Bitcoin has been on a surge since April 1st. So, what would be the next “bullrun” for Bitcoin? Clearly the market should go into new highs and volume should reach an all time high as well. As far as adoption though, what needs to happen? Let’s discuss this and the implication of the upcoming Bitcoin halving.
Note that nothing in this article should be considered financial or investment advice. Enjoy the ride.
The next halving is on May 20, 2020. With simple analytics based on historical trends, any analyst could easily predict that Bitcoin’s price will soar to new highs after this goes into effect. Without basing Bitcoin price on sentiment, heavy handed investors should consider preparing before the pump happens.
Why is this the case though?
Simply, it significantly cuts the supply of Bitcoin that is pushed out into the market. Exchanges, OTCs, brokers and hedge funds all need this supply of constant BTC flowing into the market to supply new investors and large orders. Specifically, OTC desks require large sums up front with flexible negotiable terms. As the supply is cut, there are less miners and mining companies willing to sell their BTC in bulk which effectively squeezes the market.
Naturally from this squeeze, Bitcoin will become more valuable. As larger investors and traditional vehicles continue to open their doors to the cryptocurrency scene, this will only increase over time. Similar to the drastic increase in market cap for Gold, Bitcoin will also see more dramatic climbs in market cap and price.
Focusing on the trading aspect, we can say that the crypto market is in a Semi-Strong market economy. This means that you cannot accurately predict the price movement from public or historical knowledge but it is still relevant. Furthermore, this infers that upon announcements, prices sharply fluctuate and investors can not gain the market after announcements are made.
This is a stepping point for crypto as we still lack the internal portfolio efficiencies that traditional investors would like to see. The top assets in the space are the closest to any efficient portfolio, but the forks of Bitcoin still exhibit extreme swings.
Similarly, there is a large amount of insider trading still happening daily throughout the market. For the crypto market to reach a Strong-market economy, this would have to be resolved and the insider trading would have to be foregone.
Bitcoin to Reach New Highs
In addition to the cut supply, investment vehicles like the proposed ETF’s, futures, derivatives, and options will boost adoption of tradition funds in the space. Every company has a set reserve of funds that they choose to hedge into different markets. The more options that the crypto market is exposed to, the better chance for crypto to be a choice of these funds.
If we review the historical chart of the gold price, we will see a clear trend once these vehicles reach mass adoption. To reach a $50,000 Bitcoin, the market cap of Bitcoin would have to reach around $1 trillion dollars. Currently, the gold market cap is $8 trillion which is a great indicator of the market cap potential for Bitcoin in the long-term.
At a $1 trillion dollar market cap for Bitcoin, that is only 2.5x times the previous all time high. For comparison, the 2013 all time high was $1,000, meanwhile the 2017 all time high touched $20,000. From a 20x time gain per bull run to a 2.5x time gain between bull runs is extremely reasonable. If Bitcoin reaches these levels, altcoins could easily make a new set of millionaires in this world.