The new year is a revival of hope on the cryptocurrency market. Of course, many analysts give reasons why BTC could be worth a lot of dollars by the end of 2020. But why would this happen? Let’s consider why the Bitcoin exchange price would rise at all.
This reason is given in every discussion about the price of a cryptocurrency. Why? Well, the reduction in the supply of new Bitcoins on the market combined with the growing demand must even lead to a jump in the exchange rate. At least until 2017, this was how it worked. Will it be different now? Probably not, although today we have a lot more cryptocurrencies and tokens on the market than at the time when the last bull run started. However, we can assume that halving will do its job and cause even a psychological effect. People will be more eager to buy BTC because “it has grown before”.
The cryptocurrency community is people who do not like politicians, officials and authorities and their main tool – fiat money. Now, however, politics may affect the BTC price.
Since last Thursday, we are really close to a new war in the Middle East. An interesting thing is the reaction of the financial markets after the killing of the Iranian top general Qasem Soleimani, as all media have been saying for several days, stock prices began to decline, while safe heavens, like gold, silver, bonds and of course cryptocurrencies, gained strength.
This time the world has another safe heaven, Bitcoin which surged by 5% after the escalating situation between Iran and the US, while Gold gained 1.5% and Oil 3%.
The chart below showed the 3 safe heavens movement amid the news and fears for a new war in the region.
Bitcoin price surges because of tensions between the US and Iran. Source: ADVFN
Even gold bugs like Peter Schiff think that bitcoin surge was caused by war tension between Iran and the US, however, he thinks that this is just speculators buying bitcoin because they think that will go higher, while gold is going up because investors are buying it.
Heightened geopolitical risk has resulted in both gold and Bitcoin moving higher, but for different reasons. #Gold is being bought by investors as a safe haven. #Bitcoin is being bought by speculators betting that investors will buy it as a safe haven.
— Peter Schiff (@PeterSchiff) January 3, 2020
However, in our opinion, the chart above shows the fast reaction of professionals around the globe to the recent news and it seems that bitcoin is considered a safe heaven whether Peter likes it or not.
The economies are starting to shrink today, putting pressure on banks and Fiat-based financial systems. The Fed is printing more dollars and this is unlikely to change in 2020. The European Central Bank is doing the same.
Therefore, economic pressure is pushing investors towards safe assets. Gold and silver are good candidates to hedge the fast devaluation of Fiat government money but bitcoin too is slowly being recognized as a safe asset. If inflation hits harder (e.g. through a jump in oil prices) in different currencies, some of the more aware investors will start buying (or already doing) digital assets. At some point, others will join them, and while prices go up FOMO will hit probably causing a parabola like that in 2017.
So it turns out that bitcoin is not only an option to hedge against the government money but it is also a way to have more freedom, so nobody can decide whether you can use your money or not.