Some Bullish Signs for Bitcoin
One pattern that has become almost sad to watch is the number of times crypto-enthusiasts say that it is just on the verge of a recovery. From well-known investors explaining their bull position to technologists rationalizing why things are changing, there is a news story about this nearly every week.
Bitcoin’s price, although having slightly recovered from its lows, is still experiencing a fairly flat trading pattern around the $4,000 mark. It is still volatile enough for traders to make a living, but not nearly as lucrative as it was during the bull run of 2017.
Bullish Sign From the Hash Rate
One bullish sign that has been useful in the past is the hash rate. It has been climbing recently and this is a strong signal that miners are putting more confidence in the coin. They are reallocating resources because they believe the revenues will prove to be profitable in the future.
In a way, this is the same sort of indicator that any other investor provides, except these investors are using technical resources rather than monetary.
It should be noted that Ethereum has dropped significantly in its hash rate (approximately 50%), but not shown any sign of recovering. Bitcoin, on the other hand, dropped to 50% and has improved back to 80%.
Bitcoin’s Reward Halving
Another event that has people talking about the recovery of Bitcoin is the Bitcoin mining reward halving that will occur in May 2020. This will lower the inflationary pressures on Bitcoin, which is a fundamental win from an investor perspective. If less Bitcoin is being printed, the supply becomes more limited. At the same time, demand could increase for any number of reasons (institutional money, ETF approval, global financial crisis). This combination could prove to be the kingmaker for Bitcoin.
Two of these halving events have occurred before. First in November 2012 and then in July 2016. Once the next halving event goes through, the mining reward will be cut from 12.5 BTC to 6.25 BTC.
This could be the lowest demand for Bitcoin in years, so any increase that occurs as more users gain access to Bitcoin would cause some very positive price action. One example of how users would find it easier to use crypto occurred last week when some developers created a service that allows users to send crypto from within WhatsApp.
Increases in convenience and integration with current applications is one way to get the users who are looking for low-friction enhancements to their lives. This is why crypto ATM’s have been so effective for onboarding new crypto enthusiasts.
Developing an Investment Thesis
We are always looking for the signs that a price surge is imminent, but nothing is ever for sure. Recent days have seen the price of Bitcoin surging above $4,200, as there has been a significant increase in the number of confirmed transactions on the chain. Technical signs show it going through a strong recovery, but technicals are all fine and dandy until fundamentals knock them into irrelevance.
The final thing to remember is that fundamentals for other coins will change as well. Accessibility to the sector helps all coins, but the Bitcoin halving is more likely to only help Bitcoin. So maybe looking for other events similar to the halving or hash rate in other coins could yield a positive investing outcome.