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At around £24,000, current Bitcoin (BTC) prices are down about 28% since early 2022. However, prices fell to similar levels in late January before recovering to around £35,000 in late March, leading many to speculate what could be next for the cryptocurrency.
BTC prices are primarily driven by four key factors: supply, demand, competition, and sentiment. Here we’ve taken a look at how each factor could play out in the foreseeable future, along with some additional pressures and expert opinion to help predict what might be next for bitcoin prices.
Deliver
The scarcer an asset becomes, the more valuable it tends to become. The total amount of Bitcoin that will ever be available is capped at 21,000,000, meaning supply is limited.
New bitcoins are minted when a new block of verified transactions is added to the blockchain by a bitcoin miner (read more here). As a reward, they receive a lot of newly minted bitcoins.
Over the past 12 years, more than 19,000,000 BTC have already been minted, leaving around 2,000,000 more to be mined. Although the unmined BTC supply is over 10% of the total BTC supply, this does not mean that the 21,000,000 mark will be reached in 14 months (10% of 12 years).
This is because the minting of new bitcoins is set at a fixed rate that slows down over time. When Bitcoin started, the reward for adding a block of transactions to the blockchain was 50 BTC. Four years later it was halved to 25 and the reward halves every four years.
The reward is expected to be 1.56 BTC by the end of 2024, meaning it will take decades to mint all 21,000,000 bitcoins. Bitcoin will therefore not be in short supply in the medium term.
However, the halving mechanism effectively constrains supply, which could push prices higher if demand increases in the future.
Support financially
The growing demand for a finite resource should increase its value. As we know, Bitcoin is a finite resource that will become scarcer over time.
The greater the demand for bitcoin, that is, the number of buyers, the more transactions there will be. Daily bitcoin transactions peaked in May 2021 at around 440,000. There were just over 200,000 transactions on June 5, which may indicate a significant drop in demand.
Google trending data also appears to show that fewer people are searching for Bitcoin today than a few years ago, with searches peaking in December 2017. Today, the number of people searching for bitcoin is at its lowest since October/November 2020.
Another worthwhile indication of demand is the number of active bitcoin addresses, as you need an active address to buy bitcoin.
At the time of writing, there were around 1.1 million active addresses, which is the highest since November of last year, according to Glassnode data, and not far off its December 2017 peak of 1.26 million.
A recent bitcoin price crash may have increased demand as speculators look to “buy the dip” – believing they will make a profit if prices recover. On the other hand, the crash and its illustration of crypto’s volatility may have had the opposite effect and dampened demand.
After all, the next bitcoin halving is scheduled to take place in spring 2024, and demand could surge ahead of that date in anticipation of the supply tightening associated with it, in theory.
contest
The advent of cheaper, faster altcoins hasn’t cost Bitcoin its crown as king of cryptocurrencies. It’s still the largest cryptocurrency by market cap and has even been adopted as the state currency in El Salvador – something no altcoin can boast.
Critics have argued that some altcoins have more potential than Bitcoin because while the latter is a payments-only system, Ethereum, Cardano and Ripple have programmable blockchains that can host smart contracts and decentralized apps (dApps).
Proponents might argue that Bitcoin cannot be directly compared to such altcoins.
It is interesting to note that the May 2022 crash, which cost around 20% of Bitcoin’s value, also hurt competition. Ethereum (ETH) and Cardano (ADA) both fell more than 20%, meaning Bitcoin’s losses weren’t the gains of its peers.
Even stablecoins, created as a less volatile alternative to traditional crypto assets, have been negatively impacted by global economic factors.
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feeling
Bitcoin prices can be affected by people’s attitudes towards it.
A fear and greed index is a tool used by investors to gauge sentiment in a market. Fear reflects a market where investors are selling their assets because they fear prices will fall. Greed reflects a market in which investors buy because they expect prices to rise.
According to the much-cited Crypto Fear & Greed Index at alternative.me, which tracks crypto trends, the market is currently in a state of extreme fear — meaning crypto holders are generally selling their assets for fear of future losses. However, critics of fear and greed indices say that while they can be useful as sentiment gauges, they don’t work well for predicting price movements.
Another good indicator of sentiment is bitcoin outflow from crypto exchanges: in other words, the less bitcoin is moving out of crypto exchanges, the more investors are holding their bitcoin with the expectation that it will appreciate in value.
Coinmetrics data shows a spike in bitcoin withdrawals from major exchanges since May this year, suggesting investors could expect prices to fall further.
While around 18,000 bitcoins were withdrawn on June 6, withdrawals were about five times higher a week earlier, only slightly higher 30 days ago, and more than three times higher this time last year. In context, this could mean that holders are less willing to sell because they expect prices to rise.
expert predictions
ES Money asked leaders in the crypto arena for their thoughts on Bitcoin’s prospects.
Martin Škorjanc of cryptocurrency mining platform NiceHash reflects on bitcoin prices will rise.
He said: “Bitcoin fundamentals are still strong and despite the gloom in most media, the price has held up. I think that over the summer we will see more of a surge in bitcoin price. The only thing that might dampen this would be if another altcoin implodes, which could keep market sentiment low.”
Jeremy Cheah, Associate Professor of Decentralized Finance at Nottingham Business School contradicts.
He said, “Bitcoin prices will continue to be very volatile but overall will be lower due to the looming recession and a rate hike.”
Sam Onigbanjo, Founding Partner of Capital Markets Academy UK reflects on bitcoin prices remain stable or fall.
He said: “For bitcoin bulls to thrive in the market this summer, it will take a lot of investment and trust in the instrument. However, it will likely stay the same or fall over the next few months.”
Richard Rauser of NFT music marketplace TokenTraxx predicts prices could fall.
He said: “There is a high probability that the price of bitcoin must fall further. The macro environment of high inflation, rising interest rates, quantitative tightening and geopolitical tensions has already proved detrimental to crypto prices and is expected to continue.”
says dr Raullen Chai from the crypto exchange IoTeX Prices can fall.
He said: “No one can currently predict where BTC is going. The best predictions say it’s as good down as it could be up. However, the overall outlook is that there could be more declines before starting an uptrend towards the fourth quarter of this year.”
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