Against the background of the Brexit-invoked market turmoil, the plunge of the British pound and the insecurity that lays ahead, analysts are busy discussing the best possible investment and trying to project what will happen next.
One of the popular topics in the discussion is cryptocurrencies and Bitcoin in particular.
In the past several months its value has been trending upward, increasing its value by 55% in H1 2016, to peak at $768 on June 18. The trend is driven partly by the bitcoin block reward halving and partly by the insecurity surrounding the outcome of UK’s EU referendum.
The halving is a reduction in the payout for those who mine Bitcoins that happens around every four years when a certain amount of mined Bitcoins is reached, as a measure to limit the cryptocurrency inflation. The second one since the launch of the cryptocurrency in 2008 happened last weekend, on July 9, and now the miner is rewarded 12.5 Bitcoins for each verified block.
At today’s rate the reward adds up to $8337, which, according to some experts is barely covering the expenses of the miners to run 24/7 the thousands of powerful computers solving the complex, automatically generated mathematical puzzles used to verify the Bitcoin transactions and keep the blockchain secure.
After the halving Bitcoin lost 5% of its value, but nevertheless remained relatively stable. The Bitcoin remained stable on June 24 while the British pound tanked as well.
Considering the relative stability of the Bitcoin against the background of major market upheavals, some financial analysts argue that the Bitcoin is a suitable investment instrument which will continue to rise in value, at least for the time being.
In an analysis of the market prospects for H2 2016, Chris Beauchamp and Joshua Mahoney, analysts at the major forex broker IG Group, for example, noted the obvious fact that the cryptocurrencies continue to gain popularity, but the Bitcoin “is the one to watch”. Beauchamp and Mahoney forecast that the effect of the Pound’s fall might drive further the value of the Bitcoin. According to them, it could reach $900, which would be close to the historical high of $1132 in December 2014.
A recently published study from Juniper Research – a UK consulting and analysis company specializing in the identification and appraisal of high growth opportunities – says that the total value of Bitcoin transaction would triple by the end of this year. It is expected that to exceed $92 billion, up from $27 billion in 2015.
According to Juniper Research, besides the halving and the Brexit, there are to other factors that would drive the Bitcoin value – the Chinese economy and Donald Trump – the former is getting weaker, while for latter might become a president of the US. Since the overwhelming majority of Bitcoin trading occurs on Chinese exchanges, investors see the cryptocurrency as a safe investment against the expectations for a further fall in the value of the yuan.
Windsor Holden, author of the Juniper Research study, concerns around an eventual Trump presidency would also likely cause spikes in Bitcoin trading and its value.
“If Donald Trump becomes President of the US, there is the very real prospect of turmoil on world markets – the Economist Intelligence Unit ranks his Presidency within the Top 10 global risks,” Holden said. However, Bitcoin trading would thrive in such an environment, at least until the impact on major fiat currencies becomes clear.”