Bitcoin surges 45% this year, breaking $10,000 again! "Halving" is expected to be hot

Source: China Securities

Author: Wang Junhui

As the global capital market and commodity market face great uncertainty, the cryptocurrency circle has seen a "small spring" since the Spring Festival holiday. After several months of silence, Bitcoin has once again begun to rise and the growth has been relatively rapid.

Based on the GATE.IO price, on January 3, the price of Bitcoin fell back to $6,875.93, and then opened the upward channel, quickly breaking through the two major barriers of $7,000 and $8,000. On January 27, the price broke through $9,000 and then accelerated its rise. After briefly hovering around $9,500 and $9,800, it broke through the $10,000 mark at around 11:00 am on February 9. As of press time, the price was $10,105, an increase of more than 45% from the end of December.

In fact, the price of Bitcoin is not the only one that stands out in this market. Its rise and fall is a weather vane. The strengthening of this price has driven the overall market recovery.

Mainstream coins such as BCH, ETC, EOS, and RXP have all turned red, and platform coins such as BNB and HT have also collectively soared. Even many long-dormant altcoins seem to have "come back to life", and some have even increased by more than 10%. According to a rough calculation by a reporter from Securities China, in the USDT trading area of ​​the GATE.IO platform, 10 coins have increased by more than 20%, and the altcoin SMT with the highest increase has increased by 66%.

The market generally expects this round of price increases, and the logic behind it is very clear. On the one hand, the halving of Bitcoin production will trigger price increases. From past experience and logic, this has formed a relatively broad "consensus" in the currency circle. On the other hand, the current attributes of Bitcoin as "digital gold" and "safe haven assets" are increasingly recognized. With the increase in global uncertainty risks and the general market downturn, the influx of some safe haven funds will undoubtedly drive prices up.

At the same time, the booming prices have triggered a rise in activities such as IEO. The booming market is accompanied by increased volatility, and investors need to pay close attention to risks.

In fact, the market generally expects this round of price increases, and the logic behind it is very clear. On the one hand, the halving of Bitcoin production will trigger price increases. From past experience and logic, this has formed a relatively broad "consensus" in the currency circle. On the other hand, the current attributes of Bitcoin as "digital gold" and "safe haven assets" are increasingly recognized. With the increase in global uncertainty risks and the general market downturn, the influx of some safe haven funds will undoubtedly drive prices up.

Bitcoin halving refers to the fact that the reward for producing a new block is halved approximately every four years. This means that after the halving, the corresponding Bitcoin reward for each block produced is only half of the reward before the halving. After Bitcoin came out in 2009, 50 Bitcoins were rewarded for each block mined. Depending on the block production speed, the reward is halved approximately every four years, and the final total amount is constant at 21 million Bitcoins.

At present, Bitcoin has been halved twice, in November 2012 and July 2016. The third Bitcoin halving is expected to take place in May 2020. By then, Bitcoin will be halved from the current 12.5 to 6.25.

According to Satoshi Nakamoto's setting, a block is produced in the Bitcoin blockchain network every 10 minutes, and a certain amount of Bitcoin will be mined continuously. According to the setting, the number of Bitcoins rewarded for each 210,000 blocks mined is halved. This is believed to be able to effectively reduce the inflation rate of Bitcoin and prevent the occurrence of hyperinflation. This is considered to be one of the biggest differences between issuing "digital currency" on the blockchain and legal currency, and is also one of its most popular mechanisms.

In addition to Bitcoin, many other currencies will also usher in the "halving period" this year.

Image source: gate.io website

The reason why the market has high expectations for the halving is that, on the one hand, after the halving, the output of Bitcoin will drop significantly within a certain period of time, and the difficulty of mining will also increase, and "scarcity makes things valuable"; on the other hand, it is also because the previous two Bitcoin halvings did bring about a bull market, and most participants have high expectations for this "good news".

