In the midst of what appears to be a new bull rally for the cryptocurrency. What lessons can we draw from the history of the price of Bitcoin?
For financial analysts and crypto influencers, the issue of Bitcoin price development is crucial to maintaining its credibility with the community. However, for traders, understanding where the cryptocurrency is going is a matter of vital importance so as not to suffer catastrophic losses in their investment portfolio. Therefore, and in an attempt to provide you with the tools to understand the movements of the currency. Today we tell you what the history of the price of Bitcoin tells us.
The theory of cycles in the price of Bitcoin
Now, for many analysts, the main key to understanding the price of Bitcoin is found in the cycles experienced by the cryptocurrency. And especially, in the cycles marked by the occurrence of Halving in the BTC Blockchain. An event that takes place every four years and that halves the rewards received by miners on the Bitcoin chain.
With the Halving, Satoshi Nakamoto’s goal was to reflect the development in the gold market. Well, the basis for the value of gold as an asset store of value is the scarcity of its supply. Therefore, if the rate of expansion of the money supply of Bitcoin is cut more and more, the logic indicates that the price of the same should increase. By reducing the speed of increase in supply, maintaining the same demand, or multiplying it.
Thus, we can see how after the first Bitcoin Halving in 2012 the price of the cryptocurrency increased by 50.16%, from just $ 2.12 to $ 1,151 during the peak of this first bullish rally in 2013. To fall to 213 dollars in 2015 in preparation for the next Halving.
It took place in 2016, and began the largest increase in history in the price of Bitcoin. When the cryptocurrency hit $ 19,499 in December 2017, its highest price so far. Before falling once again to a floor around $ 3,000, recovering in mid-2019 in advance due to the third BTC Halving that occurred a few months ago.
Everything that goes up must fall
However, this theory that should tell us that the price of Bitcoin is about to reach a new peak in the months to come, has not been unanimously accepted by the community. In fact, many analysts, ranging from crypto skeptics like Peter Schiff to crypto influencers like Vitalik Buterin, point to the drops that follow each Halving to prove that the rise in the price of Bitcoin is by no means certain.
Thus, those who follow this logic of thought, see in the increases in the price of Bitcoin a speculative impulse. Spurred further by the media coverage given to BTC rallies attracting capital from around the world, hoping to make quick profits. Which would ultimately lead to the virtual currency crash when this momentum runs out, and the market returns to normal.
So there really doesn’t have to be a new bullish rally after the last Halving on the Bitcoin Blockchain. And if it happens, it really would not be being powered by the Halving or some other event of this style. Which attempts to replicate the functioning of value reserve assets in a digital currency such as BTC.
What sustains the price of Bitcoin?
However, both theories leave out a fundamental element to really understand the price of Bitcoin. Well, both scarcity and speculation are important elements to read the market. But they are by no means the fundamental factor that determines whether the cryptocurrency has value to users.
And it is that, like any other merchandise, the value of Bitcoin resides in that the virtual currency is useful for its users. Therefore, the best guarantee that we can have on the price of BTC and its future, is in the first place in its technology, and in the second place in its adoption.
As for the first element, Blockchain technology, the foundation on which the operation of Bitcoin is based, acquires more importance each day. It is no longer just groups of privacy-freak developers who create new uses for blockchains. Rather, governments like China, or companies like Wells Fargo and Goldman Sachs are also using the Blockchain to their advantage.
On the other hand, on adoption, the work done by companies such as Binance, Ripple, or Coinbase, has created an impressive infrastructure worldwide in recent years. Which has greatly facilitated the use of Bitcoin, increasing its adoption among the population. So, no matter from which perspective it is viewed, without a doubt Bitcoin will not stop having a high value in the future, because it will continue to be very useful.