Bitcoin 2020 – what is waiting for the cryptocurrency market this year?
The first quarter of 2020 turned out to be very difficult for the world economy – on March 11, the world health organization announced a global coronavirus pandemic, which is now rapidly spreading across all continents. Many governments have imposed strict quarantine, which has negatively affected the economic situation – the world is on the verge of another crisis. Naturally, these events could not but affect the cryptocurrency market.
What was the reaction of cryptocurrency to the pandemic coronavirus?
During March 12-14, a number of events occurred in the world of digital currencies, which shocked the entire cryptocurrency community. In just a day, the cost of Bitcoin has fallen by half – from 8 thousand dollars to 4 thousand dollars. According to analysts, this is the largest price reduction for such a period in the history of Bitcoin.
Naturally, after the most popular cryptocurrency, altcoins also collapsed. A significant collapse occurred with Ethereum: for the first time in several years, one coin sank to below $ 110. The cost has fallen almost 2 times.
This also happened with Ripple, which has always been positioned as an asset independent of Bitcoin: the cost of one coin fell from $ 0.20 to $ 0.13.
The situation with other popular cryptocurrencies (Litecoin, Dash, Zcash) is almost identical. All of them sank quite heavily and lost in value from 30% to 50%. To the great relief of owners of digital currencies, by the second half of March 13, the situation more or less normalized, the price of Bitcoin was fixed at a level just above 5 thousand dollars. Now, after a few days, the cryptocurrency market is coming back to normal, and the price of Bitcoin is steadily moving up every day. But this does not mean that the cost of cryptocurrency will continue to increase.
Why has the cryptocurrency market collapsed?
Many crypto enthusiasts believed that the instability of the world economy is a great opportunity for cryptocurrencies, which will cause their value to increase by tens or even hundreds of times. Over the past month, the stock market has sunk significantly, shares of many companies have gone down at an unprecedented rate, and digital gold has not only not risen in price, but also significantly lost in value. You should definitely not be disappointed in cryptocurrencies, their history remembers the worst times. At this stage, it is very important to understand what exactly influenced this fall.
According to Kyle Samani, Manager of Multicoin Capital, the sharp drop in the market indicates that cryptocurrencies are not ready to work on a global scale. During the crisis, cryptocurrency blockchains become so loaded that commissions and the duration of transfers increase many times. As a result, performing arbitrage transactions that can somehow stabilize the currency price becomes an almost impossible task. According to data, on the BitMEX exchange, the amount of applications for the purchase of Bitcoin was $ 20 million, and for its sale – as much as $ 200 million. The difference between supply and demand is tenfold, which significantly affected the price of the asset.According to the Creator of the Galaxy Digital cryptocurrency Bank, Mike Novogratz, traders trading with leverage are to blame for the market collapse. He believes that against the background of the announced pandemic and a slight decrease in the price of Bitcoin, they began to sell coins, which led to an uncontrolled process and General panic. There may be some truth in this, but many of Mike Novogratz's statements are quite controversial and not always confirmed in practice.
What does the cryptocurrency market expect in 2020
There are several points that you need to pay attention to when predicting the future situation. First, this is the upcoming halving, which will reduce the reward of miners who produce Bitcoin by half. It occurs automatically every 4 years, and according to preliminary forecasts, the next reduction in the reward should occur on March 17, 2020.As practice shows, halving always has a positive effect on the value of Bitcoin. This was the case in 2013, when the value of Bitcoin increased hundreds of times, and it happened in 2017, when its price peaked at around 20 thousand dollars. There is every reason to believe that the tradition will continue, and in 2020 or 2021, Bitcoin will conquer new heights.
The second point is related to the coronavirus pandemic. Recently, the supply of mining equipment, which is mainly manufactured in China, has stopped. If the situation does not change, the network expects a significant drop in hashrate, which will reduce the complexity of extracting new blocks. In this scenario, Bitcoin mining will remain profitable even after halving, which is expected in may.
Given these factors, we can expect positive dynamics and a gradual increase in the value of Bitcoin and other cryptocurrencies, but it is definitely not worth blindly believing in a significant increase.
Conclusion
The cryptocurrency market is currently not in the best situation, but after a significant subsidence on March 12-13, there is a positive dynamics. Many experts give optimistic forecasts. For example, the Creator of Cardano, Charles Hoskinson, said that the digital currency market is incredibly stable and can cope with much more significant drawdowns. You should not panic here, you need to soberly assess the situation and be aware of all events in the crypto industry.
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