the US Dollar weakens.  Large bailouts related to the pandemic are fueling concerns that the USD will continue to depreciate, which prompted Goldman Sachs to up its forecast for gold from $2,000 to $2,300 in the next 12 months.

“Combined with a record level of debt accumulation by the U.S. government, real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge,”  Goldman Sachs said.

Investors looking for alternatives to the USD such as gold and other commodities may be fueling the rise in the BTC market cap, which sits at just over $200 billion. Just to give you an idea of BTC in context to publicly traded companies, Cointelegraph reports the digital coin’s market cap is larger than that of Intel and Coca-Cola.

“HODL” Wave.  Another indication that Bitcoin holders are bullish on the coin is the current “HODL (Hold on For Dear Life) Wave” which is the number of BTC unmoved on the blockchain.  Currently, it sits at an all-time high of over 60%. Historically, when the HODL wave occurs like this one, it signals that coin holders believe the value of BTC is higher than the current market value and a bull run may follow.

Rise in Bitcoin Investors. The actual number of digital coin owners is elusive. But we do know that as of June 2020, there are more than 50 million Blockchain wallet users worldwide, according to Statista (keep in mind a user can have more than one wallet).  That’s up more than 13.5 percent from December 2019. And a new study from Cornerstone Advisors shows that half of the 15% of American adults who own cryptocurrency invested in it for the first time during the first six months of this year.

Growth in new users adopting crypto continues to fuel a robust digital currency market not just for Bitcoin, but for altcoins and stablecoins as well.

Changes in the Regulatory Environment. In recent months, changes by major regulatory agencies surrounding digital currencies are opening new opportunities for investors to hold and manage their crypto assets.

Last month, the U.S. government gave the green light to crypto custody services for its financial institutions. The Swiss Financial Market Supervisory Authority (FINMA) recently approved crypto custody services for two of its largest financial institutions.  And in Germany, BaFin laid out new detailed guidance for banks in terms of cryptocurrency services. The movement in the regulator sphere offers greater opportunity for crypto holders to attain levels of privacy and security of their digital holdings.

No doubt, this is an exciting time for crypto holders, many whom have been waiting patiently since they bought their first coin to see Bitcoin become what it was meant to be. The idea of money as a decentralized asset which can be exchanged quickly and peer-to-peer, without any middleman, without high fees, may have seemed a novel idea in 2009 when the first Bitcoin was traded.  But not today.  Clearly, crypto is here to stay.

Joyce Pavia Hanson