"It is obvious that the main driving force of this round of market is halving," Du Wan, CEO of digital asset contract analysis tool Hetongdi, told China Securities Journal reporters that since December 18, BTC has risen from 6,333 US dollars on Huobi to 9,700 US dollars. It has fluctuated and risen for 50 days. ETC, which is about to be halved, has risen from 3.4 US dollars to 13 US dollars, and BSV, which is about to be halved, has risen from 75 US dollars to 455 US dollars, and currently remains around 360 US dollars. BTC will also be halved in May.

“Before this round of rise, BTC fell from $14,000 to $7,000. The market was bearish and expectations for halving kept falling. This once again proves that market sentiment is also a reference for market conditions. What’s more interesting is that this round of rise broke the rule that BTC must fall one month before the Spring Festival,” Du Wan said.

After Bitcoin broke through $10,000 three times before, it fell back significantly within a few months. It remains to be seen whether it can hold steady this time under the influence of the halving expectations.

Several industry insiders interviewed by Securities China reporters said that although they are optimistic about the price of Bitcoin in the long term, there will be frequent fluctuations around US$10,000, and short-term fluctuations will be relatively large.

OKEx analysts believe that there are still about three months before the Bitcoin production cut, and the market's expectations and speculation have just begun. There are two important barriers to note in the next three months. One is the price level of $10,000. Before reaching this level, the Bitcoin price will experience repeated corrections and large fluctuations. The other is the price level of $15,000. In the last round of the bull market, the Bitcoin price failed to break through this price level. This round of rise is expected to experience violent fluctuations at the $15,000 level.

Du Wan believes that the first quarter of 2020 will be a good uptrend for BTC. In the current short-term market, 10,000 is an important trading area for chips, and BTC has also reached the upper track of the weekly line. According to the big data of Hetongdi, the four major futures exchanges hold more than 3 billion funds. Among them, BitMEX holds more than 1 billion US dollars.

"Historically, every time BitMEX's holdings reached 1 billion US dollars, it triggered a waterfall after a period of time. What will happen this time? We will have to wait and see," said Du Wan.

This view is not without basis. Unlike other mainstream assets such as stocks, futures, bonds, and commodities that are greatly affected by the external environment, Bitcoin has been relatively independent in its price trend since its birth. Excluding several major direct policy impacts, its rise and fall are unique. If we look at the absolute price, it is no longer the same as the price of a few cents at the beginning of its birth. It has maintained a good upward trend over a long period of time.

Marija Veitmane, senior multi-asset strategist at State Street, said gold and bitcoin prices are rising because investors seem to distrust last year's stock market rally. Bitcoin, like gold, benefits from the fact that interest rates are low (or negative in some cases). Historically, bitcoin, gold and other cryptocurrencies, as well as precious metals, have performed well when investors bet that the value of large government-backed currencies will fall.

"There is a new consensus in the market about dollar weakness." Wittman said Bitcoin and gold may continue to perform well as safe-haven investments.

Comparing the performance of asset prices in the global market recently, the above view seems to be supported. After four consecutive increases, the US stock market has temporarily slowed down its upward pace. As of the close of February 7, the Dow Jones Industrial Average fell by more than 270 points, a drop of 0.94%, the Nasdaq fell by 0.54%, and the S&P 500 fell by 0.54%. The three major stock indices in the European market closed down collectively. The UK FTSE 100 index fell by 38.09 points, a drop of 0.51%, to close at 7466.70 points. The German DAX index fell by 0.45% on the 7th. The French CAC40 stock index fell by 0.14%. Brent crude oil futures fell by $0.46, a drop of 0.84%, to $54.47 per barrel.

At the same time, gold prices rose. The most active April gold futures contract on the New York Mercantile Exchange rose by $3.40, or 0.22%, to close at $1,573.40 per ounce. The Chicago Board of Trade (CBOE) Volatility Index (VIX), known as the "fear index," fluctuated greatly, indicating that risk aversion sentiment has heated up.

