Is Stage Set For Bitcoin Rally?

Bitcoin in 2018 witnessed a major sell-off. After an unprecedented boom in 2017, the price of Bitcoin fell by about 90 percent. The cryptocurrencies market capitalization lost at least $342 billion in the first quarter of 2018 alone. Since then, many called the bubble has burst and there is no value for cryptocurrencies. Many remained and hopeful for a recovery.

As per the current technical analysis, Bitcoin price action hints building of an ascending triangle with major support near $3700 (interim) and $3500 (key support level) and resistance around $4200. From the chart patterns, Late April or May will be the crucial moment to find which direction bitcoin goes.

So the question is, from which side we break-out?

Given the following events and improvement in the trading volumes in exchanges across the board may suggest we are not too far away.

(1) Bitcoin Halving:

Many believe that ‘Bitcoin halving’ could be an event that could save the day. An event which takes place every 4 years. This is done to guarantee that Bitcoin does not suffer from high inflation during its progressive distribution.

As per the design, the reward is reduced by 50% after every 210,000 blocks are added to the blockchain. Current reward for each block stands at 12.5 BTC. After BTC halving event which takes place in May 2020, the reward will be reduced to 6.25 BTC. So to add blocks of information to ‘public ledger’, miners job will be more difficult and costlier.

As per the trends from the previous two bitcoin halving events,
– Uptrend begins a year prior to the halving event &
– The halving event marks the beginning of the major bull run.

So why this happens:

It works similar to “Contractionary Monetary Policy”, how central banks control the money supply and keep inflation at check. The goal of a contractionary policy is to reduce the money supply within an economy by decreasing bond prices and increasing interest rates. This helps reduce spending because when there is less money to go around, those who have money want to keep it and save it.

In the case of Bitcoin, by reducing block size, it makes mining more difficult, creating less Bitcoin compared to the previous event. Therefore, knowing this in advance that Less Bitcoins are to go around and it will eventually be costlier to generate a block, those who have new minted Bitcoins, keep it and save it, instead of selling/spending it.

In simple terms, assume you are running a restaurant and somehow you learn for the authentic supplier that the same Kilogram of Tomatoes in a week time will cost 2 times more than today. Therefore, knowing this, you may buy more Tomatoes in advance and spend it wisely.

(2) Enterprise developments:

Lack of adoption, cumbersome dapps was a worry point. Many thought that there is no market for cryptocurrency products (decentralized apps) and blockchain has limited use case. This view has changed over time and many enterprises are developing blockchain products. Recent news has brought back investors confidence in cryptocurrencies.

Large firms typically do not make a move into a new market unless they feel promising potential and prospects for enduring success. Enterprise entrance to this space validates the huge potential of Blockchain.

Recent News:
– JP Morgan J-Coin
– Samsung Wallet
– Amazon blockchain service
– WWF using blockchain to track food

Continued announcements of more enterprise entrance in the crypto space should help to develop further confidence level and build necessary momentum.

Also, Bear in mind the events which could delay Bitcoin Rally:

Though there is more good news for bitcoin in the months to come, bear in mind the events which may slow down the progress of Bitcoin price momentum. Like Bitcoin ETF.

So far, the SEC has rejected almost every Bitcoin ETF proposal, however, the proposal submitted by VanEck-Solidx and Bitwise differs from other previous attempts, especially the one from VanEck-Solidx. Many hope VanEck-Solidx proposal has a higher chance of acceptance, a decision to be taken on 5th April. A rejection may impact investors sentiment.

Another reason could be delayed development from enterprise/blockchain projects or No more exciting news in the following months. Recently ETH upgraded its blockchain and as many hope the change should bring positive impact in the network utility and rise in the dApp ecosystem. Currently, 2nd largest by market-cap, if ETH ecosystem continues to drop, it may put a dent in the growth.

“April or May will be the crucial moment to find which direction bitcoin goes.”