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Analysts weigh in as Bitcoin leads the Crypto rally

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In the 16 days since the start of the year, the bitcoin price has risen 22 percent, an impressive performance by any measure, but especially so as January has historically been a bad month for cryptocurrency. The bitcoin price fell 11 percent in January 2019, and 27 percent and 14 percent respectively in the first months of 2018 and 2017.

As the price now inches closer to the pivotal $10,000 level, analysts have put forth several bullish narratives in an attempt to explain the upward momentum.

Tensions with Iran have eased and bitcoin is no longer trading in tandem with gold, but instead, anticipation of the halving is thought to have replaced the threat of war as a major bullish catalyst.

The halving approaches

The halving event will see the reward for mining bitcoin slashed in half. The event is expected to occur in May. Historically, previous halvings have resulted in a boom, with the price rising about 6,500 percent in the year following the 2012 halving and around 430 percent in the year after the 2016 event.

Although a sample size of two is very small, analysts suggest bullish price action is likely to play out again, and that smart investors are already positioning themselves to benefit. In the "bigger picture," says economist Alex Kruger, "$BTC is set to experience a strong halving driven pump sometime during the following five months, followed by a sustained halving crash."

Others are more skeptical, repeating what are said to be the four most dangerous words in finance, “This time is different.” Plan B, who has championed the bitcoin stock-to-flow price model, suggests the "halving is priced in" already, and that changes of demand, not supply, will dictate future prices.

Another possible catalyst for the recent price surge could be the fresh availability of professional bitcoin investment products. Grayscale, which claims to be the world's largest bitcoin and digital currency asset manager, resumed private placement of its shares of Bitcoin Trust (GBTC) for “accredited” investors on Monday.

Elsewhere, CME released its regulated bitcoin options to a keen audience on the same day. The exchange later reported that over $2 million notional value was traded in the first 24 hours. Days before, derivatives exchange FTX launched its own options product to a similarly warm reception. CEO Sam Bankman-Fried claims it only took two hours for trading volumes to reach $1 million.

Whatever the reason for the market rally, the bullish momentum comes as welcome relief to crypto traders and investors alike and sets the scene for what is sure to be another volatile and exciting year in the crypto markets.



Kieran Smith, Khareem Sudlow