Fintek.pl editorial analysis
This year has brought the largest exchange rate fluctuations since 2017 to the crypto currency market. The loosening of monetary policy by the United States government has recently increased the group of investors investing in bitcoin. May was bitcoin halving in May, in which analysts and investors placed high hopes. For now, there is no big increase in the BTC exchange rate, but the past shows that we will have to wait a while for this.
The year 2020 is not very kind to the global economy. Supply chain disruption, lockdown downtime, reduced consumption – all this will probably sooner or later leave its mark on the global economy. What impact did these events have on the cryptocurrency market? Before we proceed to consider this topic, it is worth familiarizing with the definitions of the phenomena described later in the article.
Loose monetary policy – increasing the money circulation in circulation. An instrument used by central banks when interest rates are close to zero. Popularly called “money printing”.
Halving Bitcoin – cutting the mining prize by half. If miners received 12.5 bitcoin before halving for adding a new block of information to the database, now the prize is 6.25 BTC.
Exchange rate fluctuations the largest since 2017
Certainly, Bitcoin fluctuations reaching the largest scale since 2017 are not encouraging to invest in cryptocurrencies at the present time. The maximum value of the asset in the current year was 9 thousand. USD. During declines, this indicator came close to USD 4,000.
The cryptocurrency market is characterized by very large exchange rate fluctuations, therefore investments in this type of assets are recommended for people who already have some experience on the financial market. You need to know which cryptocurrency to invest in, which stock market to use and when to get rid of your crypto-actives – says Rafał Tomaszewski, portal editor Fintek.pl
Bitcoin’s loosening of monetary policy was good
The recent rebound of the bitcoin exchange rate was probably indirectly triggered by the US central bank and its monetary policy easing actions in the country in connection with attempts to protect the economy from the negative impact of a pandemic. Some of the world’s central banks followed the example of the US. This situation pushed some investors to invest their funds in bitcoin in order to prevent potential currency depreciation.
The increase in investment traffic is already visible on cryptocurrency platforms such as Binance or MyEtherWallet.
The value of BTC as a currency with a finite number of tokens is susceptible to increases in a situation of growing demand and shrinking supply. The more that the number of bitcoins remaining to be “excavated” shrinks day by day. So experts predict that increased investment in currency should bring an increase in its exchange rate.
Bitcoin remains a highly speculative asset that has so far benefited from “old” system crises. I would not look for a direct impact of the epidemic in itself on the BTC course. The cryptocurrency exchange rate is rising rather due to the recent halving and central bank actions on the economic crisis. Crazy reprint of fiat currencies makes it an interesting investment in the eyes of BTC investors, whose supply is determined by the algorithm – comments Marcin Wenus, Editor-in-Chief Comparic.pl, President of the Invest Cuffs Foundation.
May bitcoin halving
On May 11 at 21.00 Polish time there was bitcoin halving. From now on, miners receive 6.25 bitcoin for one block of calculations, whereas before it was 12.5. This means that to produce the same value, you need to use twice the computing power of excavator computers.
At a time when central banks are printing mass money for fear of a decline in the value of their operating currency against the dollar, activities such as halving bitcoin can make this a good investment destination. The finality of BTC resources and regular halving of the currency are the two most important mechanisms protecting them against inflation. We know from history that it affects traditional currencies mainly in times of crisis exactly as they face the global economy today.
However, the hopes of cryptocurrency investors related to halving have been somewhat disappointed. A few days before the event, the bitcoin exchange rate for the first time since February was 10 thousand. USD – probably on a wave of enthusiasm. The day before halving, however, the bitcoin rate dropped to USD 8.5 thousand, the day after it was valued at USD 8.7 thousand.
It should be remembered that with previous halves of the prize, clear exchange rate jumps took place after several months, so everything indicates that the biggest increases are yet to come.
According to the assumption, halving is done to protect bitcoin resources from depletion, but in the current situation it can be an ideal stimulus to increase the BTC course – comments Rafał Tomaszewski, editor of Fintek.pl. – To all doubters that halving will have a positive effect on the bitcoin course, I recall the events that followed the half-catches in 2012 and 2016. Unfortunately, investors must be patient and wait for the BTC to rise. Everything indicates that the coming months will be the best time to buy the assets of this cryptocurrency, until prices have soared up – he adds.
Some experts, however, believe that the rate increase will occur much faster than it did during previous halving.
Halving certainly brings many positives, but for digital miners it is a big challenge. The sudden drop in profitability of digging forces some to liquefy their bitcoins, which may stop the increases for a while. However, this is a temporary phenomenon and when everything in the mining area returns to normal, nothing will block BTC from increases. And they have already begun – we have just passed the important level of USD 10,000. It is worth observing the development of the situation. In my opinion, the increases will occur much faster than in the case of previous halvingów. The market is now many times larger and more dynamic – comments Paweł Bińkowski from Blocksats.
Is it worth investing? [komentarze ekspertów]
– Some analysts expect Bitcoin to grow significantly over the next few months. According to some, the BTC valuation can break even the magic limit of 20 thousand. dollars. Of course, this cannot be ruled out, but as is well known, the cryptocurrency market is very volatile. We recommend a rather cautious approach – explains Rafał Tomaszewski, editor of the Fintek.pl website.
– Cryptocurrencies are a relatively new asset. We have not yet created a consistent investment methodology, so the risk associated with it is relatively high. However, I think that if you approach it with the right precaution, bitcoin can be an interesting alternative to diversifying your investment portfolio – comments Michał Dąbrowski, Managing Director of Fintek.pl and KLANG! Media. – The year 2020 is a time of great unrest on financial markets, which, however, do not seem to particularly affect the cryptocurrency exchange. Given that most analysts herald a significant increase in the BTC rate in connection with recent halving – maybe now is the perfect time to buy bitcoins – he adds.
– Halving influenced the price just before the distribution of the prize for miners. This is almost a permanent phenomenon. First, investors “buy gossip” and then “sell fact.” Easier: they buy BTC before halving, and then sell out coins when the price driven by the upcoming event is already high. A replay from previous cycles seems very likely today. Let us remember, however, that we have an economic crisis in the background. BTC has never functioned in such circumstances, so anything can happen – comments Marcin Wenus, Editor-in-Chief of Comparic.pl, President of the Invest Cuffs Foundation. – Cryptocurrencies are very risky assets in several respects, so I do not recommend investing in them to people without knowing the specifics of their operation. After all, if in fact the “bubble” scenario repeats, 2020 will be the last in which BTC or other leading cryptocurrencies, such as Ethereum, can be bought at relatively low prices – he adds
– In my opinion, 2020 is a great time to invest. Everything indicates that the bear market in the area of cryptocurrency is behind us. Current socio-economic events and the ongoing crisis may further weaken confidence in central banks. The community needs an alternative, and in my opinion Bitcoin is the best available. Now every business is at least partly internet based and this trend will continue. And let’s remember that BTC is a means of payment that works perfectly in the realities of the internet – no matter if we live in Poland or in China. Either way – it’s not investment advice. Everyone should make the decision themselves, after analyzing the situation – Paweł Bińkowski from Blocksats comments.