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The price of Bitcoin has been turbulent this summer.
The market was ignited by Brexit, cooled down during the long-awaited halving event, and finally turned over in an exchange hack. Since then, the market has fluctuated between $550 and $600, returning to the "relative" calm state at the beginning of the year.
Referring to the history of Bitcoin's fluctuations, analysts have begun looking for the next major event that could have an impact on Bitcoin prices.
As we head into the fall and winter months, some speculation begins to emerge about various events, ranging from price spikes to a return to the 2015 lows.
What analysts are talking about most after the institution was approved is the emergence of the Bitcoin ETF (Bitcoin exchange-traded fund), an investment tool linked to a range of stocks and commodities. Analysts believe that this fund is a price trigger point.
Many market observers have been following the development of these two ETF proposals with great interest, and while there seems to be little progress to date, excitement about the potential market first broke out in July when the SolidX Bitcoin Trust was announced and the Winklevoss Bitcoin Trust was supplemented with a filing.
Analysts say that any approval of such a fund would be a landmark event for the bitcoin community because an ETF would allow participating institutions to issue shares tied to their actual bitcoin holdings, which would stimulate new liquidity.
Daniel Masters, director of the Global Bitcoin Investment Advisory Fund (GABI), recently pointed out that once an ETF for an asset is listed, the price of that asset will rise rapidly and its trading activity will be more robust.
"Since 2000, ETFs covering a wide range of commodity interests have been established, whether it's gold, silver, oil, natural gas, copper or some index," he wrote in his August blog. "The establishment of an ETF for any commodity will push up the price of that commodity, increase its futures and spot trading volume, and at the same time, the open interest of the commodity futures contract will be higher."
Any approved Bitcoin ETF would increase Bitcoin’s liquidity, and Du Jun of China’s Huobi exchange believes that increased liquidity could push up Bitcoin prices.
"Bitcoin's liquidity depends largely on the future value of bitcoin and investors' expectations," Du said.
Technological Improvement Another event that could drive up the price of Bitcoin is the resolution of the long-debated “scaling” issue.
Currently, blocks in the bitcoin blockchain are 1MB in size, which limits the number of transactions the network can process (arguably limiting its popularity), and changes to this limit have caused some confusion and controversy in the community.
However, the community has yet to agree on a specification, as changing the code limits is tricky. But that doesn’t mean there aren’t other solutions being implemented, the most notable of which is Segregated Witness, for which the initial code was recently released.
Although analysts are hopeful about the network, they do not believe that SegWit will affect the price of Bitcoin.
Jacob Eliosoff, a manager of a cryptocurrency investment fund, believes that because SegWit was unveiled in November and originally planned to be deployed in April, investors have already priced in the future changes.
“The SegWit rollout was too gradual and well-known (not to say overly anticipated) to drive price up,” Eliosoff said.
Tim Enneking, chairman of investment management firm EAM, shared a similar view, saying:
“At least in the short term, I think SegWit will only have an incremental or minor impact on the price of Bitcoin.”
Post-halving pressure Investor and entrepreneur Vinny Lingham has a unique view that the halving of the Bitcoin network's rewards is a potential influencing factor.
This prediction may come as a surprise, as the halving, which reduced the reward from 25 bitcoins to 12.5, occurred without much fanfare.
Although the price of Bitcoin fluctuated only slightly in early July, Lingham believes that the impact of the halving has not yet been felt, and the power of the halving will cause a wave of price fluctuations in Bitcoin in the next two to four weeks.
As he wrote in a recent blog post, miners aren’t making enough profit and soon they’ll be buying Bitcoin from exchanges, triggering a “short squeeze,” or a price surge due to a lack of supply.
“It’s like selling crops in the futures market and a hurricane wipes out half the farms, with the only result being a doubling of the price at the time of the halving (which is technically impossible, of course).”
Financial (In)stability Finally, some predict that the next big event to shake up the price of Bitcoin will be closely related to the stability of the global financial system.
Traders have flocked to digital currencies during periods of financial crisis, leading many market observers to label Bitcoin a safe-haven asset or "digital gold," making it more attractive during times of economic stress.
In the past, Bitcoin has benefited from crisis events every time, such as Brexit, Cyprus and Greece economic crisis.
Exactly how much of this outflow actually went into Bitcoin is up for debate, but it is widely believed that such events can be a powerful driver of Bitcoin’s price.
As Huobi’s Du Jun said, when the global financial system encounters a crisis, investors will “look for safe-haven investments,” such as Bitcoin.
Other influencing factors include the government's attitude towards Bitcoin. Analysts say that if major countries accept Bitcoin, it will have a significant impact on Bitcoin trading activity and prices.
Original link: What Will Be Bitcoin's Next Big Price Event?
Original author: Charles Bovaird
Media source: Coindesk
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