New Bitcoin all-time high predicted for 2020
|Despite bitcoin suffering its worst sell-off in the last seven years, smart money is preparing for a golden bull run after May 20, which is bitcoin’s next block halving event. Analysts predict that the event could propel bitcoin to an all-time high above $20,000 per coin.
Bullish predictions were also shared by retail investors who own cryptocurrency retirement accounts. In a survey by Bitcoin IRA, 46% of customers said they expect bitcoin to rebound past $8,000 within three months or less, while 81% believed that now is the best time to buy investments.
Bitcoin is already up 56.37% from its low of $3850 on March 12, catalyzed by a record-breaking 24-hour trading volume of $34 billion. Bulls were also extremely close to breaking the 18-day dynamic inflection point of $6,724 with a daily high of $6,706, signalling that the sell-off has done little to change bitcoin’s trajectory - even in the short-term. The next target is the first resistance point at $6,835 which would confirm that the coin is in a renewed uptrend and would act as the support level moving forward.
On the way up to $8,000, we can expect pullbacks at the 23.6% and 38.2% Fibonacci levels. Expect selling pressure at $7,402 and $7,821 as well as the $8,000 psychological level, which is also close to a 50% retracement.
As people continue to accumulate bitcoin at a discount, this may give the coin the liquidity and buying pressure it needs to continue a recurring historical pattern. After each halving event took place, bitcoin reached a new all-time high. This occurred two times in the coin’s 11-year history. It jumped from $12 in 2012 to $175, then $652 in 2016 to $3190. Each of these halving events was followed by a bull run, a bearish correction, and then a long horizontal accumulation phase.
The reason why bitcoin halving events cause new highs is two-fold. First, price increases after a block halving event have become ingrained into bitcoin’s fundamentals, which means that traders are now more likely than ever to enter long positions before the event takes place.
The next reason is due to the effect on the miner’s block rewards and the increasing scarcity of bitcoin. Every four years the amount that miners receive halves as per bitcoin’s deflationary model. This year rewards will drop from 12.5 btc to 6.25 btc. This means miners will have less bitcoin to sell while demand remains the same, so this drives up the cryptocurrency’s price.
Further evidence can be taken from a stock-to-flow model developed for bitcoin that so far has been generally accurate since 2010. This model also confirms that bitcoin’s price will increase but on a much greater order of magnitude. It predicts that bitcoin will be worth $100,000 by 2021 and then $1,000,000 by 2024. However, stock-to-flow models are generally used to evaluate the scarcity and abundance of commodities and precious metals, not cryptocurrencies. The model also does not account for the actual demand for bitcoin besides a lower supply, or the effect that diminishing block rewards will have on miners to continue running the network.
At least over the short-term, however, we can determine that bitcoin is in a strong position to take off to new levels after May’s halving event due to its record trading volumes and reaccelerating momentum.
This might be the third time we’ll see bitcoin reach a new all-time high in 11 years — and the first time we’ll see bitcoin reach over $20,000.
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