Silent Harbor: why cryptocurrencies have risen in price since the beginning of 2020

On Monday, February 10, the world cryptocurrency market is showing mixed dynamics. At the beginning of trading, the price of bitcoin increased by 2.5% and for the first time since September 2019 exceeded $ 10.1 thousand. After a record increase, the value of the cryptocurrency was slightly adjusted and in the middle of the day fell to $ 9.8 thousand.

Since the beginning of 2020, bitcoin has risen in price by more than 36%. Other digital assets showed similar dynamics. For example, Ethereum increased in price by 70% (to $ 220), Bitcoin Cash - by 116% (to $ 450), rip - by 40% (to $ 0.27). The total market capitalization of electronic money has increased by 47% and today amounts to about $ 280 billion. Such data are provided by the Coinmarketcap portal.

The main reasons for the observed dynamics polled by RT experts consider the aggravation of relations between the US and Iran in January, as well as the spread of coronavirus in China. Traditionally, during the growth of uncertainty in the global economy, investors begin to actively buy gold as a reliable means to save money. At the same time, bitcoin has also recently acquired the properties of a protective asset.

“People increasingly see bitcoin as a“ safe haven ”where you can invest in some kind of global upheaval. For many years, gold was considered a protective asset, but recently, cryptocurrency has been considered in a similar vein. Such assets always become more expensive in case of aggravation of the geopolitical situation or in case of epidemic threat, ”said Alexei Kiriyenko, EXANTE managing partner, RT.

Recall that in early January, the US military launched a missile strike on the outskirts of Baghdad, which killed an Iranian general. In response, Iran attacked the location of US troops in Iraq. Against the backdrop of the military conflict between Washington and Tehran, in the first week of January, gold on the world market went up by 6%, to $ 1615 per troy ounce, and bitcoin - by 15%, up to $ 8300 per coin.

In mid-January, panic among world investors provoked news of the death of several people infected with the virus in China. Players began to massively sell securities and additionally purchase gold with cryptocurrency.

Note that at the end of December 2019, authorities in the Chinese city of Wuhan reported an outbreak of a respiratory infection of unknown origin. According to Chinese experts, the cause of the disease was a new type of coronavirus 2019-nCoV. To date, the number of infected has exceeded 40 thousand, and 908 infected have died.

As the disease spreads and uncertainty grows in the stock markets, the Chinese authorities may limit financial transactions in the country, including with digital assets. This was in a conversation with RT told the analyst of the information-analytical center "Alpari" Vladislav Antonov. Thus, investors are trying to buy cryptocurrency in advance, and the demand for electronic coins is growing.

“China is one of the main players in the cryptocurrency and gold markets. If the epidemic gets out of hand, the consequences could be serious for the PRC economy, including restrictions on the withdrawal of capital. It is also possible to disconnect mining farms, most of which are located in China, ”said Antonov.

According to the new rules

According to Alexei Kiriyenko, in 2020, changes in the rules for cryptocurrency mining may affect the value of bitcoin.

Recall that bitcoin exists on the basis of blockchain technology - a single database that contains information about all transactions completed. The issue of new crypto coins occurs due to mining - solving complex mathematical problems and the emergence of a new block in the blockchain network. Each such block is a data array, where information about all operations performed after the creation of the previous block appears. For solving the problem, miners receive a reward in the form of bitcoins.

It is noteworthy that every year the search for such blocks becomes more complicated and requires more and more computing power, and the reward for mining is reduced. So, in 2009 it amounted to 50 bitcoins per block, in 2012 - 25, and in 2016 decreased to 12.5.

Experts do not exclude the possibility that in May 2020 the remuneration of miners will again halve - to 6.25 bitcoins per block. As a result, the supply of bitcoins will decrease, and the demand for electronic coins will increase over time.

“The reward of miners was halved in 2012 and 2016. Usually, immediately after this event, the price of bitcoin rose slightly, and after another six months, the market was covered by a second wave of growth, and cryptocurrency was seriously rising in price, ”said Alexei Kirienko.

Exchange support

According to analysts, the launch of bitcoin-ETF may be another driver for the rise in the price of cryptocurrency in 2020. We are talking about a special fund whose securities are traded on an exchange at the price of bitcoin.

“The expected launch of such a fund will actually mean the release of bitcoin on the New York Stock Exchange. If this happens, the cryptocurrency is recognized as a serious asset, after which its value can grow two or three times, ”Kiriyenko added.

According to RT, the head of the analytical research department of the Higher School of Financial Management, Mikhail Kogan, at the moment, institutional investors, insurance companies and pension funds, are increasingly interested in cryptocurrencies in the world. It is expected that the emergence of such large players in the digital asset market may trigger an additional increase in the price of electronic coins.

“Forecasts of specialists on the Bitcoin exchange rate so far vary. Meanwhile, it is obvious that as the share of institutional investors in the market increases, the price of the main cryptocurrency can not only renew last year’s maximum ($ 14 thousand), but again reach $ 20 thousand, ”concluded Mikhail Kogan.