There’s no doubt Bitcoin ended 2019 on a sour note. After topping at a price of $14,000 in June of last year, the price of the leading cryptocurrency tumbled and tumbled, falling all the way to $6,400 by the middle of December.
Although prices have recovered since then, some have questioned if this bullish momentum will last, or if it is only a matter of time before Bitcoin bears begin to take this market back down into $6,000s and maybe even lower.
A prominent industry executive recently tried to reassure investors that yes, the momentum will last, saying that he expects Bitcoin to see much upside in the coming 12 months.
Why Bitcoin Suisse is Bullish On, Well, Bitcoin
Last week, chief executive of crypto financial services company Bitcoin Suisse, Arthur Vayloyan, sat down with CNN’s Swizterland channel to talk about his company’s thoughts on the cryptocurrency market for 2020.
He (unsurprisingly) expressed a positive sentiment, laying out a number of reasons why he expects the following year to be a bullish one for digital assets.
The root of his argument is the upcoming Bitcoin block reward reduction or “halving,” which is a cyclical event built into the code of the network that will reduce the number of BTC issued per block by half, effectively resulting in a 50% decrease in the inflation rate of Bitcoin.
Vayloyan said that he believes this event will cause “quite positive” price action:
2020 is one of those years where the halving takes place, roughly mid of May. And when you look back and take history as a little bit of a prediction, or at least an idea of what could happen, it so happens that price movements were actually quite positive in those years. Or in the year that followed.
Some have pushed back against this sentiment. Bitmain’s Jihan Wu, for instance, last year cast doubt on the bullish effects of the halving, though Vayloyan was quite certain this event will have a positive effect:
It will be interesting, but I would say the general rule is it will go up.
Indeed, a price model created by institutional quantitative analyst PlanB, as the pseudonymous market analyst goes on Twitter, found that the fair price of BTC will rise to above $50,000 after the halving.
His model effectively states that the more scarce a precious asset is, the more its market capitalization will be. The model has been accurate to a 95% R squared when backtested, and BTC always moved to trade at the fair price as predicted by the model.
Other Bull Factors
This wasn’t the only reason the Bitcoin Suisse executive was optimistic about the digital asset market. He specifically looked to the caliber of individuals and institutions that are entering the space, which he claims can indicate how mature a certain industry may be:
Crypto assets, in general, are here to stay. We have seen a major change in the participants. Before, it was the interested technical people with a high affinity to something new. But more and more we see now institutions coming in — be it the banks, be it the central banks even. And they look at the technical opportunity that stands behind the crypto technology.
He added that due to this market’s ever-growing size, institutions will continue to focus on the cryptocurrency and blockchain markets.
This is true — Fidelity Investments, the Intercontinental Exchange through Bakkt, and other mainstream financial institutions have begun Bitcoin initiatives to help service other institutional clients, opening up this market to potentially billions of dollars worth of free capital.