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Bitcoin is currently the largest and the most trusted digital currency, garnering a market capitalization of over 325 billion US dollars. Various billionaires and celebrities have endorsed bitcoin in the past, showering it with the praises of being a dependable investment prospect. The coin is mostly common for its volatile nature, which creates opportunities for investors to earn supernormal amounts over time. Its price has also plunged every end of the year in the past few years.
But what causes the plunges? Foremost there is the miner outflow. The miner outflow comes when miners decide to sell their large holdings and create selling pressure in the exchanges and the bitcoin market. The second reason is when the fiat currency, like the US dollar, shows some strength and performs well in the market, leading to a decline in other investment assets’ values.
However, although bitcoin plunging is an annual end of year event, it’s safe to speculate that this year there could be no end of year Bitcoin price plunging. Here are three main reasons for my speculation.
The Fall of DeFi
The foremost and most important thing to note is the DeFi losses and plummets. There have been recent continuous drops in DeFi and Dex platforms generally. For instance, just before starting the long series of token price plunges, DeFi platforms had a daily trade volume of around 8 billion US dollars. However, the most recent reports show that the values have been dropping and have hit 3 billion US dollars.
Other reports show that some DeFi platforms lost over 70% of their valuation; even Uniswap, one of the greatest platforms, suffers highly from those plummets. Some experts have gone to the extent of suggesting that DeFi is dying, and soon the platform will have no relevance.
Although the experts’ predictions of DeFi’s complete death are not necessarily true, their current fall drives investors away from DeFi. More investors are choosing Bitcoin in preference to DeFi assets.
Bitcoin preference leads to a surge in the bitcoin’s value over time, making the coins highly valuable to investors. Since the DeFi drops might last to probably early 2021, investors should expect a more rising value of bitcoin in the next few weeks. Bitcoin investors should find opportunities to buy them as early as now to enjoy the much anticipated future gains. Bitcoin plunges will not be happening this year.
Fiat Currency and Stock Market Drops
2020 proves to be one of the worst years for the financial world. An IMF report shows that the global growth projections are currently at -4.9%, around 1.9% points from the early April forecast. The report also suggests that there is little chance of recovering from the global financial crisis in 2020. Between February and April 2020, a global stock market crash was also dubbed the Coronavirus crash. There have been stock market plunges worldwide, making the stock markets the most unreliable investment options of 2020. Moreover, fiat currencies like the US dollar have also fallen to inflation; USD had an inflation rate of 1.18% in 2020. It’s hard to store value in inflating and unstable issues.
Amidst all those issues surrounding the year 2020, Bitcoin has only seen serious price plunges once, an episode that lasted for a few hours. The volatility of bitcoin is still the same, and this year brought good earnings for investors who took advantage. Some large scale investors with knowledge about the crypto world chose to invest in Bitcoin to secure their value. That will ensure the bitcoin market remains in high demand and high values. Bitcoin is, therefore, a haven for investors in this trying financial time.
The Bitcoin Halving
Bitcoin halving is an event that happens every four years in the bitcoin world where the miners’ rewards are halved. This event took place in 2020 on May the 11th. After the halving event, it’s quite common for Bitcoins value to surge to supernormal prices.
Experts predicted different values for bitcoin after the halving, others expecting the value to hit 55 thousand US dollars a few months after the halving. Although that is not necessarily the case currently, experts are still anticipating that the values will grow soon.
The expert predictions and anticipations make more people want to own bitcoins to enjoy the much-predicted benefits. As such, there is still a high demand for bitcoins translating into higher prices over the next few months.
Although the bitcoin price plunge is a year-round event, the episodes could take a break this year. There are several reasons to support that, foremost being the dropping DeFi market and their tokens’ issues. Some Dex platforms lost millions in the continuous DeFi plummets, losing customers daily. Most of the DeFi investors are now shifting their focus to Bitcoin to enjoy its reliability as an investment option. Moreover, because there have been episodes of market crashes this year, some billionaire investors choose to invest in bitcoin to enjoy future benefits.
Another important reason that will ensure no plunge in bitcoin is the May halving, which left investors anticipating value rises. It’s safe to say that unlike the previous years, when bitcoin plunged, 2020, things will be different, and bitcoin will maintain or increase in value.