With the frequent occurrence of various "black swan" events, this feature of Bitcoin has begun to attract more attention, especially its safe-haven properties have been hotly debated. The attitudes of mainstream financial institutions such as Wall Street have also undergone subtle changes, and some institutions have begun formal layout in the field of cryptocurrency.

Fidelity Investments established a subsidiary called "Fidelity Digital Asset Services" in October 2018, which is committed to providing comprehensive enterprise-level services for the security and trading of digital assets such as Bitcoin, and providing new cryptocurrency-related products for institutional investors. In December last year, the company's president Tom Jessop said that the company has done a lot of work on ETH and intends to support Ethereum in the new year at the request of customers. Fidelity is in talks with many traditional institutions to launch Bitcoin as an entry-level product to institutional investors.

Last November, Grayscale Investments, the largest digital currency fund, disclosed a report showing that despite a -23.3% drop in the price of Bitcoin during the same period in the second quarter of that year, in the third quarter of 2019, the Grayscale Bitcoin Trust experienced the largest quarterly inflow of funds ($171.1 million) in the six-year history of the product.

The report shows that across Grayscale’s entire platform, inflows in U.S. dollars reached a record high in the third quarter of 2019, reaching $254.9 million, a more than 200% increase from $84.8 million in the second quarter of 2019. Institutional investors, represented by hedge funds, remain a strong driving force for Grayscale’s inflows, with 84% of the funds coming from institutional investors.

But compared with the previous bull market, this time BTC is not the only one that is doing well, but has led to a general rise in the market.

Mainstream coins such as BCH, ETC, EOS, and RXP have all turned red, and platform coins such as BNB and HT have also collectively soared. Even many long-dormant altcoins seem to have "come back to life", and some have even increased by more than 10%. According to a rough calculation by a reporter from Securities China, in the USDT trading area of ​​the GATE.IO platform, 10 coins have increased by more than 20%, and the altcoin SMT with the highest increase has increased by 66%.

It is worth noting that the platform coins issued by various digital currency trading platforms, such as BNB, HT, GT, etc., have all risen significantly in recent days. Among them, the price of OKB issued by OKEx has increased by 22.41% in the past seven days, the price of BNB issued by Binance has increased by 26.79% in the past seven days, and the price of HT issued by Huobi has increased by 14.95% in the past seven days.

In this regard, an industry insider told the reporter of Securities China that the recent rise in platform coins is due to the fact that many platforms will start a new round of IEO, that is, new digital currencies will be launched on the trading platform. The reporter found an "Announcement on the Sales Rules of OKEx Jumpstart's Tenth Phase Project HyperDAO (HDAO)" in the announcement area of ​​the OKEx website, which adopts the IEO model.

It should be pointed out that for similar behaviors, regulatory authorities in many countries, including the People's Bank of China, have repeatedly issued warnings. At the end of November last year, the Shanghai headquarters of the central bank once again named the hype related to virtual currencies (such as ICO, IFO, IEO, IMO and STO, etc.) as being renewed, speculation is prevalent, prices are soaring and plummeting, and risks are rapidly accumulating. The relevant financing entities raise funds or virtual currencies such as Bitcoin and Ethereum from investors through illegal issuance and circulation of tokens, which is essentially an unauthorized illegal public financing behavior, suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal crimes, which seriously disrupt the economic and financial order.

On January 14, the U.S. Securities and Exchange Commission (SEC) issued a notice to warn of the risks of participating in IEOs. The SEC pointed out that IEOs may be conducted in violation of federal securities laws and lack the protection of registered and tax-free securities issuances for investors. The notice warned that IEOs are touted as an innovation of ICOs, with online trading platforms providing instant trading opportunities for digital assets directly on behalf of companies. However, these online trading platforms are generally not registered with the SEC and may inappropriately refer to themselves as "exchanges." Such products may induce investors to invest through misleading statements and promises of false high returns.