It is a few weeks before the end of 2019, and typically the markets have slowed down. Bitcoin is still struggling between the $7,000 and $7,500 horizontal channel while other cryptocurrencies are seeing even lesser activities. This is the kind of behaviour that most markets experience around this time of the year, although the year 2017 revealed otherwise.
What happened in 2017 has given some people the hope of a possible movement before the year ends or at the beginning of 2020. Supporting this idea is the fact that another Bitcoin block reward halving event is just around the corner. This is where the dilemma comes in.
Anyone who is expecting something similar to what happened in 2017 will be doing so in error or living in self denial. Unless something else is behind such a motivation, then the events that led to the 2017 surge in Bitcoin price are yet to realign.
If you remember well, apart from the ICO popularity which attracted new crypto users and created a lot of awareness, the post halving effect was also visible. Bitcoin was fresh from the 2016 block reward halving when the surge began. The surge stretched throughout 2017 to see Bitcoin reach its highest price ever at $20,089.
So now, let us itemize and realign the few events that preceded the surge in the price of Bitcoin in 2017. We will then compare them with what is happening in the market today in order to predict when Bitcoin will embark on another steep ride to the top.
The Growth of Ethereum
Before Ethereum, there had been other altcoins, most of which were forks of Bitcoin. However, none of them really looked like a worthy rival that could compete with Bitcoin. When Ethereum arrived, it made a lot of noise and generated a lot of expectations. It also brought some unique values that the industry has enjoyed till date. If you ask me, I would say that the awareness that Bitcoin and the entire crypto industry enjoy today can be attributed to Ethereum.
Ethereum offered a platform for the creation of decentralized applications (dApps). This simplified the process of decentralizing processes and the creation of tokens. This is where the ICO industry caught its fire from and exploded all over the place. It became very easy for ideas to be converted into blockchain processes with the creation of tokens.
At that time, most of the tokens being created were on the Ethereum blockchain. Therefore, to participate in the ICO marketplace, investors needed to possess some ETH or BTC. Hence, the demand for Bitcoin and ETH increased rapidly and it reflected in the price.
Bitcoin Block Reward Halving
The Bitcoin protocol is equipped with an automatic control system that determines the amount of Bitcoins that is introduced into the network per time. This system ensures that the number of Bitcoins in existence does not exceed some predetermined limits. This process is known as block reward halving and it occurs after every four years.
Miners on the Bitcoin network compete for blocks by solving mathematical problems using computational power. The first to find a block gets rewarded with a specific number of Bitcoins, and it takes 10 mins to find a block. These conditions make it possible for you to know how many Bitcoins can ever be in circulation at any given time.
In 2016, Bitcoin underwent its second block reward halving process. This reduced the number of Bitcoins earned for finding a block from 25BTC to 12.5BTC. The result of this is a reduction in the rate of supply. This happened when many people were just knowing about Bitcoin and cryptocurrency and realizing the possibilities therein. As a result, demand became very high and price picked up the indices and skyrocketed.
The Actions of Speculators
In markets like the Bitcoin and crypto markets, there are those who are in it mainly to take advantage of the price movement and make money out of it. The process of doing this is known as speculative trading.
During speculative trading, those involved make analysis and try to predict the next direction of the market. This is not an easy thing to do, and requires some extensive knowledge to do so consistently. And of course, people do it and succeed in it.
While there are professional speculative traders, there are those who are really amateurs that engage in trading practices. Most of these people are the dumb money, and they are the ones that money is usually taken from. The dumb money category are not completely useless to the marketplace. As a matter of fact, they are the ones that give the markets the momentum to exhaust a run.
After the fundamental factors have kicked in and the market moved upwards, speculators played their part, and the dumb money took over, creating a bandwagon effect. Even people who had very little knowledge about cryptocurrencies jumped into the market. These factors pushed Bitcoin price and that of other cryptos so high until it came crashing from the beginning of 2018.
What to Expect Going Forward
If history must repeat itself as it often does, then nobody should really expect much from the market in the remaining weeks of 2019. All eyes should then be on the months following the block reward halving, and the year after. The reason for this is that similar patterns are already forming again.
There may not be an ICO buzz this time, but the actions of government and regulators is creating some significant awareness for Bitcoin and cryptocurrencies. This is yet happening again around the block reward halving period. To add to this, speculators are all set with itchy fingers waiting for the initial signs of a price surge.
Naturally, Bitcoin and cryptocurrencies are expected to become more useful in the mainstream. This is an automatic occasion that will increase demand. Adding the above scenarios and comparing with the things that have happened in the past gives us an idea on how to time the markets.
Bitcoin has been described as digital gold and a store of value. The tendency of significantly increased value keeps becoming clearer with each passing day. People who are positive about the markets are using the opportunity of a slump in price to buy Bitcoin and other cryptocurrencies. This could be an intelligent thing to do, even as users are advised to always carry out their own independent investigations before investing their funds.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.